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FUTURES TRADING ACT

FUTURES TRADING ACT

INTRODUCTION

Details of Enactment and Amendment

- Enactment: This Act was enacted on December 29, 1995, as Act No. 5041, in order to contribute to the protection of the trusters and investors and the sound development of futures markets, by ensuring that futures are traded in a fair and smooth manner.
- Amendment: This Act has arrived at its present form as a result of being amended eight times subsequently to its enactment. The latest amendment was on July 29, 2005.

Main Contents

- Any person who intends to carry on the futures trading shall be a corporation with equity capital of not less than 3 billion won, and shall obtain a permit from the Financial Supervisory Commission.
- Futures trading shall be made through the futures markets opened by the Korea Securities and Futures Exchange, and any person other than the Korea Securities and Futures Exchange shall not open any futures markets.
- Any person other than the members of the Korea Securities and Futures Exchange shall not trade in futures through the Korea Securities and Futures Exchange, and the futures dealer shall, in conducting any futures trades, place a specific amount of the security deposit.
- Any person who intends to become a dominating stockholder of a futures company by acquiring its stocks shall obtain the prior approval of the Financial Supervisory Commission after satisfying the necessary conditions as prescribed by the Presidential Decree for sound management, from among main investor conditions in case of establishing a futures company, and the Financial Supervisory Commission may give orders to dispose of stocks acquired without approval during a fixed period of time.
- No one shall commit unfair trade activities, such as a manipulation of quotations concerning the futures trades, and any person who has committed such violation shall be punished by imprisonment for not more than 10 years or by a fine not exceeding 20 million won. In this case, where the amount of the profit unjustly gained through such unfair trade activities is not less than five billion won, he shall be punished by punishment of imprisonment for life or for a limited term of not less than five years, with the suspension of qualifications for not more than ten years if necessary.
- The Financial Supervisory Commission may make restrictions on the scale of futures trades by the futures dealers and customers, for the smooth trades in the futures markets.
- A futures dealer shall set forth the standards and procedures (internal control standards) to be observed by his officers and employees, in order to comply with laws and regulations, to make a sound property operation, and to protect the customers.
- A futures dealer in receipt of trade orders shall conduct his futures trades through domestic or overseas futures markets, and shall not conduct any futures trades not through these markets but by becoming the counter-party.
- A futures dealer shall submit quarterly a business report to the Financial Supervisory Commission so that the general public may read it.
- A futures dealer shall keep the equity capital regulatory ratio by the level of not less than 100 percent, and accumulate an amount equivalent to 1/1,000 of trust commission amount in case the disposable earned surplus exceeds 1/1,000 of the trust commission amount as a liability reserve in order to indemnify the losses inflicted on truster.
- Any foreigner may trade in futures on the position equal to the Korean nationals, and any foreign futures dealer may become a member of the Korea Securities and Futures Exchange with permission from the Financial Supervisory Commission.

FUTURES TRADING ACT

Act No. 5041, Dec. 29, 1995
Amended by Act No. 5504, Jan. 13, 1998
Act No. 5737, Feb. 1, 1999
Act No. 5982, May 24, 1999
Act No. 6171, Jan. 21, 2000
Act No. 6707, Aug. 26, 2002
Act No. 7113, Jan. 29, 2004
Act No. 7428, Mar. 31, 2005
Act No. 7530, May 31, 2005
Act No. 7617, Jul, 29, 2005

CHAPTER I GENERAL PROVISIONS

Article 1 (Purpose)
The purpose of this Act is to contribute to the protection of customers and investors by ensuring that futures are traded in a fair and smooth manner, and the development of national economy by seeking the fosterage of futures business and development of futures market.

Article 2 (Scope of Application)
This Act shall apply to futures trading of goods falling under any of the following:
1.Agricultural, livestock, fishery, forestry, mining or energy goods, any goods that are manufactured or processed from such goods as raw materials and other similar goods (hereinafter referred to as commodity futures );
2.Currency, securities, claims, service charges, or similar goods other than commodity futures (including products for which interest rates and other trading terms are standardized in order to make the futures trading smooth; hereinafter referred to as financial futures ); and
3.Indexation of goods falling under subparagraphs 1 and 2 by utilizing prices, interest rates, etc. thereof (hereinafter referred to as index ).

Article 3 (Definitions)
The definitions of terms used in this Act shall be as follows: <Amended by Act No. 5504, Jan. 13, 1998; Act No. 6171, Jan. 21, 2000; Act No. 7113, Jan. 29, 2004; Act No. 7530, May 31, 2005>
1.The term futures trading means any transaction which is executed on a futures market in accordance with such standards and procedures as prescribed by this Act and the Korea Securities Futures Exchange established under the Korea Securities Futures Exchange Act (hereinafter referred to as the Exchange ) and which falls under any of the following items and other similar transaction:
(a) A transaction in which parties agree to deliver and receive particular commodity futures or financial futures at specified prices at the specified time in the future, wherein the accounts of the difference between prices agreed in advance and prices at the time of long covering or short covering, if they are covered long or short, can be settled;
(b) A transaction based on the agreement to deliver or receive an amount calculated on the basis of the difference between the agreed upon value (hereinafter referred to as agreed value ) established in advance with respect to a particular index and the value of such index at a specified point of time in the future; or
(c) A transaction based on the agreement whereby a party grants the other party a right to effectuate transaction falling under any of the following and the other party promises to pay an amount in return for such right:
( )Transaction referred to in item (a) or (b);
( )Purchase or sale of commodity futures or financial futures; or
( )Transaction for which the subject matter is an index;
2.The term overseas futures trading means a transaction conducted on an overseas futures market and falling under any of subparagraph 1 (a) through (c) or other similar transaction as prescribed by the Presidential Decree;
3.The term futures market means a market established by the Exchange for the purpose of carrying out futures trading;
4.The term overseas futures market means a market similar to a futures market which is located overseas;
5.The term futures business means the business in which any futures company executes futures trading and overseas futures trading (hereinafter referred to as futures trading, etc. ) for its own account or for its customer account or the business in which any futures company acts as a broker, intermediary, or agent for its customer;
6.The term futures company means a company which runs the futures business after getting a license under this Act;
7.The term customer means a person who entrusts the execution of futures trading, etc. to a futures company;
8.Deleted; <by Act No. 5737, Feb. 1, 1999>
9.The term foreigner means an individual who is not a national of the Republic of Korea or a foreign corporation; and
10.The term foreign corporation means:
(a) Corporation established under Acts of a foreign country;
(b) International institution or organization as determined by the Presidential Decree;
(c) Entity similar to those mentioned in items (a) and (b) and prescribed in the Presidential Decree; or
(d) Corporation established under Acts of the Republic of Korea, in which persons who do not have Korean nationality or those falling under items (a) through (c) make a contribution representing a majority stake or hold controlling stake.

CHAPTER II Deleted.

Articles 4 through 22 Deleted.
CHAPTER III FUTURES TRADING

Article 23 (Capacity to Trade)
(1)No person other than a member of the Exchange shall carry out futures trading on the Exchange: Provided, That where the members management regulations under the provisions of Article 16 of the Korea Securities Futures Exchange Act (hereinafter referred to as the members management regulations ) provides for specific futures trading to be done, he may carry out such futures trading. <Amended by Act No. 7113, Jan. 29, 2004; Act No. 7530, May 31, 2005>
(2)A person who can carry out futures trading on the Exchange pursuant to the proviso of paragraph (1) shall be deemed to be a member of the Exchange in applying the provisions of Articles 23-2, 24 (2) 7, 26 through 29, 34, 35 and 36. <Amended by Act No. 7113, Jan. 29, 2004>
[This Article Wholly Amended by Act No. 5737, Feb. 1, 1999]

Article 23-2 (Member Deposits)
(1)Members shall deposit member deposits with the Exchange to secure the fulfillment of potential liabilities in connection with futures trading.
(2)The Exchange shall not set off the claims obtained pursuant to Article 28 (1) as a result of the fulfillment or acceptance of liabilities on behalf of its members, against such member s deposits.
(3)A person who commissions futures trading to a member shall have the right to receive payment in preference to other creditors for his member deposits with respect to claims arising from such commission.
(4)The necessary matters for the minimum deposit limit, operation and management of member deposits referred to in paragraph (1) shall be determined by the members management regulations of the Exchange.
[This Article Newly Inserted by Act No. 7113, Jan. 29, 2004]

