INDIRECT INVESTMENT ASSET MANAGEMENT BUSINESS ACT

Transcription

1 INDIRECT INVESTMENT ASSET MANAGEMENT BUSINESS ACT Act No. 6987, Oct. 4, 2003 Amended by Act No. 7221, Oct. 5, 2004 Act No. 7335, Jan. 14, 2005 Act No. 7386, Jan. 27, 2005 Act No. 7428, Mar. 31, 2005 Act No. 7618, Jul. 29, 2005 Act No. 8516, Jul. 19, 2007 Act No. 8852, Feb. 29, 2008 Act No. 8863, Feb. 29, 2008 Act No. 8910, Mar. 14, 2008 CHAPTER Ⅰ GENERAL PROVISIONS Article 1 (Purpose) The purpose of this Act is to prescribe necessary matters concerning the composition of indirect investment fund, etc. and the management of assets as well as the protection of investors in order to contribute to the development of the national economy through the revitalization of the indirect investment in capital market. <Amended by Act No. 7221, Oct. 5, 2004> Article 2 (Definitions of Terms) The terms used in this Act shall be defined as follows: <Amended by Act No. 7221, Oct. 5, 2004; Act No. 8516, Jul. 19, 2007; Act No. 8863, Feb. 29, 2008> 1. The term indirect investment means collecting funds, etc. from investors to manage the assets falling under each of the following items (hereinafter referred to as the assets ) and to distribute profits accruing from the management of such assets to investors: Provided, That any indirect investment made by persons prescribed by Presidential Decree shall not be deemed the indirect investment: (a) Investment securities; (b) Exchange traded derivatives or over-the-counter derivatives; (c) Real estate; (d) Real assets; and (e) Others prescribed by Presidential Decree; 1

2 2. The term indirect investment fund, etc. means any investment trust and any investment company (hereinafter referred to as the indirect investment fund ) aimed for making indirect investments, and any private equity fund; 3. The term investment trust means the indirect investment fund that is used by any truster to collect funds, etc. from investors for any trustee to invest in and manage the property (hereinafter referred to as the investment trust property ) according to the former s intructions and then distribute beneficial rights accruing therefrom to investors; 4. The term investment company means the indirect investment fund that is the stock company incorporated in accordance with the Commercial Act to manage the property of any company (hereinafter referred to as the investment company property ) as assets and distribute profits accruing therefrom to stockholders; 4-2. The term private equity fund means any limited partnership company that is incorporated in accordance with the Commercial Act for the purpose of investing the property of any company (hereinafter referred to as the private equity fund property ) in shares or equity, etc. of any other company to raise the values of the shares and equity of the invested company by means of participation in corporate governance and improvements in the business structure or the control structure, etc. and to distribute profits accruing from higher values of the shares and equity of the invested company to partners; 5. The term investment advisory business means the business of offering counsel about the value of assets prescribed by Presidential Decree (hereinafter referred to as the investment advisory assets ) or offering investment judgment (referring to the judgment on kinds, items, quantities, prices and the classification, ways and the timing of transaction, etc. of the investment advisory assets that are subject to investment; hereinafter the same shall apply) on the investment advisory assets by means of oral statement, document or others: Provided, That advice that is prescribed by Presidential Decree and offered to many and unspecified persons by means of public disclosure and s, etc. shall be excluded; 6. The term discretionary investment business means the business of 2

3 making investment for any client after being entrusted, in whole or in part, by him with the service of making investment judgment based on the analysis of the value of the investment advisory assets, etc.; 7. The term investment securities means those falling under any of the following items: (a) Securities (excluding securities option, etc. prescribed by Presidential Decree; hereinafter referred to as the securities ) provided by Article 2 (1) and (2) of the Securities and Exchange Act; (b) Bills and debt certificates that are issued, sold or brokered by financial institutions prescribed by Presidential Decree; (c) Securities denominated in foreign currency prescribed by Presidential Decree from among securities denominated in foreign currency provided by the Foreign Exchange Transactions Act; and (d) Instruments prescribed by Presidential Decree from among instruments that carry the indication of property-value rights; 8. The term exchange traded derivatives means transactions, prescribed by Presidential Decree, which are performed on currencies, investment securities, interest rates, indirect investment securities, real estate and real assets or the prices of currencies, investment securities, interest rates, indirect investment securities, real estate and real assets and price-based index numbers in the stock market provided by Article 2 (12) of the Securities and Exchange Act (hereinafter referred to as the stock market ), in KOSDAQ provided by Article 2 (14) of the same Act (hereinafter referred to as KOSDAQ ), in the futures market provided by subparagraph 3 of Article 3 of the Futures Trading Act and in other foreign markets similar to aforementioned markets, which are prescribed by Presidential Decree (hereafter in this Article referred to as the stock markets, etc. ); 9. The term over-the-counter derivatives means transactions, prescribed by Presidential Decree, which are performed on currencies, investment securities, interest rates, indirect investment securities, real estate and real assets or the prices of currencies, investment securities, interest rates, indirect investment securities, real estate and real assets and price-based index numbers outside the stock markets, etc.; 10. The term real assets means farm products, livestock products, fishery products, forest products, mineral products, goods belonging to energy, 3

