REGULATION

ON

INVESTIGATION OF SECURITIES AND FUTURES

Regulation on Investigation of Securities and Futures

CONTENTS

I.	General Provisions

§1.	Purpose

§2.	Scope of Application

§3.    Investigators

§4.    Confidentiality

§5.    Withdrawal

§6.    Consideration Matters in Investigation

§7.    Documenting of Investigation

II.	Acceptance and Jurisdiction of Cases

§8.    Acceptance of Cases

§9.    Unit of Cases

§10.   Case Allocation

§11.   Concurrence of Investigation in Charge

§12.   Form of Case Acceptance

III.     Procedures And Method of Investigation

§13.   Conducting Investigation

§14.   Conducting Preliminary Investigation

§15.   Simplified Investigation

§16.   Request for Joint Investigation

§17.   Method and Procedure of Joint Investigation

§18.   Notice of Investigation

§19.   Written Order for Investigation

§20.   Method of Investigation

§21.   Demand for Attendance

§22.   Demand for Submission of Written Statement

§23.   Demand for Submission of Books

§24.   Detention of Things

§25.   On-Site Investigation

§26.  Demand for Submission of Data from Securities-Related Institutions and	Futures-Related Institutions

§27.   Demand for Transaction Information on Financial Institutions

§28.   Simplified Procedure

§29.   Examination

§30.   Hearing of Statement of Relevant People

§31.   Preparation of Written Questions and Answers.

§32.   Issue and Management of Forms

§33.   Report of Investigation Result

§34.   Provisions of Mutatis Mutandis Application

IV.     Measures Following Investigation

Section 1. Report of Investigation Results and Measures Plan

§35.   Processing of Investigation Result and Measures Plan.

§36.   Disposition Following Investigation

§37.   Rule for Making Reports

Section 2. Procedure of Review and Mediation

§38.   Request for Review and Mediation

§39.   Review·mediation and Notice of Results

Section 3. Composition and Operation of Securities·Futures Investigation Deliberation	Committee.

§40.   Securities·Futures Investigation Deliberation Committee

§41.   Composition of Deliberation Committee

§42.   Operation of Deliberation Committee

Section 4. Submission to Deliberation Committee and Report of Results

§43.   Submission to Deliberation Committee

§44.   Notice of Deliberation Results

Section 5. Measures on Investigation Results

§45.   Filling of Complaint

§46.   Imposition of Surcharge

§47.   Imposition of Negligence Fine

§48.   Correction Order

§49.   Necessary Measures for Disgorgement of Short-Swing Profits

§50.   Warning

§51.   Concurrent Imposition

§52.   Special Case of Concurrent Imposition

§53.   Aggravating or Lightening of Disposition

§54.   Standards of Disposition

§55.   Partial Delegation of Power of Disposition

§56.   Ex Post Restriction

§57.   Hearings

§58.   Notification of Objection Procedures

§59.   Exclusion of Application of Hearings

§60.   Request for Reopening of procedure

V.	Unfair Trade Investigation·Supervision Institution Consultation	Committee

§61.   Unfair trade Investigation·Supervision Institution Consultation Committee.

§62.   Composition of Consultation Committee

§63.   Duties of Consultation Committee

§64.   Opening a Meeting

§65.   Contribution of Affairs between Investigation·Supervision Institution.

§66.   Confidentiality

§67.   Detailed matters

VI.     Books and Kept Documents

§68.   Books and Kept Documents.

§69.   File of Case Record

VII.	Supplementary Provisions

§70.   Provisions of Multatis Mutandis Application

§71.   Notice to Relevant Institutions

§72.   Payment of Expenses

§73.   Commendations

§74.   Secret Protection of Informers

§75.   Public Relation and Training

§76.   Delegation of Powers

Addenda

Enacted on March 20, 2002. FSC 2002-10

Amended on October 30, 2002. FSC 2002-71

Amended on August 27, 2003. FSC 2003-41

CHAPTER 1.