Article 24 (Business Regulations)
(1)Necessary matters pertaining to the trading on a futures market shall be prescribed in the business regulations of the Exchange.
(2)Business regulations referred to in paragraph (1) shall contain the following matters: <Amended by Act No. 5504, Jan. 13, 1998>
1.Categories and product types of the futures trading to be handled;
2.Settlement month of futures trading;
3.Opening and closing of the futures market;
4.Suspension of futures trading;
5.Matters relating to the execution of contract relating to futures trading and trading limits;
6.Method of settlement;
7.Matters on the supervision over members, and discipline of members and the officers and employees consequent thereto; and
8.Matters necessary for futures trading other than those matters given in subparagraphs 1 through 7.
(3)Where the Exchange wishes to change its business regulations, it shall obtain approval from the Financial Supervisory Commission. <Amended by Act No. 5737, Feb. 1, 1999; Act No. 5982, May 24, 1999>
(4)Where the Financial Supervisory Commission intends to give approval referred to in paragraph (3), it shall consult in advance with the Minister of Finance and Economy. <Newly Inserted by Act No. 5504, Jan. 13, 1998; Act No. 5737, Feb. 1, 1999; Act No. 5982, May 24, 1999>

Article 25 Deleted.
<by Act No. 5737, Feb. 1, 1999>

Article 26 (Trading Margins)
(1)In order to guarantee the fulfillment of its obligation to the Exchange, a member shall, when carrying out futures trading, deposit a trading margin with the Exchange under the conditions as determined by the business regulations. <Amended by Act No. 7113, Jan. 29, 2004>
(2)The necessary matters for the minimum deposit limit, operation and management of trading margins referred to in paragraph (1) shall be determined by the business regulations of the Exchange. <Amended by Act No. 5504, Jan. 13, 1998>

Article 27 (Common Fund for Compensating for Damages)
(1)In order to compensate for damages arising from the default of liabilities with respect to futures trading, the Exchange may have its members reserve a common fund for compensating for damages (hereinafter referred to as the Common Fund ).
(2)The necessary matters for the reserve rates, reserve limit, use or operation of the Common Fund shall be determined by the Presidential Decree. <Amended by Act No. 5504, Jan. 13, 1998>

Article 28 (Performance of Obligations, etc. by Exchange)
(1)For effective futures trading, the Exchange may, in accordance with the business regulations and on behalf of its members, exercise or acquire the relevant credits or fulfil or undertake the relevant obligations, with respect to the credits and obligations resulting from the futures trading conducted by such members. <Amended by Act No. 7113, Jan. 29, 2004>
(2)Where the Exchange has incurred a loss as a result of such fulfillment or undertaking of obligations as provided in paragraph (1), the Exchange may, in accordance with the business regulations, hold such member or other members liable for either the total amount or a portion of such loss. <Amended by Act No. 7113, Jan. 29, 2004>

Article 29 (Order of Priority in Discharge of Liabilities)
(1)Where a member of the Exchange causes damage to the Exchange or other members due to default of his obligations with respect to futures trading, the latter shall hold the right to preference payment over any other creditors against the former s member deposits, trading margins (excluding the trading margins belonging to the account of any customer who is not responsible for the default of obligations) and the share in the Common Fund. <Amended by Act No. 5737, Feb. 1, 1999; Act No. 6171, Jan. 21, 2000>
(2)Notwithstanding the provisions of paragraph (1), the rights to member deposits by a customer referred to in Article 23-2 (3) shall prevail over the right of the Exchange or members. <Newly Inserted by Act No. 5737, Feb. 1, 1999; Act No. 7113, Jan. 29, 2004>

Article 30 (Public Notice of Stock Lists and Submission, etc. of Reports)
(1)The Exchange shall publish stock lists that detail each trading day s total volume, openings, highs, lows and closings quoted or agreed turnovers for each item of futures trading product types. <Amended by Act No. 5504, Jan. 13, 1998>
(2)Deleted. <by Act No. 5737, Feb. 1, 1999>

Article 31 (Prohibition of Unfair Trading Practices such as Price Manipulation, etc.)
(1)No person shall, in connection with futures trading, commit any of the following: <Amended by Act No. 6171, Jan. 21, 2000>
1.Submission of an offer of futures trading through prior agreement with other person whereby such other person will simultaneously submit a matching offer to necessarily effectuate the relevant futures trading with an identical price or an agreed value;
2.A false transaction without the real intention to transfer the concerned right in the transactions;
3.Entrustment or acceptance of such entrustment with respect to activities provided in subparagraph 1 or 2;
4.Trading activities, by alone or in cooperation with other persons, giving the wrong impression that the pertinent futures trading is experiencing active trading or attempting to either fix or change market prices of items subject to the futures trading, for the purpose of soliciting a certain futures trading;
5.Dissemination of rumors to the effect that the market price of futures trading shall change as a result of a market operation by itself or other person, for the purpose of soliciting a certain futures trading;
5-2.The act of fixing or altering, independently or jointly with other person, prices of items subject to the futures trading for the purpose of gaining unfair profits or getting any third person to gain such unfair profits in the futures trading; and
6.Other activities as prescribed by the Presidential Decree that are in conflict with fair execution of futures trading.
(2)Persons that have violated paragraph (1) shall be liable for the pertinent damages incurred by a person who executed the futures trading, entrusted the futures trading or accepted such entrustment in the futures market based on prices established by such act of violation, in connection with the relevant futures trading, and giving or accepting such entrustment.
(3)The right to claim for damages pursuant to paragraph (2) shall lapse by prescription in the event it has not been exercised within 1 year since the claimant became aware of such act of violation of paragraph (1) or within 3 years since such act was committed.

Article 31-2 (Special Cases of Unfair Trading Practices against Stocks Futures Trading)
(1) Persons who fall under any of the following subparagraphs (including those for whom one year has not elapsed from the date of becoming not to fall under any of the following subparagraphs), and persons who have come to know, in connection with the business, of important information concerning the business etc. of the stock-listed corporations or KOSDAQ-listed corporations under the Securities and Exchange Act including those to list within six months), that has not been opened to the public, and those who have received the relevant information from them, shall be prohibited from utilizing the said information or getting other persons to utilize it in connection with the futures trading subject to the securities issued by the relevant corporations: <Amended by Act No. 7530, May 31, 2005>
1.Relevant corporation and its officers, employees and agents;
2.Major shareholders of the relevant corporation;
3.Persons having authorities to permit, authorize, guide, supervise and others under the Acts and subordinate statutes with regard to the relevant corporation;
4.Persons having concluded a contract with the relevant corporation; and
5.Agents, employees or other employed persons of those falling under any of subparagraphs 2 through 4 (where those falling under any of subparagraphs 2 through 4 are corporations, their officers, employees and agents).
(2)The term important information that has not been opened to the public in paragraph (1) means what capable of giving a great impact on the investor s judgment on investments, from among the information on the facts, etc. falling under any subparagraph of Article 186 (1) of the Securities and Exchange Act, that is what prior to an opening by the relevant corporation under the conditions as set by the Ordinance of the Ministry of Finance and Economy, to the public so as to let the multitude know of it. <Amended by Act No. 7530, May 31, 2005>
(3) The offenders of the provisions of paragraph (1) shall be liable for compensating any damages incurred to those who have made the relevant futures trading, in connection with the said trading.
(4) Claims for damage compensation under the provisions of paragraph (3) shall be expired by prescription in case where the rightful claimants have not exercised them for one year from the date of knowing of an occurrence of the fact of violating the provisions of paragraph (1) or for three years from the date of occurrence of such acts.
[This Article Newly Inserted by Act No. 7113, Jan. 29, 2004]

Article 32 (Limits on Trading, etc.)
The Financial Supervisory Commission may, in accordance with the Presidential Decree, take measures, including limiting the volume of futures trading of futures companies and customers, in order to maintain the order of the futures market. <Amended by Act No. 5504, Jan. 13, 1998; Act No. 6171, Jan. 21, 2000>

Article 33 (Prohibition of Disclosure of Information Obtained While Performing Duties)
Neither persons falling within any of the following, who have obtained, in connection with the duties of their office, information that may have an impact on the determination of prices in the futures market nor any other who have obtained such information from such persons shall disclose such information, make a profit for themselves or enable a third party to make a profit by using such information: <Amended by Act No. 5504, Jan. 13, 1998; Act No. 6171, Jan. 21, 2000>
1.Any person engaged in licensing, approval, permission or supervision pursuant to this Act over futures-related institutions mentioned in Article 81 (1);
2.Any officer and employee of the Exchange; and
3.Any person in charge of drafting, formulating and implementing a policy that may affect the prices of items subject to the futures trading.