4 goods that are manufactured and processed by using such goods as raw materials and other goods similar thereto which are prescribed by Presidential Decree; 11. The term short-term financial instruments means the instruments, including the provision of funds under the short-term fund transaction of not more than 30 days between financial institutions (hereinafter referred to as the short-term lending ) and bills and debt certificates, etc. referred to in subparagraph 7 (b), which are all traded in the financial market for a short term; 12. The term indirect investment property means the investment trust property and investment company property; 13. The term indirect investment securities means the beneficiary certificates of investment trust and the stock of the investment company; 14. The term beneficiary means the person who holds the beneficial rights of investment trust provided by Article 47; 15. The term indirect investor means the beneficiary of investment trust and the stockholder of the investment company; 16. The term asset management company means the person who becomes a truster of the investment trust or the corporate director of the investment company provided by Article 77 (1) to run the business of managing the indirect investment property, who is licensed by the Financial Services Commission in accordance with Article 4 (1); and 17. The term large stockholder means a shareholder falling under any of the following items: (a) The largest stockholder: A person himself, where he/she and the others specially related to him (hereinafter referred to as the specially related person ) as prescribed by Presidential Decree, holds the greatest number of outstanding voting stocks of an asset management company, summing up the total number of stocks they own, no matter whose name the accounts stand in; and (b) A major stockholder: A person who holds 10/100 or more of the total number of outstanding voting stocks of an asset management company on his/her own no matter whose name the accounts stand in, or a person prescribed by Presidential Decree among the shareholders who exercise de facto influence on the major matters of management, such as appointing or dismissing of executives, 4

5 etc. of the asset management company. Article 3 (Scope of Application, etc.) (1) This Act shall apply to any indirect investment, any act performed in relation therewith and any actor involved therein. (2) Any person shall be prohibited from running the business of indirect investment without obtaining a license therefor under this Act. (3) Any person who intends to run the business of managing, keeping in custody and managing any indirect investment property, or selling and redeeming any indirect investment securities and managing any indirect investment fund, etc. shall obtain a license or have his/her business registered under this Act. CHAPTER Ⅱ INDIRECT INVESTMENT MANAGER AND RELATED PERSONS SECTION 1 Asset Management Company Article 4 (Asset Management Company) (1) Every asset management company shall be a stock company provided by the Commercial Act or a financial institution prescribed by Presidential Decree, and obtain a license from the Financial Services Commission in accordance with Articles 5 and 6. <Amended by Act No. 8516, Jul. 19, 2007; Act No. 8863, Feb. 29, 2008> (2) Any person who obtains a license in accordance with paragraph (1) shall run the business falling under each of the following subparagraphs: 1. The business of establishing and terminating the investment trust; 2. The business of managing the investment trust property and offering management instructions; 3. The business of managing the investment company property; and 4. Other businesses prescribed by Presidential Decree. (3) Every asset management company may sell the indirect investment securities of indirect investment fund managed by it under the conditions as prescribed by Presidential Decree besides the business referred to in each subparagraph of paragraph (2). In this case, the provisions governing the distribution company provided by Article 26 (2) shall apply to the 5

6 relevant asset management company. Article 5 (Requirements for License) (1) Any person who intends to obtain a license in accordance with Article 4 (1) shall fulfill each of the following requirements: <Amended by Act No. 7386, Jan. 27, 2005; Act No. 8516, Jul. 19, 2007> 1. His/her capital is required to at least 10 billion won (3 billion won in the case of an asset management company which is entrusted with the management of assets only from infrastructure fund under the Act on Private Participation in Infrastructure); 2. He/she is required to have human resources and facilities, including data-processing equipment, which are fully adequate to run the business of his/her asset management company; 3. His/her business program is required to be feasible and sound; 4. He/she is required not to have any executive falling under each subparagraph of Article 8 (1) from among executives; and 5. Large stockholders (including specially related persons, and persons prescribed by Presidential Decree among the shareholders who exercise de facto influence on the major matters of the management of the asset management company, if the largest stockholder is a corporation; hereafter the same shall apply in Article 5-2) are required to have full investment capability, sound financial standing and social credit. (2) Necessary matters concerning details of the requirements for the license referred to in paragraph (1) shall be prescribed by Presidential Decree. Article 5-2 (Approval, etc. on Alteration of Large Stockholders) (1) Any person who intends to become a large stockholder (excluding those prescribed by Presidential Decree) by acquiring the stocks of asset management company shall equip himself/herself with the requirements prescribed by Presidential Decree for a sound management among the requirements for large stockholders under the provisions of Article 5 (1) 5 and (2), and obtain in advance an approval of the Financial Services Commission. <Amended by Act No. 8516, Jul. 19, 2007; Act No. 8863, Feb. 29, 2008> (2) The Financial Services Commission may order a disposition of the stocks acquired without obtaining an approval under the provisions of paragraph (1) by setting the period within six months. <Amended by Act No. 6

