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KOREA SECURITIES AND FUTURES EXCHANGE ACT
KOREA SECURITIES AND FUTURES EXCHANGE ACT
INTRODUCTION
Details of Enactment and Amendment
- Enactment and Amendment: This Act was enacted in accordance with the Act No. 7112 on January 29, 2004 to establish and operate the
Korea Securities and Futures Exchange in order to ensure stability and efficiency of transactions in securities and futures trading
with the aim of contributing to the sound development of the national economy.
Main Contents
- The Korea Securities and Futures Exchange is established as a stock company through the merger of the Korea Stock Exchange and the
Korea Futures Exchange, etc. and its principal office is located in the Busan Metropolitan City.
- The Korea Securities and Futures Exchange is mandated to perform the work of opening and operating the securities market, the KOSDAQ,
the futures market and to run the business of transactions in securities and futures trading, etc.
- The Korea Securities and Futures Exchange has the president, members of the Audit and Inspection Committee who are all standing
directors, the chairman of the Market Supervision Committee and the board of directors that consists of not more than 12 directors,
but a majority of board of directors is required to be from outside directors and the subcommittee is each set up by the securities
market, the KOSDAQ and the futures market in the board of directors.
- The regulations are laid down to govern matters concerning major organizations such as the board of directors, the Audit and Inspection
Committee, the Director Candidate Recommendation Committee, the Market Supervision Committee, etc. in order to ensure the public
interest of the Korea Securities and Futures Exchange.
- The Market Supervision Committee is established in the Korea Securities and Futures Exchange with the mandate to deliberate on abnormal
transactions, to supervise members and to decide on disciplinary actions against members, etc.
- The identical person is prohibited from holding shares in excess of 5/100 of shares issued by the Korea Securities and Futures Exchange
and if he holds shares in excess of 5/100, he is prohibited from exercising his voting right on the portion of such shares that is
in excess of 5/100.
KOREA SECURITIES AND FUTURES EXCHANGE ACT
Act No. 7112, Jan. 29, 2004
Amended by Act No. 7428, Mar. 31, 2005
CHAPTER I GENERAL PROVISIONS
Article 1 (Purpose)
The purpose of this Act is to contribute to the sound development of national economy by establishing and operating the Korea Securities
and Futures Exchange to ensure the stability and efficiency of transactions of securities and futures trading.
Article 2 (Definitions)
(1) The term "securities market" used in this Act means any market other than the KOSDAQ, which is established by the Korea
Securities and Futures Exchange (hereinafter referred to as the Exchange ) for the purpose of transactions of securities.
(2) The term "KOSDAQ" used in this Act means any market which is established by the Exchange for the purpose of transactions
of securities as prescribed by the Presidential Decree.
(3) The term "futures market" used in this Act means any market which is established by the Exchange for the purpose of
trading futures as prescribed in subparagraph 1 of Article 3 of the Futures Trading Act.
(4) The term "member" used in this Act means any person who may participate in transactions in the securities market, KOSDAQ
or futures market established by the Exchange and who is prescribed in Article 16 (1).
(5) The term "Acts and subordinate statutes related to securities and futures" used in this Act means this Act, the Securities
and Exchange Act and the Futures Trading Act.
(6) The term "Acts and subordinate statutes related to finance" used in this Act means any of the following:
1. The Banking Act;
2. The Act on Business of Operating Indirect Investment and Assets;
3. The Insurance Business Act;
4. The Act on Real Name Financial Transactions and Guarantee of Secrecy;
5. The Act on the Establishment, etc. of Financial Supervisory Organizations;
6. The Depositor Protection Act;
7. The Act on the Efficient Disposal of Non-Performing Assets, etc. of Financial Institutions and the Establishment of Korea Asset
Management Corporation;
8. The Specialized Credit Financial Business Act;
9. The Trust Business Act;
10. The Use and Protection of Credit Information Act;
11. The Foreign Exchange Transactions Act;
12. The Act on the Structural Improvement of the Financial Industry; and
13. Other Acts prescribed by the Presidential Decree.
(7) Except as provided in paragraphs (1) through (6), the terms used in this Act have the same meanings as set forth in the Securities
and Exchange Act and Futures Trading Act.
Article 3 (Application of Commercial Act)
Except as otherwise prescribed in Acts and subordinate statutes related to securities and futures, the provisions concerning stock
companies of the Commercial Act shall apply to the Exchange.
CHAPTER II ESTABLISHMENT AND ORGANIZATION
Article 4 (Establishment)
(1) There shall be established the Exchange to fix and stabilize fair prices in transactions of securities and futures as well as
to facilitate any negotiation therein.
(2) The Exchange shall be a stock company with capital of 100 billion won or more.
(3) The head office of the Exchange shall be located in Busan metropolitan city, and there may be established other branch offices
thereof if necessary.