Article 34 (Conclusion of Remaining Business in Case of Suspension of Futures Trading)
(1)In case where the futures trading is suspended under the conditions as set by this Act, or the business regulations or the members management regulations of the Exchange, the Exchange shall get the relevant members or other members to suspend any futures trading performed by the relevant members.
(2) In case where the Exchange has made other members suspend the relevant futures trading under paragraph (1), it shall be deemed that a delegated contract is effected between the relevant member and another member.
[This Article Wholly Amended by Act No. 7113, Jan. 29, 2004>

Article 35 (Brokerage Contract Rules)
(1)In accepting consignment of futures trading, members of the Exchange shall comply with brokerage contract rules prescribed by the Exchange.
(2)Brokerage contract rules under paragraph (1) shall contain the following:
1.Conditions for consignment of futures trading;
2.Method of settlement;
3.House margin and method of deposit thereof;
4.Commission fee and method of collecting thereof; and
5.Necessary matters other than those given in subparagraphs 1 through 4 with respect to consignment of futures trading.
(3) Where the Exchange intends to change its brokerage contract rules, it shall obtain approval from the Financial Supervisory Commission. <Amended by Act No. 5737, Feb. 1, 1999; Act No. 5982, May 24, 1999>
(4) Where the Financial Supervisory Commission intends to give approval referred to in paragraph (3), it shall consult in advance with the Minister of Finance and Economy. <Newly Inserted by Act No. 5504, Jan. 13, 1998; Act No. 5737, Feb. 1, 1999; Act No. 5982, May 24, 1999>

Article 36 (House Margin)
(1)Where a member of the Exchange accepts consignment of futures trading, he shall receive from the customer the house margin in such amount as prescribed by the Exchange.
(2)The necessary matters for the minimum deposit limit, operation and management, etc. of house margin under paragraph (1) shall be determined by brokerage contract rules. <Amended by Act No. 5504, Jan. 13, 1998>

CHAPTER IV FUTURES BUSINESS

Article 37 (License for Futures Business)
(1)Any company which intends to run the futures business shall get a license from the Financial Supervisory Commission. <Amended by Act No. 6171, Jan. 21, 2000>
(2)Deleted. <by Act No. 5737, Feb. 1, 1999>
(3)Where a futures company which is a foreign corporation (hereinafter referred to as foreign futures company ) intends to open its branch or business office in order to run the futures business in Korea, it shall get a license from the Financial Supervisory Commission. <Amended by Act No. 6171, Jan. 21, 2000>
(4)The branch or business office that the foreign futures company opens after getting a license under paragraph (3) shall be deemed the futures company and its operating fund shall be deemed its capital in the application of this Act. <Newly Inserted by Act No. 6171, Jan. 21, 2000>
(5) The Financial Supervisory Commission may attach conditions to any license granted under paragraphs (1) and (3). <Newly Inserted by Act No. 6171, Jan. 21, 2000>

Article 38 (Requirements for License)
(1)Any company which intends to get a license for the futures business under Article 37 (1) shall satisfy requirements falling under each of the following subparagraphs:
1.It shall be a corporation that is capitalized with not less than three billion won;
2.It shall be able to protect its customers and shall be complete with manpower, computer facilities and equipment and other physical facilities sufficient to run the futures business;
3.Its business plan shall be appropriate and sound; and
4.Its major investors prescribed by the Presidential Decree shall have the capability to fully invest with sound financial standings and social credit ratings.
(2) Any foreign futures company which intends to get a license for opening its branch and other business office in accordance with the provisions of Article 37 (3) shall satisfy requirements falling under each of the following subparagraphs:
1.The operating fund of its branch or other business office shall exceed not less than three billion won;
2.It shall be presently running the futures business under foreign Acts and subordinate statutes;
3.Its property, finance and business shall be sound enough to run the futures business in Korea and it shall have high international credit ratings; and
4.It shall satisfy the requirements referred to in paragraphs (1) 2 and 3.
(3) Details of the requirements for the license referred to in paragraphs (1) and (2) shall be prescribed by the Presidential Decree.
[This Article Newly Inserted by Act No. 6171, Jan. 21, 2000]

Article 38-2 (Approval, etc. of Alteration of Major Shareholders)
(1) Any person intending to become major shareholders prescribed by the Presidential Decree by acquiring the stocks of futures company shall equip himself with the requirements prescribed by the Presidential Decree for sound management among the requirements for major investors under the provisions of Article 38 (1) 4 and (3), and obtain in advance an approval of the Financial Supervisory Commission.
(2) The Financial Supervisory Commission may order, by setting the period within six months, a disposition of the stocks acquired without obtaining an approval under the provisions of paragraph (1).
(3) Any person who has acquired the stocks without obtaining an approval under the provisions of paragraph (1) shall not exercise any voting right on the portion of stocks acquired without obtaining an approval.
(4) Matters necessary for the detailed requirements for approval and order under the provisions of paragraphs (1) and (2) shall be prescribed by the Presidential Decree.
[This Article Newly Inserted by Act No. 7617, Jul. 29, 2005]

Article 39 (Publication of License)
The Financial Supervisory Commission shall, when it grants a license pursuant to Article 37 (1) and (3), promptly publish its contents in the Official Gazette and make it widely known to the public making use of computer communications, etc.
[This Article Wholly Amended by Act No. 6171, Jan. 21, 2000]

Article 39-2 (Maintenance of Soundness in Asset Holdings)
(1)Any futures company shall abide by matters prescribed by the Presidential Decree with respect to the operation of assets, the maintenance of soundness in the management and improvement of business operation in carrying out the futures business. <Amended by Act No. 6171, Jan. 21, 2000>
(2)The branch or other business office of a foreign futures company shall hold assets equivalent to the gross amount of its operating fund and liabilities in Korea. <Amended by Act No. 6171, Jan. 21, 2000>
(3)The branch or other business office of a foreign futures company shall settle accounts independently of its head office, and if the assets held in Korea pursuant to paragraph (2) fall, as a result of the settlement, short of the total amount of its operating fund and liabilities, it shall compensate for such deficiency within sixty days from the date on which its accounts are finalized. <Amended by Act No. 6171, Jan. 21, 2000>
(4)Where the branch or other business office of a foreign futures company is liquidated or goes bankrupt, it shall preferentially appropriate its assets held in Korea for the performance of obligations payable to parties concerned with carrying out the futures business of the branch or other business office, which have their addresses or dwelling places in Korea at the time of the business activities. <Amended by Act No. 6171, Jan. 21, 2000>
[This Article Newly Inserted by Act No. 5737, Feb. 1, 1999]

Article 39-3 (Disqualifications of Officers)
The persons falling under any of the following subparagraphs shall be prohibited from becoming the officers of a futures company, and when they become to correspond thereto after they became the officers, they shall lose such officers qualifications: <Amended by Act No. 7428, Mar. 31, 2005>
1.Minors, incompetents or quasi-incompetents;
2.Bankrupt who fails to be reinstated;
2.Person who is sentenced to a bankrupt; Enforcement Date: Apr. 1, 2006
3.Person for whom 5 years have not elapsed from the day on which his sentence execution was terminated (including the case where it is deemed to have been terminated) or was exempted, after he had been sentenced to an imprisonment without prison labor or a heavier punishment;
4.Person who is under a grace period after having been sentenced to a suspension of the execution of imprisonment without prison labor or a heavier punishment;
5.Person for whom 5 years have not elapsed from the day on which his sentence execution was terminated (including the case where it is deemed to have been terminated) or was exempted therefrom, after having been sentenced to the heavier punishment than a fine pursuant to this Act or the foreign Acts and subordinate statutes relating to futures trading and other finance-related Acts and subordinate statutes as prescribed by the Presidential Decree (hereinafter referred to as the finance-related Acts and subordinate statutes );
6.Person for whom 5 years have not elapsed from the day on which he was dismissed or removed pursuant to this Act or the finance-related Acts and subordinate statutes; and
7.Person who has been an officer or an employee of the corporation or company whose license or authorization etc. of business was revoked pursuant to this Act or the foreign Acts and subordinate statutes relating to futures trading or the finance-related Acts and subordinate statutes (limited to the person who is directly responsible for occurrence of the causes for said revocation, and who is prescribed by the Presidential Decree), for whom 5 years have not elapsed from the day on which a revocation against the relevant corporation or company was rendered.
[This Article Wholly Amended by Act No. 7113, Jan. 29, 2004>

Article 40 (Internal Control Standards)
(1) Any futures company shall set fundamental procedures and standards (hereafter in this Article referred to as the internal control standards ) to be followed by its officers and employees when they perform their duties in order to observe the Acts and subordinate statutes, manage assets in a sound manner, and protect customers.
(2) Specific matters to be included in the internal control standards referred to in paragraph (1) shall be prescribed by the Presidential Decree.
[This Article Newly Inserted by Act No. 6171, Jan. 21, 2000]