7 8863, Feb. 29, 2008> (3) Any person who has acquired the stocks without obtaining an approval under the provisions of paragraph (1) shall not exercise the voting right on the acquired portion of stocks obtained without an approval. (4) Matters necessary for detailed requirements for approvals and orders under the provisions of paragraphs (1) and (2) shall be prescribed by Presidential Decree. [This Article Newly Inserted by Act No. 7618, Jul. 29, 2005] Article 6 (Procedures for License) (1) Any person who intends to obtain a license in accordance with Article 4 (1) shall file a written application with the Financial Services Commission for such license under the conditions as prescribed by Presidential Decree. <Amended by Act No. 8863, Feb. 29, 2008> (2) Any person who intends to apply for the license referred to in paragraph (1) (hereafter in this Article referred to as the main license ) may file in advance a preliminary application with the Financial Services Commission. In this case, the Financial Services Commission shall examine such preliminary application and notify the applicant of its decision on whether to grant him the license within the period set by Ordinance of the Prime Minister. <Amended by Act No. 8863, Feb. 29, 2008> (3) The Financial Services Commission may set conditions to any main license and any preliminary license under the conditions as prescribed by Presidential Decree. <Amended by Act No. 8863, Feb. 29, 2008> (4) The Financial Services Commission shall, when any person who has obtained a preliminary license files an application for a main license, grant him the main license after confirming his/her implementation of the conditions set to his/her preliminary license. <Amended by Act No. 8863, Feb. 29, 2008> (5) The Financial Services Commission shall, when it grants any main license, publish without delay contents of such main license in the Official Gazette and make it known to the public by means of computer communications, etc. <Amended by Act No. 8863, Feb. 29, 2008> (6) Necessary matters concerning detailed procedures, etc. for the main and preliminary license shall be prescribed by Presidential Decree. Article 7 (Firm Name) (1) Every asset management company shall use the letters of asset management in its firm name: Provided, That the same shall not apply to 7

8 a case where any financial institution incorporated under the Banking Act, any insurance company incorporated under the Insurance Business Act and any merchant bank incorporated under the Merchant Banks Act concurrently run the business of the asset management company. <Amended by Act No. 8516, Jul. 19, 2007> (2) Any person who is not the asset management company shall be prohibited from using the letters of asset management, investment trust or similar letters in his/her firm name. Article 8 (Qualifications of Executives) (1) Any person falling under any of the following subparagraphs shall be disqualified from becoming an executive of any asset management company: <Amended by Act No. 7428, Mar. 31, 2005; Act No. 8910, Mar. 14, 2008> 1. A minor, an incompetent or quasi-incompetent person; 2. A person who is not reinstated yet, after having been declared bankrupt; 3. A person who has been sentenced to imprisonment without prison labor or a heavier punishment, or has been sentenced to a fine or a heavier punishment in accordance with this Act, finance-related Acts and subordinate statutes prescribed by Presidential Decree (hereinafter referred to as the finance-related Acts and subordinate statutes ) or foreign finance-related laws and regulations (referring to foreign laws and regulations equivalent to this Act and finance-related Acts and subordinate statutes of Korea; hereinafter the same shall apply in this Article), and five years have yet to passed since the expiration of the term of sentence or since the decision to exempt such sentence has been made (including cases where the execution of such sentence is deemed terminated); 4. A person who is in a stay period after having been sentenced to a stay of the execution of imprisonment without prison labor or a heavier punishment; 5. A person who has worked as an executive or employee for a company or a corporation, whose license, authorization and registration, etc. of business have been revoked in accordance with this Act, the finance-related Acts and subordinate statutes or foreign finance-related laws and regulations (limited to any person who is prescribed by Presidential Decree as being directly responsible for incurring the 8

9 grounds of revoking such license, authorization and registration, etc.) and for whom five years have yet to expire from the date on which such license, authorization and registration, etc. of the company or the corporation were revoked; 6. A person who has been removed or dismissed from his/her post in accordance with this Act, the finance-related Acts and subordinate statutes or foreign finance-related aws and regulations, and five years have yet passed since the date on which he/she was removed or dismissed from his/her office; and 7. A person who was notified as a retired executive or resigned employee who would have received a request for dismissal (including recommendation of dismissal) or request for removal if he/she had held office under this Act or the finance-related Acts and subordinate statutes, and five years have not elapsed since the date of such notification (in cases where five years from the date of notification exceeds seven years from the date of retirement or resignation, seven years from the date of retirement or resignation shall apply). (2) If any person who has been selected and appointed as an executive of any asset management company falls under each subparagraph of paragraph (1) or is found to have fallen under each subparagraph of paragraph (1) at the time that he/she was selected and appointed as an executive, he/she shall be justly dismissed from his/her office. (3) Any act in which any executive has been involved before he/she is dismissed in accordance with paragraph (2) shall not lose its effect. Article 9 (Securing of Fund Managers) (1) Every asset management company shall secure fund managers prescribed by Presidential Decree in order to raise the expertise of asset management and protect investors. (2) Every asset management company shall have matters concerning the fund managers referred to in paragraph (1) registered with the Asset Management Association of Korea (hereinafter referred to as the Asset Management Association of Korea ) established pursuant to Article 160 under the conditions as prescribed by Presidential Decree. (3) Every asset management company shall be prohibited from getting any person who is not the fund manager that is registered under paragraph (2) to perform the business falling under each of the following 9