GENERAL PROVISIONS

§1. Purpose

The purpose of this Regulation, pursuant to the provisions under Article 206-2 paragraph (4) of the Securities and Exchange Act (hereinafter, "the Securities Act") and Article 90-2 paragraphs (2) · (3) of its Enforcement Decree or Article 95 paragraph (4) of the Futures Trading Act (hereinafter, "the Futures Act") and Article 36-2 paragraphs (1)· (2) subparagraph 3 of its Enforcement Decree, is to prescribe matters necessary where the FSC or the SFC delegates authority of investigation, pursuant to the provisions under Article 206-3 of the Securities Act or Article 81-2 of the Futures Act, to the Chairman of the SFC or the Governor of the Financial Supervisory Service (hereinafter, "the Governor"), and where the FSC or the SFC takes measures, pursuant to the provisions under Article 193, Article 206-3 paragraph (5), Article 206-11 and Article 206-12 of the Securities Act and Article 84-26, Article 90-4 and Article 91 of its Enforcement Decree or Article 81-2 paragraph (4) of the Futures Act and Article 25-4 of its Enforcement Decree, to maintain fairness of investigation .

§2. Scope of Application

This Regulation shall apply in respect of the investigation and practices (hereinafter, "unlawful practice(s)"), which violate the Futures Act and the Securities Act, orders thereunder, or the regulations or orders issued by the FSC and the SFC (hereinafter, "the relevant statutes") and the dispositions against such unlawful practice(s).

§3. Investigators

(1) Any person who conducts an investigation (hereinafter, "investigator") shall be a public official of investigation under Article 206-3 paragraph (7) of the Securities Act and an employee of the investigation department of the Financial Supervisory Service (hereinafter, "the FSS"), (hereinafter referred as," the investigation department")

(2) Where the Chairman of the SFC or the Governor intends to conduct  an investigation, he or she shall organize an investigation team in charge of the relevant case and designate the captain of investigation to direct the team generally.

§4. Confidentiality

Every investigator shall strictly maintain confidentiality of any information obtained in the course of investigation and take special care not to undermine the integrity of the investigated or other parties.

§5. Withdrawal

In the event investigation of a case is in danger of losing objectivity because an investigator has a direct interest or special relationships with the person subject to investigation, such as, a spouse or a blood relative first or second removed, the investigator shall state the prescribed reasons on investigation withdrawal application form (Annexed Form 1) for submission to the Chairman of the SFC or the Governor and withdraw himself from the investigation with their approval.

§6. Consideration Matters in Investigation

⑴ An investigator shall conduct an investigation with a sense of duty and an honest and fair manners and observe the service regulation for investigators under the annexed table 1.

(2) An investigator conducting an investigation shall pay attention to the motives, causes, nature, dates, places, methods, results of the unlawful practice(s).

(3) An investigator shall make efforts to minimize the inconvenience of the person subject to investigation, such as demand for attendance and confirmation of the fact.

§7. Documenting of Investigation

Any investigator documenting investigation shall pay special attention to items in the following subparagraphs in order to secure the correctness of contents and the voluntariness of statements:

1. He or she should use easily understandable language in the course of the investigation as much as possible;

2. He or she should describe complicated matters by itemizing them;

3. For abbreviations, enigmas, and foreign expressions, he should provide a brief explanation in the parenthesis next to them;

4. For names of places or persons that are likely to cause confusion, he should provide the Chinese characters for such terms or an explanation next to them;

5. On each document, he should record the date of documenting, put a seal between two pages, and write down his name and affix his seals. However, in the event any person making the statement does not have a seal, he shall have obtain an impression of such person's thumbprint;

6. In case of attaching documents written in foreign languages, he shall provide a Korean translation of the important parts thereof.

CHAPTER 2.

ACCEPTANCE AND JURISDICTION OF CASES

§8. Acceptance of Cases

(1) The Governor shall accept a case applicable under any of the following subparagraphs of Article 13 paragraph (1)( except Article 13 paragraph (2) subparagraphs 2 to 5) as a case subject to investigation (hereinafter, referred as "a case")

(2) The Governor shall accept a case under paragraph (1) by stamping a case acceptance as of the Annexed Table 2 on the blank of the cover of the case report

§9. Unit of Cases

Where a case has a connection applicable under any of the following subparagraphs with a different case which is under investigation or of which an investigation is not conducted, the Governor shall manage the said relevant cases as one.