Article 41 (Authorization for Change of Business, etc.)
Any futures company shall, where matters falling under any of the following subparagraphs take place, seek authorization from the Financial Supervisory Commission: <Amended by Act No. 5982, May 24, 1999; Act No. 6171, Jan. 21, 2000>
1.The merger, dissolution, or discontinuation of business of a corporation;
2.Matters prescribed by the Presidential Decree are changed from among the contents of a licence referred to in Article 37 (1) and (3); and
3.Transfer or takeover of the whole of the business (including any case similar thereto).
[This Article Wholly Amended by Act No. 5737, Feb. 1, 1999]

Article 41-2 (Matters to Report)
Any futures company shall, where it falls under any case of the following subparagraphs, promptly file a report thereof with the Financial Supervisory Commission:
1.Where it changes the trade name;
2.Where it appoints or dismisses officers;
3.Where a change takes place in the largest investor;
4.Where it newly opens a branch or other business office;
5.Where it changes the location of the head office, the branch or other business office, or discontinues, resumes or closes its business; and
6.Where matters that have a serious impact on the performance of the business of the corporation concerned and prescribed by the Presidential Decree occur.
[This Article Newly Inserted by Act No. 6171, Jan. 21, 2000]

Article 42 (Settlement of Remaining Business)
In case of a cancellation of license, the complete or partial suspension of business operations, etc., the futures company or its successor shall be deemed to be a futures company to the extent of the settlement of futures trading which were executed by such futures company. <Amended by Act No. 6171, Jan. 21, 2000>

Article 43 (Advance Notification of Risk in Trading, etc.)
(1)Any futures company shall, prior to making a contract with a customer, notify in writing the customer of potential risk exposure associated with price fluctuation arising from futures trading as well as the possibility of additional liabilities. <Amended by Act No. 6171, Jan. 21, 2000>
(2)Any futures company shall deliver in writing to the customer the terms and conditions of the contract for the pertinent futures trading with respect to business operations of such futures trading. <Amended by Act No. 6171, Jan. 21, 2000>
(3)The matters to be entered in documents, and necessary matters for the notification and delivery referred to in paragraphs (1) and (2) shall be determined by the Presidential Decree. <Amended by Act No. 5504, Jan. 13, 1998>

Article 44 (Prohibition on Self-Transactions)
Where any futures company receives an entrustment of a futures trading, etc. or is engaged in brokerage, intermediary or agency of such entrustment (hereinafter referred to as brokerage, etc. ), it may not become the counter-party effectuating the transaction instead of filing an application pertaining to the pertinent entrustment with the Exchange or an overseas futures market, or performing the pertinent brokerage, etc. <Amended by Act No. 6171, Jan. 21, 2000>

Article 45 (Prohibition on Improper Solicitation, etc.)
(1)Any futures company and its officers and employees shall be prohibited from committing the acts falling under any of the following subparagraphs: <Amended by Act No. 6171, Jan. 21, 2000>
1.To solicit the execution of a contract by making a promise to undertake the compensation for all or a part of the losses incurred by a customer or to guarantee a profit to a customer;
2.To solicit the execution of a contract by presenting a conclusive judgement that leads a customer to the wrong impression that a profit would be guaranteed;
3.To make an offer or a brokerage, etc. without executing a contract and then seek ex post facto confirmation from a customer;
4.To acquire entrustment margins or brokerage commissions by using false prices or by employing unjust methods in connection with a contract;
5.To refuse or to unjustifiably delay either the making of an offer or brokerage, etc. of a futures trading, etc. pursuant to a contract or the fulfillment of all or a part of the obligations arising from such contracts; or
6.Other acts prescribed by the Presidential Decree that are in conflict with customer protection, in the acceptance of entrustment with respect to futures trading, etc., or that are harmful to the fair execution of futures trading, etc.
(2)Any futures company and its officers and employees who have violated paragraph (1) shall be liable for the damages suffered by any customer, which have resulted from such trade. <Amended by Act No. 6171, Jan. 21, 2000>

Article 46 (Documents on Business Operations)
Any futures company shall prepare and keep documents on business operations in accordance with the methods prescribed by the Financial Supervisory Commission. <Amended by Act No. 5504, Jan. 13, 1998; Act No. 6171, Jan. 21, 2000>

Article 47 (Business Reports)
(1) Any futures company shall prepare a business report stating the actual record of business, financial status and other matters prescribed by the Presidential Decree for three months, six months, nine months and twelve months from the opening date of every business year, and submit it to the Financial Supervisory Commission within 45 days after the elapse of the relevant period respectively.
(2) Any futures company shall provide the business report under the provisions of paragraph (1) to the perusal of general public by keeping it in the principal office, branch office and other business places or by means of the electronic documents for one year from the date of submission to the Financial Supervisory Commission.
(3) Detailed matters and other necessary matters for a preparation of the business report under the provisions of paragraph (1) shall be provided by the Financial Supervisory Commission.
[This Article Wholly Amended by Act No. 7530, May 31, 2005]

Article 48 (Trading Limits of Officers and Employees, etc.)
(1)Except for cases prescribed by the Presidential Decree, officers and employees of a futures company may not commit an entrustment of futures trading, etc. on their account, no matter what account name it may be under. <Amended by Act No. 6171, Jan. 21, 2000>
(2)Where a futures company accepts an entrustment of futures trading from a customer, it may make a futures trading by being vested with discretionary power in decisions on trade terms, limited to its volume, price and trading period. In this case, the kinds of futures trading items and trading methods shall be determined by the customer. <Amended by Act No. 7113, Jan. 29, 2004>
(3)Where a futures company accepts an entrustment of futures trading from a customer by being vested with discretionary power in all matters concerning the futures trading, and makes the said trading under paragraph (2) (hereafter in this Article, referred to as the discretionary futures trading ), it shall make the trading with the care of a good manager, and shall be prohibited from committing any acts falling under each of the following subparagraphs: <Newly Inserted by Act No. 7113, Jan. 29, 2004>
1.Acts to persuade an entrustment relating to the discretionary futures trading or accepting an entrustment, in contradiction to the customer s investment principle under his own judgement and responsibility;
2.Acts to make the futures trading excessively often in view of the purport of accepting an entrustment and the scale of money under entrustment; and
3.Acts to make use of the discretionary futures trading for the benefits of his own or the third party.
(4)Where a futures company makes any discretionary futures trading under the provisions of paragraph (2), it shall be under the conditions as prescribed by the Ordinance of the Ministry of Finance and Economy. <Newly Inserted by Act No. 7113, Jan. 29, 2004>

Article 49 (Management of Customer s Assets and Accounting Treatment in Connection with Acceptance of Entrustment of Futures Trading, etc.)
Any futures company shall comply with matters prescribed by the Financial Supervisory Commission with respect to the management of money or securities deposited by the customer in connection with the futures trading, etc., and any other assets belonging to the customer s account, and with respect to the accounting treatment. <Amended by Act No. 5504, Jan. 13, 1998; Act No. 6171, Jan. 21, 2000>

Article 49-2 (Separate Custody of Customer Deposits)
(1)Any futures company shall deposit (including a trust; hereinafter the same shall apply) money deposited from customers in connection with futures trading or other money belonging to customer s property (hereinafter referred to as customer deposits ) separately from his own property with a securities finance company referred to in Article 145 of the Securities and Exchange Act (hereinafter referred to as a depository ). <Amended by Act No. 6171, Jan. 21, 2000; Act No. 7113, Jan. 29, 2004; Act No. 7530, May 31, 2005>
(2)Where a futures company deposits customer deposits with a depository pursuant to paragraph (1), it shall specify that such deposits are customer s property. <Amended by Act No. 6171, Jan. 21, 2000>
(3)Any futures company which has deposited customer deposits pursuant to paragraph (1) (hereinafter referred to as depository futures company ) shall not assign or offer customer deposits as security and no person shall set them off or attach (including attach provisionally) them, unless the Presidential Decree may otherwise determine. <Amended by Act No. 6171, Jan. 21, 2000>
(4)A depository futures company shall withdraw customer deposits deposited with the depository and pay preferentially them to customers where the futures company falls hereunder. In this case, the futures company shall make public notice of such fact, payment time and place of customer deposits, and other matters relating to the payment of customer deposits in at least two daily newspapers within the period as prescribed by the Presidential Decree: <Amended by Act No. 6171, Jan. 21, 2000>
1.Where it resolves to discontinue business operations;
2.Where it receives an order for suspension of business operations;
3.Where it has its license cancelled;
4.Where it resolves to be dissolved;
5.Where it is declared bankrupt; and
6.Where any equivalent cause listed in subparagraphs 1 through 5 occurs.
(5)The depository, where it falls under any of subparagraphs of paragraph (4), shall preferentially pay customer deposits to the depository futures company. <Amended by Act No. 6171, Jan. 21, 2000>
(6)The depository shall operate customer deposits in any method hereunder:
1.Purchase of national and local bonds;
2.Purchase of bonds whose payment is guaranteed by the Government, local governments or financial institutions; and
3.Other method by which it is deemed possible to operate customer deposits safely and which the Presidential Decree determines.
(7)The scope, deposit ratios, matters on the withdrawal, and matters on the management of customer deposits to be deposited by a futures company with the depository under paragraph (1), and other matters necessary for depositing customer deposits shall be determined by the Presidential Decree. <Amended by Act No. 6171, Jan. 21, 2000>
[This Article Newly Inserted by Act No. 5737, Feb. 1, 1999]