Article 5 (Articles of Incorporation)
(1) The articles of incorporation of the Exchange shall include the following matters:
1. Purpose;
2. Trade name;
3. Number of shares to be issued by the Exchange;
4. Price per share;
5. Total number of shares to be issued at the time of establishment of the Exchange;
6. Methods of announcements by the Exchange;
7. Matters concerning the division between the securities market, the KOSDAQ and the futures market;
8. Matters concerning the establishment, amendment and repeal of the regulations of the Exchange;
9. Matters concerning officers and executive members of the Exchange;
10. Matters concerning the board of directors, subcommittees established thereunder and the director nomination committee;
11. Matters concerning the audit committee;
12. Matters concerning the Market Supervision Committee; and
13. Matters concerning the performance of duties;
(2) The Exchange shall, when intending to amend the articles of incorporation thereof, obtain approval of the Minister of Finance
and Economy. In this case, the Minister of Finance and Economy shall take into consideration the autonomous operation of each market
in granting approval.
Article 6 (Duties)
The Exchange shall perform the following duties:
1. Duties of the establishment and operation of the securities market, the KOSDAQ and the futures market;
2. Duties of transactions of securities and futures;
3. Duties of the listing of securities;
4. Duties of the listing of items of futures contracts (including settlement month);
5. Duties of the public notification of stock-listed corporations and KOSDAQ-listed corporations;
6. Duties of the surveillance of abnormalities in trading that are prescribed by the Presidential Decree, including the trading where
the prices or trading quantities of securities or futures contracts fluctuates abnormally (hereinafter referred to as the "abnormal
trading"), and the investigation of members;
7. Duties of auction of securities;
8. Duties of the independent conciliation of disputes arising from transactions carried out in the securities market, the KOSDAQ and
the futures market;
9. Duties incidental to the establishment of the securities market, the KOSDAQ and the futures market; and
10. Other duties comparable to those referred to in subparagraphs 1 through 9, which are prescribed in the articles of incorporation.
Article 7 (Prohibition of Use of Similar Name)
Any entity other than the Exchange shall not use the name or trade name of the Korea Securities and Futures Exchange, the Korea Stock
Exchange, the Korea Futures Exchange, the securities market, the KOSDAQ, the futures market or any other name confused therewith.
Article 8 (Officers)
(1) The Exchange shall have 15 or less officers as prescribed in the following subparagraphs:
1. One chief executive officer;
2. One full-time director who is a member of the audit committee;
3. One chairman of the Market Supervision Committee; and
4. 12 or less directors.
(2) The term of service of the officers shall be 3 years, but the consecutive appointment may be permitted in accordance with the
provisions in the articles of incorporation.
(3) The chief executive officer shall be elected at the general meeting of shareholders upon nomination of the Director Nomination
Committee (hereinafter referred to as the "Nomination Committee") under Article 14 (1) from among those persons who have
experience and knowledge on financial affairs as prescribed by the Presidential Decree and who are unlikely to impair the sound management
of the Exchange and the fair trade order.
(4) Where it is deemed that the chief executive officer elected under paragraph (3) is incompetent to perform his/her duties, the
Minister of Finance and Economy may request the dismissal of the chief executive officer by clearly stating the reasons in detail
within one month of the election. In this case, the chief executive office whose dismissal has been requested shall be suspended
from performing the duties of office, and the Exchange shall elect a new chief executive officer within two months.
(5) Each of the outside directors and the full-time director who is a member of the audit committee shall be elected at the general
meeting of shareholders upon nomination of the Nomination Committee. In this case, Article 191-11 (1) and Article 191-12 (3) of the
Securities and Exchange Act shall apply mutatis mutandis to the full-time director who is a member of the audit committee.
Article 9 (Board of Directors)
(1) In the Exchange, there shall be organized the Board of Directors which is composed of such persons as prescribed in any subparagraph
of Article 8 (1). In this case, a majority of the Board members shall be the outside directors.
(2) For the purpose of the autonomous operation of the securities market, the KOSDAQ and the futures market and the effective performance
of duties of the Board of Directors, a subcommittee for each market shall be established in the Board of Directors pursuant to Article
393-2 of the Commercial Act and deliberate and resolve on matters as delegated by the Board of Directors.
(3) Other matters necessary for the organization and operation of the Board of Directors and subcommittees shall be prescribed by
the articles of incorporation.
Article 10 (Disqualifications for Officers)
A person who falls under any of the following subparagraphs shall not be appointed to be an officer of the Exchange, and if he does
so after being so appointed, he shall lose the qualification therefor:
1. A minor, incompetent person or quasi-incompetent person;
2. A bankrupt who fails to be reinstated;
3. A person in whose case five years have not elapsed since his imprisonment without labor or heavier punishment as declared by a
court or his fine or heavier punishment as declared under Acts and subordinate statutes related to securities and futures (including
foreign Acts and subordinate statutes similar thereto) or under Acts and subordinate statutes related to finance was completely executed
(including that which is deemed to be completely executed) or exempted;
4. A person who is under the suspension of the execution of imprisonment without labor or a heavier punishment as declared by a court;
and
5. A person in whose case five years have not elapsed since he was dismissed or removed from his office under Acts and subordinate
statutes related to securities and futures (including foreign Acts and subordinate statutes similar thereto) or under Acts and subordinate
statutes related to finance.