10 subparagraphs: 1. The business related directly to the investment and management of indirect investment property; 2. Deleted; <by Act No. 7221, Oct. 5, 2004> 3. The investment advisory business; and 4. The discretionary investment business. Article 10 (Appointment of Outside Directors) (1) Any asset management company, prescribed by Presidential Decree taking the scale of its indirect investment or such into account, shall have three or more outside directors (referring to directors who are not engaged in ordinary business of the relevant company and do not fall under any subparagraphs of paragraph (4); hereinafter the same shall apply), and the number of outside directors shall exceed not less than 1/2 of the total number of directors. (2) An asset management company under paragraph (1) shall set up a committee to recommend the candidates for outside directors in accordance with Article of the Commercial Act (hereinafter referred to as the outside director candidates recommendation committee ). In this case, the number of outside directors shall be not less than half the number of the total members of the outside director candidates recommendation committee. (3) An asset management company under paragraph (1) shall appoint outside directors from among those recommended by the outside director candidates recommendation committee. If the outside director candidates recommendation committee of a corporation listed on the stock market or on KOSDAQ recommends candidates for outside directors, the candidates recommended by the stockholders, who meet the requirements for exercising their rights referred to in Article of the Securities and Exchange Act, shall be included. (4) No person who falls under any of the following subparagraphs shall become an outside director of an asset management company under paragraph (1), and he/she shall lose his/her position, if he/she comes to fall thereunder after becoming an outside director: 1. A minor, incompetent or quasi-incompetent; 2. A person who was declared bankrupt and has not been reinstated; 3. A person who was sentenced imprisonment without labor, or higher, 10

11 and 2 years have not passed since the expiration of the term of sentence, or since the decision to exempt such sentence has been made; 4. A person who was dismissed or removed from the office pursuant to this Act, and 2 years have not passed since; 5. The largest stockholder; 6. The specially related person of the largest stockholder; 7. A major stockholder, his/her spouse, lineal ascendant or descendant; 8. A person who is, or used to be, a full-time executive or an employee of the asset management company or an affiliated company thereof (referring to an affiliated company pursuant to the Monopoly Regulation and Fair Trade Act; hereinafter the same shall apply) for last 2 years; 9. Spouse, a lineal ascendant or descendant of a full-time executive of the asset management company; 10. A person who is, or used to be, a full-time executive or an employee of a corporation for last 2 years, which has important business relationship prescribed by Presidential Decree with the asset management company, or which is a competitor or collaborator of the asset management company; 11. A full-time executive or an employee of a company for which a fulltime executive or an employee of the asset management company is working part-time; or 12. A person who has difficulty in faithfully performing the duties as an outside director, or who may exercise influence over the asset management company as prescribed by Presidential Decree. (5) Where the number of outsided directors fails to meet the requirements for organizing the board of directors under paragraph (1), due to the reasons such as death or resignation of outside directors, an asset management company under paragraph (1) shall comply with the requirements under paragraph (1) on the first general meeting of stockholders called after such reason occurs. (6) The latter part of paragraph (2) shall not apply to cases where an asset management company, which initially falls within the requirements for appointment of outside directors under paragraph (1), appoints its outside directors [This Article Wholly Amended by Act No. 8516, Jul. 19, 2007] 11

12 Article 11 (Internal Control Standards) (1) Every asset management company shall prescribe fundamental procedures and standards (hereinafter referred to as the internal control standards ) to be observed by its executives and employees when they perform their duties in order to abide by Acts and subordinate statutes, manage its assets in a sound manner and protect investors. (2) Every asset management company shall have at least one person (hereinafter referred to as a compliance officer ) in charge of the task of checking on the observance of internal control standards, investigating any violation of the internal control standards and reporting the findings of their investigation to auditors or the audit committee established pursuant to Article 12 (1). (3) Every asset management company (excluding the local branch office and local business place of any foreign asset management company provided for in Article 156 (1)) shall, when it intends to appoint any compliance officer, go through a resolution thereon of the board of directors. (4) Compliance officers shall meet requirements falling under each of the following subparagraphs: <Amended by Act No. 8516, Jul. 19, 2007; Act No. 8852, Feb. 29, 2008; Act No. 8863, Feb. 29, 2008> 1. They are required to have the career falling under any of the following items: (a) They have worked at least 10 years at the Bank of Korea or institutions (including foreign financial institutions equivalent thereto) subject to inspection of the Financial Supervisory Service under Article 38 of the Act on the Establishment, etc. of Financial Services Commission; (b) They have worked at least 5 years as researchers or full-time lecturers with master s degrees or higher degrees in finance-related field at research institutes or universities; (c) They have worked at least 5 years as attorneys-at-law or certified public accountants in the fields related to their qualifications; and (d) They have worked at least 5 years at the Ministry of Strategy and Finance, the Ministry of Land, Transport and Maritime Affairs, the Financial Services Commission, the Securities and Futures Commission or the Financial Supervisory Service, and five years have passed since they resigned or retired from their respective 12