Article 49-3 (Depositing of Customer Securities in Custody)
(1)Any futures company shall promptly deposit customer securities and bonds or deeds as determined by the Presidential Decree which it is entitled to hold on consignment of futures trading or other transaction with the Korea Securities Depository and Settlement established pursuant to Article 173 of the Securities and Exchange Act (hereafter in this Article referred to as the Depository ). <Amended by Act No. 6171, Jan. 21, 2000; Act No. 7113, Jan. 29, 2004; Act No. 7530, May 31, 2005>
(2)Any futures company shall promptly deposit securities, bonds and deeds which it is entitled to hold in operating its assets and which are determined by the Presidential Decree with the Depository. <Amended by Act No. 6171, Jan. 21, 2000; Act No. 7113, Jan. 29, 2004>
[This Article Newly Inserted by Act No. 5737, Feb. 1, 1999]

Article 50 (Liability Reserve)
(1) Any futures company shall accumulate a liability reserve to indemnify the customers from any losses that may be incurred due to the default of liabilities, violation of Acts and subordinate statutes or negligences by its officers or employees during the course of carrying out futures business. <Amended by Act No. 6171, Jan. 21, 2000>
(2) Any futures company shall comply with the matters prescribed by the Presidential Decree with respect to the accumulation, operation and management of liability reserves. <Amended by Act No. 5504, Jan. 13, 1998; Act No. 6171, Jan. 21, 2000>

Article 51 (Overseas Futures Trading)
(1) Any person wishing to carry out overseas futures trading shall do so through an entrustment with a futures company. <Amended by Act No. 6171, Jan. 21, 2000>
(2) Necessary matters pertaining to a futures company s acceptance of entrustment with respect to overseas futures trading and fulfillment of a pertinent brokerage, etc. shall be prescribed by the Presidential Decree. <Amended by Act No. 6171, Jan. 21, 2000>

Articles 52 through 60 Deleted.
CHAPTER V Deleted.

Articles 61 through 74 Deleted.
CHAPTER VI FUTURES ASSOCIATION

Article 75 (Establishment)
(1) Futures companies may, on permission given by the Financial Supervisory Commission, establish a Futures Association (hereinafter referred to as the Association ) for the purpose of maintaining mutual business order and pursuing sound development of the futures industry. <Amended by Act No. 5737, Feb. 1, 1999; Act No. 5982, May 24, 1999>
(2)The Association shall be a juristic person.
(3) The Association shall, when it intends to alter matters prescribed by the Presidential Decree of the articles of association, get approval from the Financial Supervisory Commission. <Newly Inserted by Act No. 6171, Jan. 21, 2000>

Article 76 (Member Fees)
The Association may, in accordance with the articles of incorporation, collect membership fees from its members.

Article 77 (Work)
(1) The Association shall carry out the work falling under any of the following subparagraphs:
1.Maintenance of self-regulatory business order among futures companies themselves and the protection of customers;
2.Operation and management of the specialized manpower to raise the expertise of futures companies;
3.Survey and research of the futures-related systems;
4.Training in the futures trading;
5.Other work incidental to the work under subparagraphs 1 through 4; and
6.Other work prescribed by the Presidential Decree.
(2) The Association shall, where it makes, amends or abolishes the rules governing its work, promptly file a report thereof with the Financial Supervisory Commission.
[This Article Wholly Amended by Act No. 6171, Jan. 21, 2000]

Article 78 (Application Mutatis Mutandis of Civil Act)
Except for special provisions in this Act pertaining to the Association, the provisions for corporate juridical persons in the Civil Act (excluding Article 39 of the Civil Act) shall apply mutatis mutandis to the Association. <Amended by Act No. 7530, May 31, 2005>

Article 79 (Provisions of Application Mutatis Mutandis)
The provisions of Article 39-3 shall apply mutatis mutandis to the officers of the Association, and the provisions of Article 48 (1) shall apply mutatis mutandis to the officers and employees of the Association, respectively.
[This Article Wholly Amended by Act No. 7113, Jan. 29, 2004]

Article 80 (Futures Academy)
The Association may establish a futures academy for the purposes of enhancing proficiency of persons engaged in futures business and spreading expert knowledge of futures trading.

CHAPTER VII SUPERVISION

Article 81 (Report and Inspection)
(1)The Financial Supervisory Commission may order the Exchange, the Association, and futures companies (hereinafter referred to as futures-related institutions ) to make a report or submit data on their business and property and may have the Governor of the Financial Supervisory Service established under the Act on the Establishment, etc. of Financial Supervisory Organizations (hereinafter referred to as the Financial Supervisory Service ) inspect their business, financial status, books, documents or other articles. <Amended by Act No. 7530, May 31, 2005>
(2)A person who conducts an inspection pursuant to paragraph (1) shall carry a certificate showing his powers and produce it to the persons concerned.
(3)The Financial Supervisory Commission may determine the methods and procedures of an inspection and standards for measures for results thereof and other necessary matters.
[This Article Wholly Amended by Act No. 5504, Jan. 13, 1998]

Article 81-2 (Investigations by Financial Supervisory Commission and Securities and Futures Commission)
(1)Where there exists a violation of this Act, an order under this Act, or any rules or order of the Financial Supervisory Commission or where it is deemed necessary for public interests or the protection of investors, the Financial Supervisory Commission (referring to the Securities and Futures Commission under the Act on the Establishment, etc. of Financial Supervisory Organizations (hereinafter referred to as the Securities and Futures Commission ) where the provisions of Articles 31 through 33, 44, 45, 48, 51, 93 and 94 are violated; hereafter in this Article the same shall apply) may order the persons concerned to make a report or submit data for reference or may have the Governor of the Financial Supervisory Service (hereinafter referred to as the Financial Supervisory Service Governor ) inspect books, documents or other articles. <Amended by Act No. 5737, Feb. 1, 1999; Act No. 7530, May 31, 2005>
(2)The Financial Supervisory Commission may, if it is deemed necessary for an investigation under paragraph (1), request the persons concerned to perform the following:
1.Submission of a statement on the fact and situations relating to matters to be investigated;
2.Presence for a testimony relating to matters to be investigated; and
3.Submission of books, documents or other articles necessary for an investigation.
(3)The Financial Supervisory Commission may request futures-related institutions to submit data necessary for an investigation on conditions as the Presidential Decree in case where deemed necessary for conducting an investigation referred to in paragraph (1).
(4)Where there exists a violation of this Act, or an order under this Act or any rules or an order of the Financial Supervisory Commission as a result of an investigation referred to in paragraph (1), the Financial Supervisory Commission may give a corrective order or take other measures as determined by the Presidential Decree.
(5)Where it deems that there is a suspicion of violating this Act or an order under this Act or any rules or an order of the Financial Supervisory Commission, the Exchange shall notify the Financial Supervisory Commission thereof.
(6)The Financial Supervisory Commission may determine standards for procedures and measures necessary for an investigation referred to in paragraph (1) and measures referred to in paragraph (4) or other necessary matters.
[This Article Newly Inserted by Act No. 5504, Jan. 13, 1998]