Article 10 (Disqualifications for Officers)
A person who falls under any of the following subparagraphs shall not be appointed to be an officer of the Exchange, and if he does
so after being so appointed, he shall lose the qualification therefor:
1. A minor, incompetent person or quasi-incompetent person;
2. A person who is sentenced to bankruptcy and fails to be reinstated;
3. A person in whose case five years have not elapsed since his imprisonment without labor or heavier punishment as declared by a
court or his fine or heavier punishment as declared under Acts and subordinate statutes related to securities and futures (including
foreign Acts and subordinate statutes similar thereto) or under Acts and subordinate statutes related to finance was completely executed
(including that which is deemed to be completely executed) or exempted;
4. A person who is under the suspension of the execution of imprisonment without labor or a heavier punishment as declared by a court;
and
5. A person in whose case five years have not elapsed since he was dismissed or removed from his office under Acts and subordinate
statutes related to securities and futures (including foreign Acts and subordinate statutes similar thereto) or under Acts and subordinate
statutes related to finance.
Enforcement Date: Apr. 1, 2006
Article 11 (Responsibility of Officers, Employees, etc.)
(1) A person who is or was an officer or employee of the Exchange shall neither disclose any confidential information which comes
to his knowledge in the course of performing his duties to other persons nor use such confidential information for any purpose other
than to perform duties of the Exchange.
(2) Except as provided in any of the following subparagraphs, an officer or employee of the Exchange shall not conduct or entrust
any securities or futures trading at his/her own expense regardless of any trading name used:
1. In case of acquiring beneficiary certificates of investment trust companies or stocks of investment companies pursuant to the Act
on Business of Operating Indirect Investment and Assets: Provided, That this shall not apply to any case where the certificates or
stocks acquired by means other than the public offering or sale are disposed within one years from the acquisition;
2. In case of disposing securities acquired before being appointed to be an officer or employee of the Exchange;
3. In case of concluding the futures trades carried out before being appointed to be an officer or employee of the Exchange; and
4. In any other cases as determined by the Presidential Decree.
(3) Officers and employees of the Exchange shall not contribute capital jointly or share losses or gains with any organization pursuant
to Article 2 (17) of the Securities and Exchange Act and any organization that has been established or obtained a business or commercial
license or authorization pursuant to the Futures Trading Act, and shall not have any special interest in any other business with
such organization.
(4) Paragraphs (1) through (3) shall apply mutatis mutandis to the following persons:
1. Members of the Financial Supervisory Commission and public officials belonging thereto;
2. Members of the Securities and Futures Committee; and
3. The Governor, Deputy Governor, Assistant Governor, Auditor and employees of the Financial Supervisory Service.
Article 12 (Request for Dismissal of Officers, etc.)
(1) In case an officer of the Exchange has violated Acts and subordinate statutes related to securities and futures or the administrative
orders taken by the competent agency pursuant to Acts and subordinate statutes related to securities and futures, the Financial Supervisory
Commission may order the said officer to suspend his/her duties or request the dismissal from his/her office within any period of
one or less year as fixed by it.
(2) In case a dismissal pursuant to paragraph (1) has been requested, the officer concerned shall suspend his/her duties, and the
Exchange shall dismiss him/her from his/her office within two months after being so requested.
Article 13 (Audit Committee)
(1) An audit committee shall be established in the Exchange pursuant to Article 415-2 of the Commercial Act (hereinafter referred
to as the "Audit Committee").
(2) The provisions of Article 54-6 of the Securities and Exchange Act shall apply mutatis mutandis to the Audit Committee.
Article 14 (Director Nomination Committee)
(1) The Exchange shall establish a Nomination Committee to nominate suitable candidates for the chairman and outside directors.
(2) The chief executive officer of the Exchange shall appoint any of the following persons as members of the Nomination Committee
and the chairman of the Nomination Committee shall be elected from among such members:
1. Five outside directors;
2. One person recommended by the Korea Securities Dealers Association;
3. One person recommended by the Korea Futures Association;
4. One person representing stock-listed corporations who meets the requirements prescribed by the Presidential Decree; and
5. One person representing KOSDAQ-listed corporations who meets the requirements prescribed by the Presidential Decree.
(3) Necessary matters for the organization and operation of the Nomination Committee shall be prescribed by the articles of incorporation.
CHAPTER III MARKETS
Article 15 (Establishment of Markets)
(1) The Exchange shall establish the following markets:
1. Securities market;
2. KOSDAQ; and
3.futures market.
(2) Any entity other than the Exchange shall neither establish any market as referred to in paragraph (1) above or other similar facilities
nor trade securities or futures through other such similar facilities: Provided, That this shall not apply to an entity that conducts
any securities business under Article 2 (8) 8 of the Securities and Exchange Act.
Article 16 (Members)
(1) Matters concerning the qualifications for members shall be prescribed by the Member Supervision Regulations.
(2) The Member Supervision Regulations stated in paragraph (1) shall include the following matters:
1. Matters concerning membership category and qualifications therefor;
2. Matters concerning member admission and expulsion;
3. Matters concerning the rights and duties of members; and
4. Other matters necessary for the administration and supervision of members.
(3) In case the Exchange intends to establish, amend or repeal the Member Supervision Regulations, it shall obtain approval of the
Financial Supervisory Commission.