1. A case which is related to the same kind of the securities or its issuer and is presumed to happen in the same or similar period.

2. A case of which the suspect is the same person or many of the suspects are reiterated or many of the suspects are presumed to be reiterated.

§10. Case Allocation.

(1) The Governor shall allocate cases received pursuant to Article 8 paragraph (1) to the director of investigation department on the basis of work responsibility schedule by the Detailed Regulations for Management of Organization of FSS; provided, however, that the Chairman of the SFC or the Consultation Committee of  Investigation and Supervision of Unfair Trade under Article 61 deems necessary for the investigation by the method of seizure and search under Article 206-3 paragraph (7) of the Securities Act (hereinafter, referred as forceful investigation), the relevant case shall be notified to the Chairman of the SFC.

(2) Notwithstanding the context of paragraph (1), The Governor may designate a different department as an investigation department where it is deemed that manpower of investigation and other reasons cause the difficulties in rapid disposition of a case.

§11. Concurrence of Investigation in Charge

Notwithstanding the context of Article 10 paragraph (1), where two or more departments take charge of the relevant case, the department applicable under any classification of the following subparagraphs take charge of the said case.

1. The department designated by the Governor in the case that two or more people issue a securities related one case and two or more investigation departments of the FSS (hereinafter, referred as "investigation department") take charge of the case.

2. The department of the case earlier accepted in the case that a different department  take charge of a different case of which the same person with the relevant person of an accepted case is suspected.

§12 Form of Case Acceptance.

(1) The Governor shall manage the details of acceptance, contribution and notice of a case by recording on the case acceptance form (the annexed form 2)

(2) The Governor shall report the acceptance date, the suspect and the particulars of suspicion  to the Chairman of the SFC where he or she accepts and contributes the case in accordance with paragraph (1).

CHAPTER 3.

PROCEDURES AND METHOD OF INVESTIGATION

§13. Conducting Investigation

(1) The Chairman of the SFC or the Governor shall conduct investigation wherever applicable under the following subparagraphs.

1. Cases where the Chairman of the SFC or the Governor detects any suspected unlawful practice(s) in connection with the operation of the FSC, the SFC and the FSS;

2. Cases where the Korea Stock Exchange, the Korea Securities and Dealer's Association, or the Korea Futures Exchange (hereinafter, the Stock Exchange, the Securities and Dealer's Association, or the Futures Exchange) has notified suspected unlawful practice(s);

3. Cases where the Chairman of the SFC or the Governor has obtained the information on unlawful practice(s) or received the complaint for requesting investigation.

4. Cases where the Chairman of the SFC or the Governor deems such investigation necessary for the public interest or protection of investors.

(2) Notwithstanding paragraph (1), wherever applicable under the following subparagraphs, an investigation may not be conducted:

1. Cases where sufficient evidence on the unlawful practice(s) concerned is secured, and suspicion of other unlawful practice(s) is not found;

2. Cases where there is a suspicion of other unlawful practice(s) in addition to the unlawful practice(s) concerned, and yet its investigation is not expected to yield substantial results because the suspicious practice is insignificant;

3. Cases where investigation is requested on the ground of only the facts widely known by the public announcement data and the report of the press or the rumors.

4. Cases where there is little direct relation with the public interest or protection of investigators and it is judged that the dispute over management right and other private interests cause the relevant complaint.

5. Cases where information on the unlawful practice(s) concerned is given in an anonymous note, petition, treaty, and their contents are deemed to be of no value

(3) The Governor may, when he judges that there is any suspicion of violation of the Securities Act or the Futures Act in the course of investigation pursuant to Article 51 paragraph (1) of the Regulation on External Audit and Accounting, simultaneously perform the investigation under this Regulation.