Article 82 Deleted.
<by Act No. 5504, Jan. 13, 1998>

Article 83 Deleted.
<by Act No. 7113, Jan. 29, 2004>

Article 84 (Supervisory Measures against Futures Companies)
(1)The Financial Supervisory Commission may revoke the business license of a futures company where the latter falls under any of the following subparagraphs: <Amended by Act No. 5737, Feb. 1, 1999; Act No. 5982, May 24, 1999; Act No. 6171, Jan. 21, 2000>
1.Where it obtains a license under Article 37 (1) and (3) in an illegal manner;
1-2.Where it commits a violation of the contents and conditions of a license under Article 37 (1), (3) or (5);
2.Where it violates the provisions of Article 41;
3.Where it continues to be engaged in business in violation of a business suspension order pursuant to paragraph (2) or receives a business suspension order not less than twice; and
4.Where it violates, other than subparagraphs 1 and 3, this Act or orders under this Act and therefore is deemed to be unfit to conduct business activities as a futures company.
(2)The Financial Supervisory Commission may order the suspension of the whole or part of a futures company s operation for the specified period of one year or less where the futures company falls hereunder: <Amended by Act No. 5504, Jan. 13, 1998; Act No. 5737, Feb. 1, 1999; Act No. 6171, Jan. 21, 2000>
1.Where the futures company violates the provisions of Article 39-2, 40, or 43 through 50; or
2.Where it is deemed inevitable for protecting investors as the futures company is likely to be insolvent in view of its business operations and financial standing.
(3)Deleted. <by Act No. 5737, Feb. 1, 1999>
(4)Where the Financial Supervisory Commission acknowledges that an officer or employee of the futures company has been appointed or employed in an illegal manner or has violated this Act, orders under this Act, the related Acts and subordinate statutes, it may present the ground therefor, and request that the relevant futures company suspend the exercise of duties by such officer or employee or dismiss such officer or employee. <Amended by Act No. 7113, Jan. 29, 2004>
(5) The provisions of Article 39 shall apply mutatis mutandis to the cancellation of a license under the provisions of paragraph (1). <Newly Inserted by Act No. 6171, Jan. 21, 2000>

Article 84-2 (Hearing)
Where the Financial Supervisory Commission intends to make a disposition of cancelling a license for futures business under the provisions of Article 84 (1), it shall hold hearings.
[This Article Wholly Amended by Act No. 7113, Jan. 29, 2004]

Article 85 (Supervisory Measures against Association)
(1) The Financial Supervisory Commission may order the partial suspension of the work of the Association, or the Association to take other necessary measures if deemed necessary for public interest and the protection of investors. <Amended by Act No. 5504, Jan. 13, 1998; Act No. 6171, Jan. 21, 2000>
(2) The provisions of Article 84 (4) shall apply mutatis mutandis to other supervisory measures against the Association. In this case, the Exchange and its officers and employees shall be deemed to be a member of the Association and its officers and employees. <Amended by Act No. 5504, Jan. 13, 1998; Act No. 7113, Jan. 29, 2004>

Article 86 (Measures in Emergency Situations)
The Minister of Finance and Economy may order the close of the futures market or other appropriate measures, in case where deemed that the normal execution of futures trading is impossible due to natural disaster, war, national emergency, radical changes in the economic situation or incidents equivalent to the foregoing. <Amended by Act No. 5737, Feb. 1, 1999>

Article 87 (Consultation)
The Minister of Finance and Economy or the Financial Supervisory Commission shall, if measures under Articles 84, and 85 through 86 are deemed to have a serious impact on the commodity futures market, consult with the Minister in charge of such commodity futures. <Amended by Act No. 5504, Jan. 13, 1998; Act No. 5737, Feb. 1, 1999; Act No. 7113, Jan. 29, 2004>

CHAPTER VIII SUPPLEMENTARY PROVISIONS

Article 88 Deleted.
<by Act No. 5737, Feb. 1, 1999>

Articles 89 through 91 Deleted.
<by Act No. 5504, Jan. 13, 1998>

Article 92 (Relation with Other Acts)
(1)The Exchange, any futures company, and any depository shall be deemed a foreign exchange agency under Article 8 of the Foreign Exchange Transactions Act, in connection with intermediary business of foreign exchange deals accompanied by futures trading; in case where there exist special provisions in this Act pertaining to the Exchange, the futures company, and the depository, such provisions shall prevail over the Foreign Exchange Transactions Act. <Amended by Act No. 5737, Feb. 1, 1999; Act No. 6171, Jan. 21, 2000; Act No. 7530, May 31, 2005>
(2)Where foreign exchange deals (excluding the takeover and delivery of foreign exchange) of a resident are accompanied by the futures trading under this Act, Article 18 of the Foreign Exchange Transactions Act shall apply only to cases prescribed by the Presidential Decree. <Amended by Act No. 5737, Feb. 1, 1999; Act No. 7530, May 31, 2005>

Article 93 (Orders on Over-the-Counter Trading)
(1) The Financial Supervisory Commission may issue an order of trading information disclosure or of internal control installation or other necessary orders against concerned parties to the relevant trading in accordance with the Presidential Decree, where certain transactions between concerned parties, which are pursued for the purposes of making a profit or averting risk without going through a futures market or overseas futures market and which carry characteristics similar to those of a futures trading, are in conflict with the underlying spirit of this Act or are deemed to be harmful to the public interest or to the sound order of the market. <Amended by Act No. 5504, Jan. 13, 1998; Act No. 7113, Jan. 29, 2004>
(2)The Financial Supervisory Commission may entrust the operation on the supervision of futures trading in other places than futures markets to the Financial Supervisory Service Governor as determined by the Presidential Decree. <Newly Inserted by Act No. 5504, Jan. 13, 1998>

Article 94 (Restrictions on Futures Trading by Foreigners)
The Financial Supervisory Commission may, if deemed necessary, restrict futures trading by foreigners. <Amended by Act No. 5504, Jan. 13, 1998>

Article 95 (Delegation and Entrustment of Powers)
(1)The Financial Supervisory Commission may delegate part of the powers under this Act to the Securities and Futures Commission on such terms and conditions as the Presidential Decree may determine.
(2) The Minister of Finance and Economy may delegate part of the powers under this Act to the Financial Supervisory Commission and the Securities and Futures Commission on such terms and condition as the Presidential Decree may determine. <Amended by Act No. 5737, Feb. 1, 1999>
(3)The Minister of Finance and Economy or the Financial Supervisory Commission may entrust part of the powers under this Act to the Exchange or the Association on such terms and conditions as the Presidential Decree may determine. <Amended by Act No. 5737, Feb. 1, 1999>
(4) The Financial Supervisory Commission and the Securities and Futures Commission may delegate matters requiring urgent dispositions from among the powers under this Act to the Chairman of the Financial Supervisory Commission or the Chairman of the Securities and Futures Commission, and minor matters thereof to the Financial Supervisory Service Governor, on such terms and conditions as the Presidential Decree may determine.
(5) The scope of matters of urgency and minor matters referred to in paragraph (4) shall be determined by the Presidential Decree.
[This Article Wholly Amended by Act No. 5504, Jan. 13, 1998]

Article 95-2 (Deliberation by Securities and Futures Commission)
The Financial Supervisory Commission shall, in any of the following subparagraphs, lay, in advance, it before the Securities and Futures Commission: <Amended by Act No. 5737, Feb. 1, 1999; Act No. 6171, Jan. 21, 2000>
1.Where it determines any of the following items:
(a)Deleted; <by Act No. 6171, Jan. 21, 2000>
(b)Matters on the preparation of documents by futures companies referred to in Article 46;
(c) Deleted; <by Act No. 7530, May 31, 2005>
(d) Matters on the management and accounting of property in trust by futures companies referred to in Article 49; and
(e) and (f) Deleted; <by Act No. 6171, Jan. 21, 2000>

2.and 3.Deleted; <by Act No. 5737, Feb. 1, 1999>

4.Where it takes measures or gives orders falling under any of the following items:
(a) Restriction on the volume of futures trading and other measures referred to in Article 32;
(b) Order for business suspension to futures companies referred to in Article 84 (2);
(c) Deleted; <by Act No. 5737, Feb. 1, 1999>
(d) Order given for a partial suspension of the work, etc. to the Association referred to in Article 85 (1);
(e) Order for over-the-counter transaction referred to in Article 93; and
(f) Measures on the restriction on futures trading against foreigners referred to in Article 94;
5.Where it consults with any competent Minister under Article 87;
6.Where it imposes a fine for negligence pursuant to Article 101 (3); and
7.Where the Financial Supervisory Commission deems that it needs any deliberation by the Securities and Futures Commission other than subparagraphs 1 through 6.
[This Article Newly Inserted by Act No. 5504, Jan. 13, 1998]

Article 95-3 (Direction to and Supervision over Financial Supervisory Service Governor)
The Financial Supervisory Commission or the Securities and Futures Commission may, in case where deemed necessary for the exercise of powers under this Act, give orders to the Financial Supervisory Service Governor such as directions, supervision, and alteration in the method of operations execution, and other orders necessary for supervision.
[This Article Newly Inserted by Act No. 5504, Jan. 13, 1998]

Article 95-4 (Operations of Financial Supervisory Service)
The Financial Supervisory Service shall carry out the following operations under directions or supervision of the Financial Supervisory Commission or the Securities and Futures Commission under this Act:
1.Operations on the inspection of futures-related institutions subject to inspection by the Financial Supervisory Service pursuant to this Act;
2.Operations on the supervision of futures trading in other places than futures markets;
3.Operations entrusted from the Government;
4.Operations assigned under this Act other than subparagraphs 1 through 3; and
5.Operations attendant on those listed in subparagraphs 1 through 4.
[This Article Newly Inserted by Act No. 5504, Jan. 13, 1998]