(4) In case the Financial Supervisory Commission grants approval pursuant to paragraph (3), it shall, in advance, consult with the
Minister of the Finance and Economy.
CHAPTER IV MARKET SUPERVISION AND DISPUTE CONCILIATION
Article 17 (Market Supervision Committee)
(1) The Exchange shall establish the Market Supervision Committee to perform duties falling under the following subparagraphs:
1. Investigation of abnormalities in trading and supervision of members;
2. Surveillance of the interrelationship between the securities market, the KOSDAQ and the futures market;
3. Discipline of members or decision-making with regard to requests for disciplinary measures against the officers and employees involved
in accordance with the findings of investigation of abnormalities in trading and supervision of members and the surveillance of the
interrelationship between the securities market, the KOSDAQ and the futures market;
4. Independent conciliation of disputes arising from securities transactions on the securities market and the KOSDAQ and futures transactions
on the futures market;
5. Establishment, amendment and repeal of the Market Supervision Regulations pursuant to Article 18 and the Dispute Conciliation Regulations
pursuant to Article 20 (1); and
6. Other duties incidental to those specified in paragraphs (1) through (5).
(2) The Market Supervision Committee shall be composed of the following members:
1. The chairman of the Market Supervision Committee;
2. One person recommended by the Korea Securities Dealers Association;
3. One person recommended by the Korea Futures Association;
4. One person recommended by the Minister of Finance and Economy; and
5. One person recommended by the Chairman of the Financial Supervisory Commission.
(3) The term of office of the members of the Market Supervision Committee shall be 3 years, but the consecutive appointment may be
permitted as prescribed by the articles of incorporation.
(4) The Chairman shall be elected at the general meeting of shareholders upon nomination of the Market Supervision Committee from
among those persons who have experience and knowledge on financial affairs as prescribed by the Presidential Decree and who are unlikely
to impair the sound management of the Exchange and the fair trade order.
(5) In case it is deemed that the Chairman elected under paragraph (4) is incompetent to perform his/her duties, the Financial Supervisory
Commission may request the dismissal of the Chairman by clearly stating the reasons in detail within one month of the election. In
this case, the Chairman whose dismissal has been requested shall suspend his/her duties, and the Exchange shall elect a new Chairman
within two months.
(6) The provisions of Articles 10, 11 (1) and 12 shall apply mutatis mutandis to the members of the Market Supervision Committee.
(7) Other matters necessary for the organization and operation of the Market Supervision Committee shall be prescribed by the articles
of incorporation.
Article 18 (Market Supervision Regulations)
(1) The Market Supervision Committee shall establish the Market Supervision Regulations including the following matters and perform
its duties in accordance with those Regulations:
1. Matters relating to the investigation of abnormalities in trading, supervision of members and surveillance of the interrelationship
between the securities market, the KOSDAQ and the futures market;
2. Matters relating to the discipline of members or decision-making with regard to requests for taking disciplinary measures against
the officers and employees involved in accordance with the findings of investigation of abnormalities in trading and supervision
of members and the surveillance of the interrelationship between the securities market, the KOSDAQ and the futures market; and
3. Other matters incidental to the matters specified in paragraphs (1) and (2).
(2) The Provisions of Article 16 (3) and (4) shall apply mutatis mutandis to the establishment, amendment and repeal of the Market
Supervision Regulations.
Article 19 (Surveillance and Investigation of Abnormalities in Trading)
(1) In case abnormalities in trading is suspected in the securities market (including the case of intermediation of securities trading
pursuant to Article 52-2 of the Securities and Exchange Act; hereafter the same shall apply in this Article), the KOSDAQ and the
futures market, in order to analyze the trading circumstances of the issue of securities concerned or the contracts of futures trading
concerned or to confirm the fact that the Exchange business regulations have not been violated, the Exchange may request the securities
firms and futures dealers concerned to submit relevant materials by sending a written request that clearly explains the reasons for
such request, or may examine the business, financial status, books, documents and other materials of the members, which are linked
to the relevant trade.
(2) The Exchange may, if deemed necessary for the investigation and surveillance pursuant to paragraph (1), request members thereof
to submit reports and documents relating to abnormalities in trading and the appearance of implicated persons and their statements.
(3) In case a member refuses to comply with the request for relevant materials or appearance and statement of implicated person prescribed
in paragraph (2) or to cooperate in the investigation pursuant to paragraph (1), the Exchange may suspend the membership of the member
pursuant to the Market Supervision Regulations or restrict the securities and futures trading of the member.
Article 20 (Voluntary Conciliation of Disputes)
(1) The Market Supervision Committee shall establish the Dispute Conciliation Regulations necessary for the voluntary conciliation
of disputes pursuant to Article 17 (1) 4.
(2) The provisions of Article 16 (3) and (4) shall apply mutatis mutandis to establishment, amendment or repeal of the Dispute Mediation
Regulations.
(3) The Market Supervision Committee may request the parties to disputes to validate the facts or submit relevant materials when deemed
necessary.
(4) The Market Supervision Committee may, if deemed necessary to hear the opinions of the parties and other interested persons, request
them to appear and make statements.
CHAPTER V REGULATION ON OWNERSHIP, CAPITAL AND ASSETS, ETC.