§14. Conducting Preliminary Investigation

(1) In conducting the investigation under Article 13 paragraph (1), when objective evidence on the unlawful practice(s) concerned is insufficient or the scope of the persons concerned is uncertain, prior to conducting the investigation through the method prescribed under the provisions under Article 206-3 paragraph (2)·(3) of the Securities Act or Article 81-2 paragraph (2) of the Futures Act (hereinafter, "main investigation"), a main investigation may be conducted in order to secure the related evidence and confirm the scope of the main investigation (hereinafter, "preliminary investigation")

(2) When obtaining fundamental data and other necessary data on  unlawful practices, an investigator shall conduct a main investigation. However, an investigator shall not conduct a main investigation  in the cases applicable under Article 13 paragraph (2) subparagraphs 1 and 2.

(3) When a main investigation is deemed unnecessary because preliminary investigation produces enough evidences of unlawful practices, an investigator shall dispose the case pursuant to the provisions of Chapter 4.

§15. Simplified Investigation

(1) One investigator may investigate the case violating the provisions falling under any of the following subparagraphs.( hereinafter, referred as, simplified investigation and the other investigations are referred as formal investigations) In this case there is no additional investigation.

1. Article 186 paragraph (1) or (2) of the Securities Act.

2. Article 188 paragraph (2) of the Securities Act.

3. Article 188 paragraph (6) of the Securities Act.

4. Article 200-2 of the Securities Act.

(2) Where a formal investigation is deemed necessary under simplified investigation, an investigator in charge of the case may report and notify the head of the case department of conducting a formal investigation.

§16. Request for Joint Investigation.

(1) The Chairman of SFC  may request the Governor for cooperation of investigation when he or she deems necessary for the efficient investigation in conducting an investigation pursuant to the proviso of Article 10 paragraph (1).

(2) The Governor may request the Chairman of the SFC for cooperation of investigation when he or she deems necessary for a forceful investigation under investigation.

§17. Method and Procedure of Joint Investigation.

(1) For a rapid and efficient investigation, the Chairman of the SFC and the Governor may organize each investigation team and conduct an investigation at the request of investigation cooperation under Article 16 and in this case, the requester for investigation cooperation may assign the general investigation captain to direct the investigation team generally.

(2) The Chairman of the SFC or the Governor shall request the Governor or the Chairman of the SFC for the investigation cooperation under Article 16 in the written form stating the reasons, purpose and request contents of the joint investigation.

(3) The Chairman of the SFC  or the Governor shall notify the Governor or the Chairman of the SFC of the investigation results in conducting an investigation under paragraphs (1) and (2).

§18. Notice of Investigation

(1) Where an investigator intends to conduct an investigation, he shall state the matters applicable under any of the following subparagraphs on  investigation notice form and get the approval of the Chairman of the SFC or the Governor; provided, however, that the on-site investigation plan is not settled yet, the matters applicable under subparagraph 7 may be omitted.

1. Classification of investigation.

2. Matters to investigate.

3. Reasons necessary for investigation.

4. Scope of investigation.

5. Method of investigation.

6. Investigators and Initiation date of investigation.

7. Period and expenses of on-site investigation.

8. Reference matters.

(2) An investigator shall prepare the on-site investigation notice and get the approval of the Chairman of the SFC or the Governor where on-site investigation or additional on-site investigation other than those prescribed in paragraph (1) subparagraph 7 is needed after the approval under paragraph (1).

§19. Written Order for Investigation

(1) Where any investigator intends to conduct an investigation, the written order of investigation issued by the Chairman of the SFC or the Governor.( the format of the annexed form 3)shall be used.

(2) Any investigator conducting an on-site investigation under Articel 18 shall present to the relevant persons a written order of investigation under paragraph (1) and a certificate identifying himself as an employee of the FSS.

§20. Methods of Investigation

(1) The Chairman of the SFC may conduct an investigation in such manner as described under the following subparagraphs.