Article 95-5 (Contributions)
(1)A person who falls under any of the following subparagraphs shall share part of operating expenses of the Financial Supervisory Service: <Amended by Act No. 6171, Jan. 21, 2000>
1.Futures companies which receive commission fees from customers;
2.Deleted; and <by Act No. 5737, Feb. 1, 1999>
3.Futures-related institutions which undergo an inspection by the Financial Supervisory Service Governor pursuant to Article 81.
(2)The necessary matters for the sharing ratio, limit or the payment of contributions referred to in paragraph (1) shall be determined by the Presidential Decree.
[This Article Newly Inserted by Act No. 5504, Jan. 13, 1998]

Article 95-6 (Restrictions on Trading by Members and Employees of Financial Supervisory Commission, Securities and Futures Commission, and Financial Supervisory Service)
The provisions of Article 48 (1) shall apply mutatis mutandis to the restrictions on trading by persons falling under any of the following subparagraphs: <Amended by Act No. 7113, Jan. 29, 2004>
1.Members and public officials belonging to the Financial Supervisory Commission;
2.Members of the Securities and Futures Commission; and
3.Governor, Vice Governor, assistant vice governors, auditor and employees of the Financial Supervisory Service.
[This Article Newly Inserted by Act No. 5504, Jan. 13, 1998]

Article 95-7 (Information Exchange with Foreign Futures Supervisory Authorities)
(1)The Financial Supervisory Commission may exchange information with foreign futures supervisory authorities.
(2)Where the Financial Supervisory Commission intends to exchange information referred to in paragraph (1), it shall consult in advance with the Minister of Fiance and Economy: Provided, That this shall not apply where the Presidential Decree may otherwise determine. <Amended by Act No. 5737, Feb. 1, 1999>
(3) The Financial Supervisory Commission (referring to the Securities and Futures Commission in case of matters violating the provisions of Articles 31 through 33, 44, 45, 48, 51, 93 and 94) may cooperate with any foreign futures supervisory authorities in case that they request the survey or investigation under Articles 81 and 81-2, expressly indicating purposes and scopes, etc. <Newly Inserted by Act No. 6171, Jan. 21, 2000>
[This Article Newly Inserted by Act No. 5504, Jan. 13, 1998]

CHAPTER IX PENAL PROVISIONS

Article 95-8 (Penal Provisions)
(1) A person who has committed a violation of the provisions of Article 31 (1), 31-2 (1) or 33 shall be punished by imprisonment for not more than 10 years or a fine not exceeding 20 million won (the amount equivalent to three times the profits or evaded loss amount in case that the amount equivalent to three times the profits resulting from the act of violation or the evaded loss amount exceeds 20 million won). <Amended by Act No. 7113, Jan. 29, 2004>
(2) Where the amount of profits or losses obtained or evaded by a person due to any violation of the provisions of Article 31 (1), 31-2 (1) or 33 is not less than 500 million won, he shall be aggravatedly punished according to the following classification: <Newly Inserted by Act No. 6707, Aug. 26, 2002; Act No. 7113, Jan. 29, 2004>
1.Where the amount of the obtained profits or evaded losses is not less than 5 billion won, he shall be punished by life imprisonment or by imprisonment for a limited term of not less than 5 years; and
2.Where the amount of the obtained profits or evaded losses is not less than 500 million won but less than 5 billion won, he shall be punished by imprisonment for a limited term of not less than 3 years.
(3) In pronouncing the penalty of imprisonment under paragraphs (1) and (2), a suspension of qualification for not more than 10 years may be concurrently imposed. <Newly Inserted by Act No. 6707, Aug. 26, 2002>
[This Article Newly Inserted by Act No. 6171, Jan. 21, 2000]

Article 96 (Penal Provisions)
A person falling under any of the following cases shall be punished by imprisonment for not more than 3 years or a fine not exceeding 20 million won: <Amended by Act No. 5504, Jan. 13, 1998; Act No. 5737, Feb. 1, 1999; Act No. 6171, Jan. 21, 2000>
1.and 2.Deleted; <by Act No. 7113, Jan. 29, 2004>

3.A person who is engaged in futures trading in violation of Article 23;
4.A person who violates the provisions of Article 44 or 45 (1);
5.A person who is engaged in futures business without obtaining permission pursuant to Article 37 (1) and (3) or has obtained such approval in an illegitimate manner; and
6.Deleted. <by Act No. 5737, Feb. 1, 1999>

Article 97 (Penal Provisions)
A person falling under any of the following cases shall be punished by imprisonment of not more than 2 years or a fine not exceeding 10 million won: <Amended by Act No. 5504, Jan. 13, 1998; Act No. 5737, Feb. 1, 1999; Act No. 5982, May 24, 1999; Act No. 7113, Jan. 29, 2004; Act No. 7617, Jul. 29, 2005>
1.A person who has acquired the stocks without obtaining an approval in violation of the provisions of Article 38-2 (1); and
2.A person who has failed to dispose of the relevant stocks in violation of orders under the provisions of Article 38-2 (2);
3.Deleted; <by Act No. 5737, Feb. 1, 1999>
4.A person who violates Article 41;
5.A person who violates Article 51 (1);
6.Deleted; and <by Act No. 5737, Feb. 1, 1999>
7.A person who violates an order issued pursuant to Article 84 (2), 85 (1), 86 or 93.

Article 98 (Penal Provisions)
A person falling under any of the following cases shall be punished by imprisonment of not more than 1 year or a fine not exceeding 5 million won: <Amended by Act No. 5504, Jan. 13, 1998;Act No. 6171, Jan. 21, 2000; Act No. 7113, Jan. 29, 2004>
1.Deleted; <by Act No. 5737, Feb. 1, 1999>
2.A person who violates Article 48 (1) (including the cases where it applies mutatis mutandis in Articles 79 and 95-6) and (2);
3.Deleted; <by Act No. 7113, Jan. 29, 2004>
4.A person who fails to fulfil written notification or delivery or makes a false notification or delivery in violation of Article 43;
5.Deleted; and <by Act No. 5737, Feb. 1, 1999>
6.A person who refuses to comply with a request for investigation by the Financial Supervisory Commission referred to in Article 81-2 (2) (referring to the Securities and Futures Commission where Articles 31 through 33, 44, 45, 48, 51, 93 and 94 are violated).

Article 99 (Cumulative Imposition of Imprisonment and Fine)
(1) Imprisonment and a fine may be cumulatively imposed on persons who have committed an offence referred to in Articles 95-8, 96 through 98. <Amended by Act No. 6171, Jan. 21, 2000>
(2) In concurrent imposition of a fine under paragraph (1) on a person who has violated the provisions of Article 95-8 (2), the amount of the fine shall be made the amount equivalent to or less than three times the amount of profits or losses obtained or evaded due to the act of violation. <Newly Inserted by Act No. 6707, Aug. 26, 2002>

Article 100 (Joint Penal Provisions)
Where a representative of a juristic person, or an agent, employee or other employed person of a juristic person or individual, violates Article 95-8, or 96 through 98, during the course of carrying out business of such juristic person or individual, such juristic person or individual, in addition to the very person who committed such offence, shall be subject to a fine to the extent of the amount prescribed in respective Articles. <Amended by Act No. 6171, Jan. 21, 2000>

Article 101 (Fine for Negligence)
(1)A person falling under any of the following cases shall be subject to a fine for negligence not exceeding 5 million won: <Amended by Act No. 5504, Jan. 13, 1998; Act No. 5737, Feb. 1, 1999; Act No. 7530, May 31, 2005>
1.Deleted; <by Act No. 7113, Jan. 29, 2004>
2.A person who violates Article 49;
3.through 5.Deleted; <by Act No. 5737, Feb. 1, 1999>