Article 21 (Restriction on Holding of Shares)
(1) Except as provided in any of the following subparagraphs, any person shall not own more than 5/100 of the total number of voting
shares issued by the Exchange:
1. Where the shares are held by investment trust companies or investment companies pursuant to the Act on Business of Operating Indirect
Investment and Assets (excluding any case of shares held by privately offering indirect investment funds pursuant to Article 175
of the same Act);
2. Where, by the necessity of cooperating with overseas securities and futures exchange, the approval of Financial Supervisory Commission
has been obtained; and
3. Where the shares are held by the Government.
(2) Any of the following subparagraphs shall be deemed to be the restricted holding of shares pursuant to paragraph (1):
1. Holding of privileges to exercise voting rights for the shares held pursuant to a trust agreement, other agreements or Acts, or
holding of the entitlement to instruct the exercise of voting rights of the shares held;
2. Holding of shares by a person having any special relation as prescribed by the Presidential Decree; and
3. Holding equivalent to subparagraphs 1 and 2 which is prescribed by the Presidential Decree.
(3) Where the shares are held in violation of paragraph (1), the exercise of voting rights of the shares in excess of the shareholding
restriction shall be prohibited, and the person who holds the shares in violation of paragraph (1) shall adjust the quantity of holding
to satisfy the limit specified in paragraph (1) without delay.
(4) The Financial Supervisory Commission may request a person who has violated paragraph (3) to dispose of the excess quantity of
shares within any period of six or less months as fixed by the Commission.
Article 22 (Charges for Compelling Compliance)
(1) Where a person who is ordered to dispose of shares pursuant to Article 21 (4) and fails to comply with such order within any given
period, the Financial Supervisory Commission shall again order him/her to dispose of the shares within a further prescribed period,
and if such order is not complied with within that prescribed period, charges for compelling the compliance which do not exceed 5/100
of the acquisition value of the shares to be disposed shall be imposed.
(2) The Financial Supervisory Commission shall, in writing, announce any intent to impose and collect charges for compelling the compliance
under paragraph (1) prior to such imposition under paragraph (1).
(3) The Financial Supervisory Commission shall, where it imposes charges for compelling the compliance under paragraph (1), do so
by any document in which the reasons for such imposition, the amount, payment deadline and receipt period of those charges, the methods
of filing an objection thereagainst, and agencies to receive the objection are clearly stated.
(4) The Financial Supervisory Commission may repeatedly impose and collect charges for compelling the compliance under paragraph (1)
up to two times per year starting from the date when the share disposal is ordered pursuant to Article 21 (4), until such order is
complied with.
(5) Where a person who is ordered to dispose of shares complies with such order, the Financial Supervisory Commission shall suspend
the imposition of new charges for compelling the compliance and collect charges for compelling the compliance which have already
been imposed.
(6) The provisions of Articles 206-12 (excluding paragraph (1) thereof) through 206-16 of the Securities and Exchange Act shall apply
mutatis mutandis to the imposition and collection of charges for compelling the compliance.
Article 23 (Approval of Transfer of Business, etc.)
Where the Exchange intends to conduct the transfer of business, merger, split-up or all-inclusive exchange or transfer of shares,
it shall obtain approval of the Minister of Finance and Economy.
Article 24 (Approval of Listing and Delisting Securities Issued by Exchange)
(1) The Exchange shall, when listing and delisting shares issued by it, obtain approval of the Financial Supervisory Commission.
(2) Where shares are listed under paragraph (1), the Exchange shall conduct any investigation, surveillance and public notification
of abnormalities in trading and any other management of such listing by itself and report the results thereof to the Financial Supervisory
Commission.
Article 25 (Committee for Enhancement of Market Efficiency)
(1) Under the Ministry of Finance and Economy, there shall established the Committee for Enhancement of Market Efficiency to deliberate
on matters concerning the reduction of expenses for transactions in the securities market, the KOSDAQ and the futures market.
(2) Where the Exchange, any organization established under the Securities and Exchange Act or the Futures Trading Act or other institutions
as prescribed by the Presidential Decree intend to change commissions or service fees or to invest any amount as prescribed by the
Presidential Decree or more in computer system, such change or investment shall be deliberated on by the Committee for Enhancement
of Market Efficiency.
(3) Necessary matters for the organization and operation of the Committee for Enhancement of Market Efficiency shall be prescribed
by the Presidential Decree.
CHAPTER V PENAL PROVISIONS
Article 26 (Penal Provisions)
A person who falls under any of the following subparagraphs shall be punished by imprisonment for not more than three years or by
a fine not exceeding twenty million won:
1. A person who violates the provisions of Article 11 (including any application mutatis mutandis under Article 17 (6)); and
2. A person who establishes or uses facilities in violation of Article 15 (2).
Article 27 (Concurrent Punishment of Imprisonment and Fine)
A person who commits any crime as prescribed in Article 26 may be concurrently punished by imprisonment and a fine.
Article 28 (Joint Penal Provisions)
Where the representative of any corporation, or any agent, employee or other employed person of the corporation or any other private
individual commits an offense as prescribed in Article 26 in the course of performing duties of the said corporation or private individual,
not only shall the offender be punished accordingly but also such corporation or private individuals shall be punished by a fine
as prescribed in the same Article.