13 ministries and institutions; 2. They are required not to fall under each subparagraph of Article 8 (1); and 3. They are required not to be subject to disciplinary measures such as caution and warning for violating finance-related Acts and subordinate statutes for last five years, which have been demanded by the Ministry of Land, Transport and Maritime Affairs, the Financial Services Commission or the Governor of the Financial Supervisory Service. (5) With respect to any asset management company that is found to have violated Acts and subordinate statutes as a result of an inspection conducted by the Governor of the Financial Supervisory Service under Article 166 (3), the Financial Services Commission may urge the relevant asset management company to alter its internal control standards in order to prevent a recurrence of such violation of Acts and subordinate statutes. <Amended by Act No. 8863, Feb. 29, 2008> (6) Every asset management company shall, when it appoints or dismisses any compliance officer, notify the Financial Services Commission and the Asset Management Association of Korea of the fact. <Amended by Act No. 8863, Feb. 29, 2008> (7) The compliance officers shall perform their duties with the care of good managers and they shall be prohibited from taking charge of the business falling under each of the following subparagraphs: 1. The business of managing the property belonging to their asset management company; 2. The business of managing the indirect investment property managed by their asset management company and the business of selling indirect investment securities, which is run by their asset management company and other business incidental thereto; and 3. The financial business run concurrently by their asset management company in accordance with each subparagraph of Article 14 (1). (8) The executives and employees of every asset management company shall, if they are requested by any compliance officer to provide materials and information to perform his/her duty, comply with the request with sincerity. (9) No asset management company shall put any former compliance officer at an unfair disadvantage in connection with personnel affairs on the 13

14 grounds of performing his/her duty as a compliance officer. (10) Necessary matters concerning the internal control standards and compliance officers shall be prescribed by Presidential Decree. Article 12 (Establishment of Audit Committee) (1) Every asset management company that is prescribed by Presidential Decree taking into account the size of its indirect investment property shall establish the audit committee (referring to the audit committee provided by Article of the Commercial Act; hereinafter the same shall apply). <Amended by Act No. 8516, Jul. 19, 2007> (2) The audit committee shall meet the requirements falling under each of subparagraph as follows: <Amended by Act No. 8516, Jul. 19, 2007> 1. That 2/3 or more of total members of the audit committee shall be outside directors; 2. That one or more of the members shall be specialists in accounting or finance, as prescribed by Presidential Decree; and 3. The representative of the audit committee of a corporation listed on the stock market or an asset management company listed on KOSDAQ shall be an outside director. (3) No person who falls under any of Article 10 (4) 1 through 4, and 7 through 9 shall be a non-outside-director member of the audit committee, and he/she shall lose his/her position when he/she comes to fall thereunder after he/she has become a non-outside-director member of the audit committee: Provided, That any person who is currently serving as a standing auditor or as a non-outside-director member of the audit committee may become a non-outside-director member of the audit committee even though he/she falls under Article 10 (4) 8. <Newly Inserted by Act No. 8516, Jul. 19, 2007> (4) Where the number of outside directors fails to meet the requirements for organizing the audit committee under paragraph (2), due to the reasons such as death or resignation of outside directors, an asset management company under paragraph (1) shall comply with the requirements under paragraph (2) on the first general meeting of stockholders called after such reason occurs. <Newly Inserted by Act No. 8516, Jul. 19, 2007> (5) The proviso to Article (2) of the Commercial Act shall not apply to composition of the audit committee under paragraph (1). <Newly Inserted by Act No. 8516, Jul. 19, 2007> 14

15 (6) The provisions of Article 409 (2) and (3) of the Commercial Act shall apply mutatis mutandis to appointment of the outside directors who become members of the audit committee. <Newly Inserted by Act No. 8516, Jul. 19, 2007> Article 13 (Minority Stockholders Rights) (1) Any person who has continually held the stock in excess of 5/100,000 of the total number of the stock issued by any asset management company (limited to the asset management company prescribed by Presidential Decree taking into account the size of its indirect investment property, etc.; hereafter the same shall apply in this Article) for not less than 6 months under the conditions as prescribed by Presidential Decree may exercise his/her right as a stockholder provided by Article 403 of the Commercial Act (including a case where the same Article is applied mutatis mutandis in Articles 324, 415, 424-2, and 542 of the same Act). <Amended by Act No. 8516, Jul. 19, 2007> (2) Any person who has continually held the stock in excess of 25/100,000 (25/200,000 in the case of any corporation prescribed by Presidential Decree) of the total number of the stock issued by any asset management company for not less than 6 months under the conditions as prescribed by Presidential Decree may exercise his/her right as a stockholder provided by Article 402 of the Commercial Act. <Amended by Act No. 8516, Jul. 19, 2007> (3) Any person who has continually held the stock in excess of 5/10,000 (5/20,000 in the case of any corporation prescribed by Presidential Decree) of the total number of the stock issued by any asset management company for not less than 6 months under the conditions as prescribed by Presidential Decree may exercise his/her right as a stockholder provided by Article 466 of the Commercial Act. <Amended by Act No. 8516, Jul. 19, 2007> (4) Any person who has continually held the stock in excess of 25/10,000 (25/20,000 in the case of any corporation prescribed by Presidential Decree) of the total number of the stock issued by any asset management company for not less than 6 months under the conditions as prescribed by Presidential Decree may exercise his/her right as a stockholder provided by Article 385 of the Commercial Act (including a case where the same Article is applied mutatis mutandis in Article 415 of the same Act) and 15