1. Demand for attendance, request for statements, books, documents and other things pursuant to the provisions under Article 206-3 paragraph (2) of the Securities Act or Article 81-2 paragraph (2) of the Futures Act;

2. Detention of statements, books, documents and other things under Article 206-3 paragraph (3) subparagraph 1 of the Securities Act.

3. Investigation of  statements, books, documents and other things by access to the office or business place of the related person pursuant to  Article 206-3 paragraph (3) subparagraph 2 of the Securities Act.

4. Demand for data from securities-related institutions or futures-related institutions pursuant to the provisions under Article 206-3 paragraph (4) of the Securities Act or Article 81-2 paragraph (3) of the Futures Act

5. Demand for reports and data or investigation pursuant to provisions under Article 19 paragraph (1) of the Securities Act (including the case to which Article 27-2, Article 186-5, Article 189-2 paragraph (5), or Article190-2 paragraph (3) of the Securities Act apply mutatis mutandis) and Article 200-2 paragraph (5) of the Securities Act;

6. Other requests for cooperation from the parties concerned.

(2) The Governor shall conduct an investigation in such manner as described in any of the following subparagraphs of paragraph (1) and the following subparagraphs.

1. Examination of the institutions subject to examination by the FSS pursuant to Article 38 of the Act on the Establishment, etc. of Financial Supervisory Organizations (hereinafter, "institutions to be examined");

2. Request for confirmation on financial transactions pursuant to the provisions under Article 4 paragraph (1) of the Act on Real Name Financial Transactions and Protection of Confidentiality;

(3) The Chairman of the SFC of the Governor shall not conduct an investigation in such manners as prescribed in paragraph (1) subparagraphs 1 to 3 excluding main investigation.

§21. Demand for Attendance

(1) In the event investigator demands the attendance of the concerned person for testimony pursuant to the provisions under Article 206-3 paragraph (2) subparagraph 2 of the Securities Act or Article 81-2 paragraph (2) subparagraph 2 of the Futures Act, he shall use an "Attendance request form"(the annexed form 4) issued by the Chairman of the SFC or the Governor,

(2) The "Attendance request form" under paragraph (1) shall be stated the purpose of the request clearly.

(3) In case of investigating foreigners, an investigator shall not violate international laws and treaties.

§22. Demand for Submission of Written Statement

(1) When any investigator demands the submission of written statement of the facts and situations about the matters investigated from the concerned person, pursuant to the provisions under Article 206-3 paragraph (2) subparagraph 1 of the Securities Act or Article 81-2 paragraph (2) subparagraph 1 of the Futures Act, he shall use a "Statement request form" (Annexed Forms 5-1 and 5-2) issued by the Chairman of the SFC or the Governor. However, these provisions shall not apply to the case where such person testifies in person or the investigator directly hears the statement and documents investigation including the statement.

(2) Article 21 paragraphs (2) and (3) shall apply mutatis mutandis to the demand for the submission of statements pursuant to the provisions under paragraph (1).

§23. Demand for Submission of Books

(1) When any investigator requests books, documents, or other things pursuant to the provisions under Article 206-3 paragraph (2) subparagraph 3 of the Securities Act or Article 81-2 paragraph (2) subparagraph 3 of the Futures Act, he shall use a "Data request form" issued by the Chairman of the SFC or the Governor. ( the annexed forms 6-1 and 6-2)

(2) Article 21 paragraphs (2) and (3) shall apply mutatis mutandis to the request for the submission of data pursuant to the provisions under paragraph (1).

§24. Detention of Things

(1) When detaining  statements·books·things (hereinafter, referred as the things)pursuant to Article 206-3 paragraph (3) subparagraph 1 of the Securities Act, an investigator shall have the relevant person or the owner·possessor, keeping person or the presenter of the things participate as an observer in order to guarantee the fairness of the procedure.

(2) An investigator finishing detention shall prepare two copies of the detention record( the annexed form 7) and list( the annexed form 8), sign and seal with an observer and present the owner·possessor and keeping person with one copy; provided, however, that the observer does not or can not sign and seal, their decisions shall be written additionally on "particulars", at the bottom of the detention record.