Article 29 (Fine for Negligence)
(1) A person who uses the name of the Exchange or any other name confused therewith in violation of Article 7 shall be punished by
a fine for negligence not exceeding twenty million won.
(2) The provisions of Article 213 (3) through (6) of the Securities and Exchange Act shall apply mutatis mutandis to any disposition
of a fine for negligence under paragraph (1) of this Article.
ADDENDA <Act No. 7112, Jan. 29, 2004>
Article 1 (Enforcement Date)
This Act shall enter into force on the date when the incorporation of the Exchange is registered under Article 11 of the Addenda:
Provided, That Articles 2 through 16 of the Addenda shall enter into force on the date of its promulgation.
Article 2 (Matters concerning Consolidation of Korea Stock Exchange, etc.)
The Exchange shall be established by merging (hereinafter referred to as "merger") any divided part of the Association brokerage
market as managed by the Korea Securities Dealers Association with the Korea Stock Exchange, the Korea Futures Exchange and any securities
company (hereinafter referred to as the "KOSDAQ") established for the purpose of brokerage of transactions of securities
in the Association brokerage market under Article 2 (14) of the Securities and Exchange Act.
Article 3 (Creation of Committee for Establishment of Korea Securities and Futures Exchange)
(1) There shall be created the Committee for the Establishment of the Korea Securities and Futures Exchange (hereinafter refereed
to as the "Establishment Committee") to deal with affairs of the merger and the establishment of the Exchange under Article
2 of Addenda.
(2) The Establishment Committee shall be composed of ten or less members designated by the Minister of Finance and Economy and include
the Deputy Minister of Finance and Economy, the Vice Chairman of the Financial Supervisory Commission, and persons recommended by
the Korea Stock Exchange, the Korea Futures Exchange and the KOSDAQ (hereinafter referred to as "corporations subject to merger").
(3) The Chairman of the Establishment Committee shall be the Deputy Minister of Finance and Economy.
(4) The Establishment Committee may, if necessary for the establishment of the Exchange, request corporations subject to merger to
provide any human and material support that is required for the performance of its duties.
(5) The Establishment Committee shall prepare a written application for the approval of merger and the articles of incorporation of
the Exchange and obtain approval of the Minister of Finance and Economy.
(6) Where the Establishment Committee obtains the approval under paragraph (5), it shall register the incorporation of the Exchange.
(7) The Establishment Committee shall, where it completes the registration of incorporation under paragraph (6), transfer duties thereof
to the chief executive officer of the Exchange.
(8) An Establishment Committeeman shall, when the transfer of his/her duties is completed under paragraph (7), be deemed to be dismissed
from his/her office.
(9) The Establishment Committee shall complete necessary procedures for the establishment of the Exchange within one year after the
date of promulgation of this Act.
(10) The expenses required for the establishment the Exchange shall be borne by the Exchange.
Article 4 (Merger Agreement)
(1) Corporations subject to merger shall prepare a merger agreement for the establishment of the Exchange.
(2) A merger agreement under paragraph (1) shall include the following matters:
1. The name or trade name and purpose of the Exchange and the place of the head office thereof;
2. Total number of shares to be issued by the Exchange and the par value per share;
3. Matters relating to the capital and reserves of the Exchange;
4. Total number and classes of shares to be issued by the Exchange at the time of merger, number of shares according to such classes
and matters relating to allocation thereof;
5. Assets of each corporation subject to merger which are to be transferred to the Exchange and their values;
6. Where the amount to be paid to the members of corporations subject to merger is determined, the regulations thereon;
7. Date of the general meeting of members and shareholders where the resolution of merger is to be made;
8. Date of merger; and
9. Other matters necessary for merger.
Article 5 (Public Notification of Balance Sheet, etc. of Merger)
Corporations subject to merger shall keep the following documents in their head offices and branch offices for a period of six months
from one week before the date of the general meeting where the resolution of merger under Article 6 of Addenda is to be made:
1. Merger agreement;
2. Documents explaining the rationale for allocation of shares to be issued to members of corporations subject to merger; and
3. Finial balance sheets of corporations subject to merger.
Article 6 (Resolution of Merger)
(1) In case of the Korea Stock Exchange, the Korea Futures Exchange or the Korea Securities Dealers Association, a merger agreement
shall be approved at the general meeting of members, and in case of the KOSDAQ, a merger agreement shall be approved at the general
meeting of shareholders.
(2) In case of the Korea Stock Exchange, Korea Futures Exchange or Korea Securities Dealers Association, the approval under paragraph
(1) shall be made by a majority vote, and in case of the KOSDAQ, the approval shall be made in accordance with Article 434 of the
Commercial Act.
(3) When the general meeting for the approval of a merger agreement is convened, the purposes of the general meeting and the main
points of the merger agreement shall, in writing, be announced to the members and shareholders not later than one week before the
date of the general meeting.
(4) The resolution of merger under paragraph (1) shall be made within nine months after the promulgation date of this Act.