16 Article 539 of the same Act. <Amended by Act No. 8516, Jul. 19, 2007> (5) Any person who has continually held the stock in excess of 5/1,000 (5/2,000 in the case of any corporation prescribed by Presidential Decree) of the total number of the stock issued by any asset management company for not less than 6 months under the conditions as prescribed by Presidential Decree may exercise his/her right as a stockholder provided by Article of the Commercial Act. In this case, the number of the stock held by him shall be based on the voting stock. <Amended by Act No. 8516, Jul. 19, 2007> (6) Any person who has continually held stocks in excess of 15/1,000 (15/2,000 in cases of any corporation prescribed by Presidential Decree) of the total number of the stock issued by any asset management company for not less than 6 months under the conditions as prescribed by Presidential Decree may exercise his/her right as a stockholder provided by Articles 366 and 467 of the Commercial Act. In this case, the number of the stock held by him shall be based on the voting stock. <Amended by Act No. 8516, Jul. 19, 2007> (7) In the event that any stockholder referred to in paragraph (1) files a lawsuit in accordance with Article 403 (including cases where the Article is applied mutatis mutandis to Articles 324, 415, 424-2, and 542 of the Commercial Act) of the Commercial Act and wins the lawsuit, such stockholder may ask the relevant asset management company for the payment of all expenses incurred by filing such lawsuit. <Amended by Act No. 8516, Jul. 19, 2007> Article 14 (Restrictions on Concurrently Running Other Business) (1) Every asset management company shall be prohibited from running other businesses than the business falling under each of the following subparagraphs: <Amended by Act No. 8863, Feb. 29, 2008> 1. The investment advisory business or the discretionary investment business; 2. The financial business (referring to the business provided by financerelated Acts and subordinate statutes; hereafter the same shall apply in this Article) that is allowed to be run in accordance with other Acts and subordinate statutes; 3. The business run by any general fund administrator in accordance with Article 25 (2); and 16

17 4. The business that the Financial Services Commission authorizes from among the types of the financial business prescribed by Presidential Decree after judging that the business run by the relevant asset management company will not undermine the protection of its investors and the maintenance of its financial soundness. (2) In the case of the financial business referred to in paragraph (1) 4, the business for which the relevant asset management company obtains a license, authorization and approval, etc. from the Financial Services Commission in accordance with other Acts and subordinate statutes or which the relevant asset management company registers with the Financial Services Commission shall be deemed authorized by the Financial Services Commission in accordance with paragraph (1) 4. <Amended by Act No. 8863, Feb. 29, 2008> Article 15 (Restrictions on Trading of Securities by Executives and Employees) (1) The executives and employees of every asset management company shall be prohibited from trading securities, performing the transaction of exchange traded derivatives and over-the-counter derivatives or entrusting such transaction for their own account no matter whose name the accounts stand in. (2) Any executive who works as a managing director for any asset management company shall, if he/she intends to work as a managing director for any profit-making corporation falling under any of the following subparagraphs, obtain the approval thereof from the Financial Services Commission: <Amended by Act No. 8516, Jul. 19, 2007; Act No. 8863, Feb. 29, 2008> 1. Institution subject to the inspection of the Financial Supervisory Service under Article 38 of the Act on the Establishment, etc. of Financial Services Commission; 2. Company (hereafter in this Article referred to as the subsidiary company ) that is contracted to compile the consolidated financial statement provided by subparagraph 2 of Article 1-2 of the Act on External Audit of Stock Companies for the relevant asset management company: Provided, That the cases falling under each of the following items shall be excluded: (a) Where the executive concurrently works as an executive for a financial institution that is a subsidiary company located overseas 17