(3) The things detained shall be returned in receiving the receipt where an immediate examination tells that they have nothing to do with the investigation and they are not expected to be necessary later, but such measures shall be taken as things should be submitted whenever necessary.

(4) Such measure as taking pictures and maintaining the original form shall be taken or the copy with the confirmation of " checked with original copy" shall be kept and the original copy shall be provisionally returned in receiving the receipt.

§25. On-Site Investigation

(1) Any investigator conducting an on-site investigation under Article 206-3 paragraph (3) subparagraph 2 shall present to the relevant persons a written order of investigation and a certificate under Article 19.

(2) An investigator conducting an investigation under paragraph (1) shall prepare the on -site investigation form.(the annexed forms 9-1 and 9-2)

§26. Demand for Submission of Data from Securities-Related Institutions and Futures-Related Institutions

(1) When any investigator requests data necessary for investigation from the books, documents, or other things pursuant to the Securities-Related Institutions and Futures-Related Institutions pursuant to the provisions under Article 206-3 paragraph (4) of the Securities Act or Article 81-2 paragraph (3) of the Futures Act, he shall use "Data request form"(the annexed form 10) issued by the Chairman of the SFC or the Governor.

(2) The "Data request form" under the paragraph (1) shall be clearly stated the purposes of its use, the object of investigation, and the types, items and trading periods of the securities.

§27. Demand for Transaction Information on Financial Institutions

(1) The Governor shall demand the delivery of transactory information pursuant to Article 4 paragraph (1) of the Act on Real Name Financial Transactions and Protection of Confidentiality by completing the Delivery of Financial Transaction Information Demand Form (Annexed Form 11). <Amended October 30, 2002>

(2) In the Delivery of Financial Transaction Information Demand Form under paragraph (1), information such as personal information about the transaction parties, intended use, transactory information demanded shall be included.  <Amended October 30, 2002>

§28. Simplified Procedure

(1) Notwithstanding Articles 21 to 23 and 26, when demanding general investigation data, such as data on securities issuing and other transaction from an institution to be examined, a written request form issued by the head of the investigation department may be used.

(2) The demand pursuant to the provisions under paragraph (1) shall be deemed necessary for the examination under the provisions of Article 37 subparagraph 1 of the Act on the Establishment, etc. of Financial Supervisory Organizations

§29. Examination

(1) The Governor may request the institution to be examined for submission of data or perform the examination when necessary for investigation of a case. In this case, the data submission request and examination shall be limited within the necessary scope of investigation purpose.

(2) In performing the examination under paragraph (1), a written order of investigation (Annexed Form 3) may be substituted for the written order of examination prescribed in Article 18 of the Detailed Enforcement Rules for the Regulations on Examination and Control of Financial Institutions.

§30. Hearing of Statement of Relevant People

An investigator may request the person applicable under Article 13 paragraph (1) subparagraphs 2·3 (for a corporation, its officer and employees) for statement on the obtained information and shall prepare the written questions and answers (Annexed Forms 12-1 and 12-2 ) or the written statement (Annexed Forms 13-1 and 13-2) when hearing.

§31. Preparation of Written Questions and Answers.

(1) An investigator shall hear the statement directly from the relevant person and prepare the investigation documents in the form of written questions and answers.

(2)  For obtaining voluntariness., the statement shall not be forced when preparing the written question and answers under paragraph (1); provided, however, that the person of statement reject to sign and seal, the reasons for rejection shall be stated.

(3) The stating person may be allowed to prepare and submit the statement where the contents of confirmation on the relevant person is simple or the stating person wants the written statement.

§32. Issue and Management of Forms

(1) The Chairman of the SFC or the Governor may issue in bulk and operate a form that he or she stamps his or her official seal and a sender and states no address on the attendance request form, statement submission form, data submission form applicable under Annexed Forms 4 through 6 and 10.

(2) The document number of the form under paragraph (1) may be given by adding the series of the number to the number of each drafted form.