(5) Where the resolution of merger is not made within the period stated in paragraph (4), the Minister of Finance and Economy may,
ex officio, determine the contents of a merger agreement. In this case, such ex officio determination shall be deemed to be the approval
at the general meeting of members or shareholders pursuant to paragraph (1).
Article 7 (Measures against Members or Shareholders Opposing Merger)
(1) Where the Board of Directors of the Korea Stock Exchange passes a resolution for merger under Article 6 of the Addenda of this
Act, the members of the Korea Stock Exchange who oppose such resolution may, notwithstanding the provisions of Article 76-4 (1) of
the Securities and Exchange Act, file a written application for withdrawal of membership prior to the general meeting of members.
In this case, it shall be deemed that such members lose their membership at the time of filing an application for membership withdrawal,
and the Korea Stock Exchange shall return the equities of such members within one month after the date of such application under
Article 76-5 (2) of the Securities and Exchange Act.
(2) The provisions of paragraph (1) of this Article shall apply mutatis mutandis to the members of the Korea Futures Exchange. In
this case, Article 76-4 (1) of the Securities and Exchange Act as referred to in the former part of paragraph (1) of this Article
shall be deemed Article 16 (1) of the Futures Trading Act and Article 76-5 (2) of the Securities and Exchange Act as referred
to in the latter part of the said paragraph shall be deemed "Article 16 (3) of the Futures Trading Act".
(3) Where the Board of Directors of the KOSDAQ passes a resolution for merger under Article 6 of the Addenda of this Act, the shareholders
who oppose such resolution may, notwithstanding the provisions of Article 374-2 (1) and (2) of the Commercial Act, make a written
request for the purchase of their shares including the classes and number thereof to the KOSDAQ. In this case, it shall be deemed
that the shares is purchased at the time when such written request is made, and the KOSDAQ shall pay the price thereof within one
month after the date of the request.
(4) The provisions of Article 374-2 (3) through (5) of the Commercial Act shall apply mutatis mutandis to the determination of the
purchase price amount of shares under paragraph (3) of this Article.
(5) The Minister of Finance and Economy may request the members or shareholders who oppose any merger to file an application for withdrawal
of their membership or to exercise a claim for the purchase of shares.
Article 8 (Procedures for Protection of Creditors)
(1) Corporations subject to merger shall, within one week after the date when the resolution of merger is made at the general meetings
under Article 6 of the Addenda (including the date when the Minister of Finance and Economy determines the contents of a merger agreement
under Article 6 (5) of the Addenda), publicly notify the creditors that they shall raise objections against merger, if any, within
two weeks or less and give the creditors known by corporations subject to merger a peremptory notice thereof.
(2) The provisions of Article 232 (2) and (3) of the Commercial Act shall apply mutatis mutandis to any public notification and peremptory
notice under paragraph (1) of this Article.
Article 9 (Inaugural General Meeting)
(1) When the procedures under Article 8 of the Addenda is terminated, the Establishment Committee shall, without delay, convoke the
inaugural general meeting.
(2) The provisions of Articles 308 (2), 309, 311, 312 and 316 (2) of the Commercial Act shall apply mutatis mutandis to the inaugural
general meeting under paragraph (1) of this Article. In this case, the "promoter" as referred to in Article 311 of the
said Act and the "auditor" as referred to in Article 312 thereof shall be deemed to be the "Chairman of the Establishment
Committee" and the "member of the Audit Committee", respectively.
Article 10 (Written Application for Approval of Merger)
(1) A written application for approval of merger as referred to in Article 3 (5) of the Addenda shall include the following matters:
1. Trade name or name;
2. Places of the head office, branch offices and other business offices;
3. Places of the securities market, the KOSDAQ and the futures market;
4. Names, resident registration numbers and domiciles of the officers; and
5. Trade names or names of the members.
(2) The following documents shall be attached to a written application for approval of merger under paragraph (1):
1. A merger agreement; and
2. The articles of incorporation of the Exchange, the Market Supervision Regulations, the Member Supervision Regulations, the Business
Regulations, the Listing Regulations, the Public Notification Regulations and other documents determined by the Minister of Finance
and Economy.
(3) The provisions of Articles 35 through 37 of the Securities and Exchange Act shall not apply to any merger of the KOSDAQ.
Article 11 (Registration of Merger)
(1) When corporations subject to merger complete the procedures for merger thereof, corporations subject to merger (excluding the
Korea Securities Dealers Association; hereafter the same shall apply in this Article) which are to be dissolved as a result of the
merger shall register such dissolution and the Exchange which is established as a result thereof shall register such establishment
within two weeks at the place of the head office and within three weeks at the place of any branch office after the said merger is
approved under Article 3 (5) of the Addenda.
(2) The merger shall become effective at the time when the Exchange registers its establishment under paragraph (1). In this case,
corporations subject to merger shall be dissolved at the time of such registration.