6.A person who fails to prepare or maintain a report pursuant to Article 46 or makes a false representation in such report;
7.A person who fails to submit a business report or to provide it to the perusal of general public, or who submits a false business report in violation of the provisions of Article 47;
8.A person who fails to submit a report or other materials pursuant to Article 81 (1), makes a false representation in such reports, or submits false materials; and
9.A person who refuses, interrupts or avoids an inspection pursuant to Article 81 (1).
(2)A person falling under any of the following cases shall be punished by a fine for negligence not exceeding 3 million won: <Amended by Act No. 5737, Feb. 1, 1999; Act No. 6171, Jan. 21, 2000>
1.Deleted; <by Act No. 7113, Jan. 29, 2004>
2.Deleted; <by Act No. 5504, Jan. 13, 1998>
3.A person who has violated limits under Article 32;
4.A person who has violated Article 41-2, 50 (1) and (2) or 77 (2); and
5.Deleted. <by Act No. 5504, Jan. 13, 1998>
(3)A fine for negligence referred to in paragraphs (1) and (2) shall be imposed and collected by the Financial Supervisory Commission on such term and conditions as the Presidential Decree may determine: Provided, That a fine for negligence referred to in paragraph (1) 1 shall be imposed and collected by the Minister of Finance and Economy. <Amended by Act No. 5504, Jan. 13, 1998; Act No. 5737, Feb. 1, 1999>
(4)A person who is dissatisfied with the disposition of a fine for negligence referred to in paragraph (3) may file a complaint with the imposer of a fine for negligence not later than 30 days after the notification date of such disposition. <Amended by Act No. 5504, Jan. 13, 1998>
(5)Where a person subject to the disposition of a fine for negligence under paragraph (3) files a complaint under paragraph (4), the imposer of a fine for negligence shall without delay notify the competent court of such fact, in which case the latter shall judge the fine for negligence in accordance with the Non-Contentious Case Litigation Procedure Act. <Amended by Act No. 5504, Jan. 13, 1998; Act No. 7530, May 31, 2005>
(6)Where no complaint is filed or no fine for negligence is paid, the fine for negligence shall be collected according to the examples of the disposition of national taxes in arrear.

ADDENDA

Article 1 (Enforcement Date)
This Act shall enter into force on July 1, 1996: Provided, That, Article 6 of this Addenda shall come into force starting from the date prescribed by the Presidential Decree.

Article 2 (Example of Application on Stock Futures Trading)
Among trading set forth in subparagraph 1 of Article 3 of this Act, the trading of which the subject products are shares certificates under Article 2 (1) 6 of the Securities and Exchange Act and indices based on the same (hereinafter referred to as share futures trading ) shall be subject to this Act starting from the date prescribed in the proviso of Article 1 of this Addenda.

Article 3 (Transitional Measures on Stock Futures Trading)
A futures investment fund business person may, notwithstanding Article 58, manage its investment fund in the share futures trading among trading set forth in the items of subparagraph 1 of Article 3, by way of the entrustment thereof with a securities company until the date under the proviso of Article 1 of this Addenda.

Article 4 (Transitional Measures on Approval of Futures Brokerage Business)
(1)A foreign exchange bank under the Foreign Exchange Control Act shall as of the enforcement of this Act be presumed to be a futures broker which has obtained approval pursuant to this Act with respect to overseas futures trading on financial products and indices relating thereto (exclusive of service fees) only: Provided, That, foreign exchange banks under the Foreign Exchange Control Act which concurrently engage in trust business as their additional business may, notwithstanding Article 40, engage in futures investment fund business subject to the approval of the Minister of Finance and Economy.
(2)Futures intermediaries designated by the head of the Supply Administration as of the enforcement of this Act shall be deemed as a futures broker which has obtained approval pursuant to this Act to the extent of its originally designated business scope.

Article 5 (Transitional Measures on Establishment of Commission)
(1) The Commission shall not be established until a date prescribed by the Presidential Decree, taking into consideration the size of futures trading and number of futures-related institutions.
(2)The Minister of Finance and Economy shall take over the authority and duties of the Commission under this Act until the date under paragraph (1). In this case, the Minister of Finance and Economy may delegate a part of such duties to the Superintendent of the Office of Bank Supervision of the Bank of Korea or other organizations prescribed by the Presidential Decree.

Article 6 Omitted.

ADDENDA <Act No. 5504, Jan. 13, 1998>

Article 1 (Enforcement Date)
This Act shall enter into force on April 1, 1998: Provided, That the amendment to Article 84-2 shall enter into force on January 1, 1998.

Article 2 (Example of Application of Provisions on Disqualifications for Officers)
The amendment to Article 21 shall apply to officers elected on or after the enforcement date of this Act.

Article 3 (Transitional Measures on License for Overseas Futures Brokerage Business)
Any person who has obtained a license for operating overseas futures brokerage business under the former provisions at the time of entry into force of this Act shall be deemed to have made a report under the amendment to Article 37 (2).

Article 4 (Transitional Measures on Penal Provisions and Fine for Negligence Provisions)
Acts committed prior to the entry into force of this Act shall, in applying the penal provisions and fine for negligence provisions, be governed by the former provisions.

Article 5 (Transitional Measures on Operations Done by Minister of Finance and Economy)
Operations done by the Minister of Finance and Economy pursuant to Article 5 (2) of the Addenda of Act No. 5041 Futures Trading Act prior to the entry into force of this Act shall be deemed operations done by the Financial Supervisory Commission under this Act.

ADDENDA <Act No. 5737, Feb. 1, 1999>

(1) (Enforcement Date) This Act shall enter into force on the date of its promulgation: Provided, That the amendments to Articles 49-2 and 49-3 shall enter into force on March 1, 1999.
(2) (Transitional Measures on Disqualifications for Officers)The amendment to Article 21 shall apply to officers elected on and after the entry into force of this Act.
(3)(Transitional Measures on Penal Provisions) The application of penal provisions and fine for negligence provisions to acts committed prior to the entry into force of this Act shall be governed by the previous provisions.

ADDENDA <Act No. 5982, May 24, 1999>

Article 1 (Enforcement Date)
This Act shall enter into force on the date of its promulgation. (Proviso Omitted.)

Articles 2 through 6 Omitted.

ADDENDA <Act No. 6171, Jan. 21, 2000>

Article 1 (Enforcement Date)
This Act shall enter into force on April 1, 2000.

Article 2 (Transitional Measures concerning License for Futures Trading Business)
Any person who has his futures trading business licensed under the previous provisions of Article 37 (1) at the time that this Act enters into force shall be deemed to have his futures trading business licensed under the amended provisions of Article 37 (1).

Article 3 (Transitional Measures concerning Disqualifications)
(1) Where a person who is the officer of the Exchange at the time that this Act enters into force is disqualified due to causes that have accrued prior to the enforcement of this Act in accordance with the amended provisions of subparagraph 9 of Article 21, his case shall be governed by the previous provisions notwithstanding the amended provisions.
(2) Where a person who is the officer of a futures company or the Association at the time that this Act enters into force falls under any of subparagraphs 4 through 9 of Article 21 which are applied mutatis mutandis under the amended provisions of Articles 39-3 and 79 due to causes that have accrued prior to the enforcement of this Act, his case shall be governed by the previous provisions notwithstanding the amended provisions.

Article 4 (Transitional Measures concerning Internal Control Standards of Futures Companies)
Any futures company at the time that this Act enters into force shall set its internal control standards in accordance with the amended provisions of Article 40 (1) within 6 months from the date on which this Act enters into force.

Article 5 (Relations with Other Acts and Subordinate Statutes following Change in Name of Futures Trading Business, etc.)
Where any futures business, any futures company or any foreign futures company is cited by other Acts and subordinate statutes at the time that this Act enters into force, such futures business, futures company or foreign futures company shall be deemed to be cited by this Act.

ADDENDA <Act No. 6707, Aug. 26, 2002>

(1)(Enforcement Date) This Act shall enter into force on the date of its promulgation.
(2)(Transitional Measures concerning Application of Penal Provisions) In application of penal provisions to any offence committed prior to the enforcement of this Act, the previous provisions shall prevail.

ADDENDA <Act No. 7113, Jan. 29, 2004>

(1)(Enforcement Date) This Act shall enter into force on the date of establishing the Korea Securities Futures Exchange under the Korea Securities Futures Exchange Act: Provided, That the amended provisions of Articles 31-2, 49-2 (1) and 95-8 (1) and (2) shall enter into force on the date of its promulgation. According to the Korea Securities and Futures Exchange Act promulgated by Act No. 7112 on January 29, 2004, the enforcement date shall be January 27, 2005
(2)(Transitional Measures concerning Common Fund for Compensating for Damages) The Exchange may return a part of the Common Fund under the provisions of Article 27 to its members by taking account of the scale of accumulations etc. by members of the previous futures exchange.
(3) (Transitional Measures concerning Application of Penal Provisions or Fine for Negligence) The previous provisions shall govern any application of penal provisions or fine for negligence to the acts committed prior to the enforcement of this Act.

ADDENDA <Act No. 7428, Mar. 31, 2005>

Article 1 (Enforcement Date)
This Act shall enter into force one year after the date of its promulgation.

Articles 2 through 6 Omitted.

ADDENDA <Act No. 7530, May. 31, 2005>

This Act shall enter into force six months after the date of its promulgation.

ADDENDA <Act No. 7617, Jul. 29, 2005>

This Act shall enter into force six months after the date of its promulgation.

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