18 or is seconded to such financial institution; and (b) Where the executive concurrently works as an executive for the subsidiary company or is seconded to the subsidiary company in order to rationalize the management of the subsidiary company or smoothly promote the restructuring of the subsidiary company; 3. Company that is a large stockholder of the asset management company; 4. Company that is provided with a loan or a credit in excess of 10/100 of the capital (referring to the amount obtained by subtracting the total amount of liabilities from the total amount of assets on the balance sheet as of the end of the latest business year) of the relevant asset management company; and 5. Company that is prescribed by Presidential Decree as being feared to undermine the sound management of the relevant asset management company. Article 16 (Restrictions on Management of Proprietary Property) (1) Every asset management company shall be prohibited from performing the act falling under any of the following subparagraphs using its own property: Provided, That the same shall not apply to the case that is prescribed by Presidential Decree as being not feared to undermine the maintenance of the sound management or the interests of in- direct investors: <Amended by Act No. 8516, Jul. 19, 2007> 1. The act of guaranteeing the repayment of debts for others (excluding a large stockholder and his/her specially related person); 2. The act of acquiring assets denominated in foreign currency; 3. The act of holding investment securities; 4. Credit extension (lending properties with economic values such as money or securities, guarantee of fulfillment of liabilities, purchasing securities, in fact, just to supply fund, other direct or indirect transactions, prescribed by Presidential Decree, which accompany credit risk; hereinafter the same shall apply) for a large stockholder (including his/her specially related person; hereafter the same shall apply in this Article and Article 16-2); or 5. Other acts prescribed by Presidential Decree. (2) Where an asset management company intends to conduct acts (excluding those determined by Presidential Decree; hereafter the same shall 18

19 apply in this Article) falling under paragraph (1) 4, pursuant to the proviso to paragraph (1), it shall undergo the prior vote of the board of directors. In this case, a decision of the board of directors shall be passed by a unanimous vote of total directors enrolled. <Newly Inserted by Act No. 8516, Jul. 19, 2007> (3) Where an asset management company conducts acts falling under paragraph (1) 4, pursuant to the proviso to paragraph (1), it shall immediately report to the Financial Services Commission, and notify of such fact on its Internet homepage or such. <Newly Inserted by Act No. 8516, Jul. 19, 2007; Act No. 8863, Feb. 29, 2008> (4) An asset management company shall collect the cases described by Presidential Decree from among those to be reported pursuant to paragraph (3), report them to the Financial Services Commission every quarter year and notify of such fact on its Internet homepage or such. <Newly Inserted by Act No. 8516, Jul. 19, 2007; Act No. 8863, Feb. 29, 2008> (5) No large stockholder of an asset management company shall be offered a credit extension from the asset management company, except for the cases pursuant to the proviso to paragraph (1). <Newly Inserted by Act No. 8516, Jul. 19, 2007> (6) Where the Financial Services Commission acknowledges that an asset management company or a large stockholder thereof is suspected of violation of paragraphs (1) through (5), the Commission may require such asset management company or large stockholder to submit necessary information. <Newly Inserted by Act No. 8516, Jul. 19, 2007; Act No. 8863, Feb. 29, 2008> (7) In cases where the healthy operation of an asset management company may significantly be harmed due to insolvent financial structures as the liabilities of a large stockholder (limited to a corporation) of an asset management company exceed its assets, as described by Presidential Decree, the Financial Services Commission may restrict the asset management company from newly obtaining securities issued by the large stockholder. <Newly Inserted by Act No. 8516, Jul. 19, 2007; Act No. 8863, Feb. 29, 2008> (8) Necessary matters concerning the soundness of the proprietary property owned by every asset management company, the control of risk and accounting, etc. shall be prescribed by Presidential Decree. Article 16-2 (Prohibition against Large Stockholder s Exercise of Unjust Influence) 19

20 (1) A large stockholder of an asset management company shall not conduct any act falling under the following subparagraphs for his/her own interest against the interest of the asset management company: 1. Asking the asset management company to provide undisclosed data or information for the purpose of exerting unjust influence: Provided, That the same shall not apply to the case falling under Article 13 (3); 2. Exerting unjust influence on the personnel administration or management of the asset management company in collusion with the other stockholders on the condition of providing economic interest or such; or 3. Other acts prescribed by Presidential Decree from among those corresponding to subparagraphs 1 and 2. (2) Where the Financial Services Commission acknowledges that a large stockholder is suspected of violation of paragraph (1), the Commission may require such asset management company or large stockholder to submit necessary information. <Amended by Act No. 8863, Feb. 29, 2008> [This Article Newly Inserted by Act No. 8516, Jul. 19, 2007] Article 17 (Report, Public Disclosure, etc. of Business Operation) (1) Every asset management company shall submit the report on the settlement of accounts of every business year and the regular report of every quarter to the Financial Services Commission and the Asset Management Association of Korea under the conditions as prescribed by Presidential Decree. <Amended by Act No. 8863, Feb. 29, 2008> (2) The Financial Services Commission and the Asset Management Association of Korea shall, upon receiving the report on the settlement of accounts and the regular report under paragraph (1), offer such documents for public reading. <Amended by Act No. 8863, Feb. 29, 2008> (3) Every asset management company shall publish matters falling under each of the following subparagraphs within 4 months from the date on the accounts of every business year are settled under the conditions as prescribed by Presidential Decree: Provided, That the matters of subparagraphs 2 and 3 shall be published within 2 months from the end of every quarter (excluding any quarter that includes the date on which the accounts are settled): 1. Matters concerning organization and manpower; 2. Matters concerning financial affairs and profit and loss; 20