(3) The Chairman of the SFC or the Governor shall designate the person in charge of managing the form under paragraph (1) (hereinafter, "the person in charge")

(4) The person in charge shall state the matters prescribed in issuing ledger (Annexed Forms 14 through 18) when presenting an investigator with the form under paragraph (1).

(5) The person in charge shall recover and keep the presented forms which an investigator shall not use or mistakes in writing, damage and other reasons make it impossible to use and state this circumstance on relevant issuing ledger. He or she shall rubricate "abolished" on the form to be abolished when intending to abolish the form.

§33. Report of Investigation Results

When an investigator concludes an investigation, he shall report its results to the Chairman of the SFC or the Governor verbally or in writing.

§34. Provisions of Mutatis Mutandis Application

Articles 22 and 23 shall apply mutatis mutandis to the demand for the submission of reports and data or investigation pursuant to the provisions under Article 20 paragraph (1) subparagraph 5.

CHAPTER 4.

MEASURES FOLLOWING INVESTIGATION

Section 1.

Report of Investigation Results and Measures Plan.

§35. Processing of Investigation Results

In case any violation is found as a result of investigation (including the case where an investigation is not conducted pursuant to the provisions under Article 13 paragraph (2) ), the Chairman of the SFC or the Governor shall submit investigation results report and measures plan to the FSC or the SFC. However, these provisions shall not apply to the case where the power of disposition with respect to such violation is delegated to the Chairman of the SFC or the Governor.

§36. Disposition Following Investigation

(1) With respect to the violation detected as a result of investigation, the measures prescribed in Articles 45 to Article 53 may be taken pursuant to the provisions under Article 206-3 paragraph (5) of the Securities Act and Article 90-4 paragraph (1) of its Enforcement Decree or Article 81-2 paragraph (4) of the Futures Act and Article 25-4 of its Enforcement Decree.

(2) When necessary for proper processing of the investigation results such as reporting the investigation results and formulating the disposition measures to the FSC or the SFC under Article 35, the Chairman of the SFC may have an advisory organization which consists of external experts such as lawyers and university professors.

§37. Rule for Making Reports.

(1) Investigation results report and measures plan shall be made pursuant to the orders applicable under subparagraphs, but the items of subparagraphs 3 and 4 should be omitted without investigation.

1. Summaries of investigation.

2. Details of initiation or no conduct of investigation.

3. Scope of investigation

4. Details of investigation

5. Unlawful practices and disposition opinion

6. Other reference matters.

(2) The unlawful facts under paragraph (1) shall be prescribed by separating the name of an unlawful practice( violating provisions) from the unlawful facts for each violator and the captain of the investigation team and investigators( without investigation, preparator of disposition opinion and his upper supervisor) shall sign and seal on the disposition opinion and the outlook of a company of investigation items and matters of important public announcement, etc shall be stated on  other reference matters.

Section 2.

Procedure of Review and Mediation

§38. Request for Review and Mediation

For matters requiring review by the Securities and Futures Review Committee pursuant to Article 40, the head of the department in charge shall request the head of deliberation and restriction department for a review and arbitration by attaching particulars applicable under any of the following subparagraphs. In the event of a joint investigation at the request of the Chairman of the SFC, and in the event of a deliberation by the Audit Committee in accordance with Article 25 of the Regulation on External Audit and Accounting pursuant to Article 40 paragraph (3), however, the review and arbitration may be waived. <Amended October 30, 2002>

1. Investigation results and measures plan (including matters for review)

2. Relevant proof data

3. Other reference data necessary for review and mediation

§39. Review·mediation and Notice of  Results

(1) The head of the deliberation and restriction department shall review the matters falling under any of the following subparagraphs , record the ensuing results, keep them and notify the director of case department of them in the application of supervision and mediation under Article 38.  In this case, the director of the deliberation and restriction department may request the director of the relevant case department for submission of additional data or statement of opinions when he deems necessary for review·mediation.

1. Substantial matters including the suitability of the statues applied to the unlawful practices.

2. Formal matters including the security of proof data and the method for preparing the report under Article 38 subparagraph 1.