(3) When the establishment of the Exchange is registered under paragraph (1), the following matters shall be registered:
1. Purpose;
2. Trade name;
3. Total number of shares to be issued by the Exchange;
4. Par value per share;
5. Places of the head office and branch offices;
6. Places of the securities market, the KOSDAQ and the futures market;
7. Methods of public notification;
8. Total amount of capital;
9. Total number of issued shares, their classes and details and number of shares in each class;
10. If it is provided that the transfer of shares should be approved by the Board of Directors, the regulations thereon;
11. If the term of existence of the Exchange or reason for dissolution thereof is provided, such term or reason;
12. If it is provided that shares should be retired for the profit distributed to shareholders, the regulations thereon;
13. Names, resident registration numbers and domiciles of the members of the Board of Directors and the Audit Committee of the Exchange;
14. Name, resident registration number and domicile of the chief executive officer of the Exchange; and
15. If a transfer agent is appointed, the trade name and head office place of the transfer agent.
(4) When the establishment of the Exchange is registered under paragraph (1), the following documents shall be attached:
1. A merger agreement;
2. The articles of incorporation of the Exchange;
3. The minutes of the general meeting of members or shareholders of corporations subject to merger, where the resolution of merger
was made before such merger;
4. Documents proving the facts that the public notification under Article 8 of the Addenda was made, the facts that the reimbursement,
return of collateral or entrustment is made to creditors if they have raised an objection, or that they need not be concerned about
any damage resulting from the merger;
5. Documents validating the values of net assets owned by corporations subject to merger prior to the merger;
6. Documents confirming the facts that the directors and the members of the Audit Committee of the Exchange accept their appointment;
7. If a transfer agent is appointed, documents proving such appointment; and
8. Copy of a written approval for merger granted by the Minister of Finance and Economy.
Article 12 (Transitional Measures on Establishment of Securities Market, etc.)
(1) Where the establishment is registered under Article 11 (1) of the Addenda, the securities market established by the Korea Stock
Exchange, the Association brokerage market established the Korea Securities Dealers Association and the futures market established
by the Korea Futures Exchange shall be deemed to be the securities market, the KOSDAQ and the futures market established by the Exchange.
(2) Where the establishment is registered under Article 11 (1) of the Addenda, the approval for the business regulations and any other
authorization and permission which the Korea Stock Exchange, the Korea Securities Dealers Association (limited to the business of
the Association brokerage market), the Korea Futures Exchange and the KOSDAQ obtain from the Minister of Finance and Economy and
the Financial Supervisory Commission shall be deemed to be those obtained by the Exchange.
Article 13 (Succession of Rights and Duties)
(1) Where the establishment is registered under Article 11 (1) of the Addenda, the Exchange shall succeed to the rights and duties
of corporations subject to merger that are ceased to exist as a result of such merger (limited to any business of the Association
brokerage market, in case of the Korea Securities Dealers Association; hereafter the same shall apply in this Article).
(2) The Exchange shall succeed to the employment contracts that corporations subject to merger have made with their employees.
Article 14 (Transitional Measures on Election of Chief Executive Officer, etc.)
(1) The chief executive officer, outside directors and any such full-time director as is a member of the Audit Committee, who are
elected at the inaugural general meeting under Article 9 of the Addenda, shall be deemed to be nominated by the Nomination Committee
under Article 8 (3) and (5) of this Act.
(2) The Chairman of the Market Supervision Committee who is elected at the inaugural general meeting under Article 9 of the Addenda
shall be deemed to be nominated by the Market Supervision Committee under Article 17 (4) of this Act.
Article 15 (Transitional Measures on Securities and Futures Trading)
Where the establishment is registered under Article 11 (1) of the Addenda, securities and futures trades which are conducted on the
securities market established by the Korea Stock Exchange, the Association brokerage market established the Korea Securities Dealers
Association and the futures market established by the Korea Futures Exchange and the settlement of which is not concluded, shall
be deemed to be trades conducted under the same trading conditions on the securities market, the KOSDAQ and the futures market that
the Exchange establishes following the merger.
Article 16 (Transitional Measures on Members)
The members (including those who have any equivalent status; hereafter the same shall apply in this Article) of the Korea Stock Exchange,
the Korea Securities Dealers Association and the Korea Futures Exchange shall be deemed to be the member of the Exchange as determined
by the Exchange taking into consideration their previous rights and duties, at the time when the Exchange is established.
Article 17 (Transitional Measures on Penal Provisions or Fine for Negligence)
With respect to any such act as is committed before this Act enters into force, the previous penal provisions or fine for negligence
shall apply.
Article 18 (Relationship with Other Acts and Subordinate Statutes)
(1) At the time when this Act enters into force, where the Korea Stock Exchange, the Korea Securities Dealers Association (limited
to any business of the Association brokerage market) or the Korea Futures Exchange (hereafter referred to as the "Exchanges,
etc." in this Article) is cited or the Securities and Exchange Act, the Futures Trading Act or respective provisions thereof
are cited in connection with the Exchanges, etc. in other Acts and subordinate statutes, it shall be deemed that this Act or corresponding
provisions of this Act are cited in lieu of the previous provisions if there are such corresponding provisions in this Act.
(2) In applying the provisions of paragraph (1) of this Article, the Exchange shall be deemed to be the Korea Stock Exchange referred
to in Article 2 (12) of the previous Securities and Exchange Act in case of transactions of securities and to be the Korea Futures
Exchange referred to in Article 4 of the previous Futures Trading Act in case of futures trading and the relevant provisions of corresponding
Acts and subordinate statutes shall apply.
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.
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