21 3. Matters concerning the raising and management of funds; 4. Matters concerning management indicators showing soundness, profitability and productivity, etc.; and 5. Other matters that are prescribed by Presidential Decree as having a great influence on the management of every asset management company. (4) An asset management company shall, if it falls under any of the following subparagraphs, report such fact to the Financial Services Commission, as prescribed by Presidential Decree: <Newly Inserted by Act No. 8516, Jul. 19, 2007; Act No. 8863, Feb. 29, 2008> 1. When the largest stockholder is changed; or 2. When the number of stocks owned by a large stockholder or his/her specially related person is changed 1/100 or more out of total voting stocks outstanding. (5) Necessary matters concerning standards for publishing the management of every asset management company, etc. shall be prescribed by Presidential Decree. Article 18 (Matters, etc. Subject to Approval and Authorization) (1) Any asset management company shall, if it intends to reduce its capital, obtain the approval thereof from the Financial Services Commission. In this case, the Financial Services Commission shall take into account the matters prescribed by Presidential Decree in order for the asset management company to secure its financial soundness when it grants the approval. <Amended by Act No. 8863, Feb. 29, 2008> (2) Any asset management company shall, if it falls under any of the following subparagraphs, obtain the authorization thereof from the Financial Services Commission. In this case, the Financial Services Commission shall take into account the matters prescribed by Presidential Decree when it grants the authorization: <Amended by Act No. 8863, Feb. 29, 2008> 1. Dissolution or the discontinuation of business; and 2. Merger, division, transfer and acquisition by transfer of the whole business (including the case corresponding thereto). (3) Any asset management company that runs the business of selling indirect investment securities in accordance with Article 4 (3) shall, when it intends to discontinue or resume the business, make a report to the 21

22 Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008> (4) Necessary matters concerning the approval, authorization and report from and to the Financial Services Commission under paragraphs (1) through (3) shall be prescribed by the Financial Services Commission. <Amended by Act No. 8863, Feb. 29, 2008> Article 19 (Liability of Asset Management Company, etc.) (1) In the event that any asset management company causes damage to indirect investors by performing any act in contravention of Acts and subordinate statutes, the deed of investment trust (hereinafter referred to as the trust deed ), the articles of incorporation of any investment company and the investment prospectus (hereinafter referred to as the investment prospectus ) provided by Article 56, and by neglecting its business, such asset management company shall be held liable to indemnify for such damage. (2) In the event that any asset management company takes the liability to indemnify for the damage in accordance with paragraph (1), if any director or any auditor (including any member of the audit committee) is responsible for causing such damage, the asset management company as well as the director and auditor shall be held liable to jointly indemnify for the damage. Article 20 (Restrictions on Exchange of Personnel and Information, etc.) (1) No asset management company shall perform the act of exchange, etc. falling under any of the following subparagraphs with its affiliates or any distribution company provided by Article 26 (2). In this case, the specific scope of the act falling under subparagraphs 1 through 3 shall be prescribed by Presidential Decree: <Amended by Act No. 8516, Jul. 19, 2007> 1. Concurrently holding posts of or seconding executives and employees; 2. Joint acts; 3. The provision of information; and 4. Other acts that are prescribed by Presidential Decree as being similar to the acts referred to in subparagraphs 1 through 3. (2) Notwithstanding the provisions of paragraph (1), the act referred to in each subparagraph of paragraph (1) may be peformed if Presidential Decree prescribes that the act does not undermine the interests of indirect investors. Article 21 (Prohibition on Use of Undisclosed Management Information) 22

23 (1) The executives and employees of any asset management company, any trustee company provided by Article 23 (2), any asset custody company provided by Article 24 (2), any general fund administrator provided by Article 25 (2) and any indirect investment fund appraisal company provided by Article 154 shall be prohibited from performing any transaction by using the undisclosed information on the indirect investment fund or allowing any other person to use such undisclosed information. (2) The undisclosed management information referred to in paragraph (1) that greatly influences the judgment of investors means the undisclosed information pertaining to investment prospectus, documents on the settlement of accounts provided by Article 99 (2), business reports provided for in Article 124 (1), documents on the settlement of accounts provided for in Article 124 (2) and the audit report (hereinafter referred to as the audit report ) provided by Article 8 of the Act on External Audit of Stock Companies. (3) Necessary matters concerning the scope of the undisclosed management information on the indirect investment fund referred to in paragraph (1) shall be prescribed by Presidential Decree. Article 22 (Dissolution and Liquidation) The provisions governing the dissolution and liquidation of the trust company in the Trust Business Act shall apply mutatis mutandis to the dissolution and liquidation of the asset management company. <Amended by Act No. 8516, Jul. 19, 2007> SECTION 2 Persons Related to Indirect Investment Article 23 (Trustee Company) (1) Any person who intends to run the business of managing and keeping the investment trust property in custody as a trustee of the investment trust shall be the person falling under each of the following subparagraphs and he/she shall have his/her business registered with the Financial Services Commission: <Amended by Act No. 8516, Jul. 19, 2007; Act No. 8863, Feb. 29, 2008> 1. The trust company incorporated in accordance with the Trust Business Act; and 2. The financial institution that concurrently runs the trust business 23