3. Fairness and justice of disposition opinions.

(2) The head of the deliberation and restriction department may notify the head of the relevant case department of the opinions on the results of supervision ·mediation under paragraph (1) and request him for correction of the contents.

(3) Where there is the request for revision under paragraph (2), the head of case department shall determine the acceptance of the review·mediation results through the procedure of revision by the director of investigation department and notify the head of deliberation and restriction department of the ensuing results.

Section 3.

Composition and Operation of Securities·Futures Investigation Deliberation Committee.

§40. Securities·Futures Investigation Deliberation Committee

(1) The Securities ·Futures Investigation Deliberation Committee(hereinafter, referred as "Deliberation Committee") shall be established as a consultant organization for deliberation of the investigation results and measures plan pursuant to Article 36 paragraph (2).

(2) The Deliberation Committee shall deliberate the matters falling under any of the following subparagraphs.

1. Matters concerning disposition of the investigation results  under this Regulation.

2. Matters concerning reopening of a procedure under Article 60.

(3) Notwithstanding the provisions of paragraph (2), in the event any non compliance as a result of the investigation is discovered to be pertinent to false statement within, or omission of any information of significance in, the financial statements, the Audit Committee shall be deemed to be the deliberation committee under this Regulation. <Amended October 30, 2002>

§41. Composition of Deliberation Committee

(1) The Deliberation Committee shall consist of 7 members falling under any of the following subparagraphs.

1. The standing commissioner of the SFC

2. A public officer under FSC's authority designated by the Chairman of the SFC.

3. The assistant governor of the investigation department of the FSS.

4. Four of the lawyers, professors and other experts having professional knowledge of financial relevant statues or having learnings and experiences of securities and futures.

(2) The member as of paragraph (1) subparagraph 1 shall be the Chairman of the Deliberation Committee, who presides over a meeting; provided, however, that unavoidable reasons keep him or her from implementing the duties, the member as of paragraph (1) subparagraphs 2, 3, and 4 in order shall act for the duties.

(3) The terms of a member shall be two year, but a consecutive appointment may be permitted. However, the terms of members as of paragraph (1) subparagraphs 1 and 3 should be each member's tenure of the each office.

(4) The Chairman of the SFC shall designate a successor until the two weeks before the expiration of the terms of a member as of paragraph (1) subparagraph 4 and shall designate a successor within 30 days from the date of vacancy where a member becomes vacant during his or her terms.

§42. Operation of Deliberation Committee

(1) The Deliberation Committee shall hold a meeting when the Chairman deems necessary.

(2) When holding a meeting, the meeting date shall be determined and the date, the place and the submission matters shall be notified each member of in writing two days before the meeting date ; provided, however, that this shall not apply to the cases of emergency situation or the requisite.

(3) The meeting shall be established with two thirds or more of members duly elected and seated and reach an agreement with over half concurrence of attendant members. However, the Chairman determine the agreement in a tie vote and the meeting may reach an written agreement on the said standard if necessary.

(4) The director of enforcement planning division of the FSC or the director of case department of the FSS preparing the submission bill to the Deliberation Committee shall attend the meeting of the Deliberation Committee and answer the questions of the members. Where the Deliberation Committee deems necessary. the Committee may have the person in charge of investigation and other reference people attend and state their opinions.

(5) A member shall be excluded from the deliberation on the matters falling under any of the following subparagraphs.

1. Matters having direct interest with him or herself

2. A member who has such relationships as a spouse, a blood relative first or second removed, or who has interest in the corporation to which he or she belongs.

(6) A member shall withdraw the deliberation on the matters prescribed in each subparagraph of paragraph (5).

(7) An attendant to the deliberation meeting shall not divulge or make use of the secret of an information obtained in the course of deliberation.

(8)  The Chairman of the SFC may pay an allowance and other necessary expenses to a member attending to the meeting under  Article 41 paragraph (1) subparagraph 4 pursuant to what the Chairman of the SFC  determines separately.

CHAPTER 4

SUBMISSION TO DELIBERATION COMMITTEE AND REPORT OF RESULTS

§43. Submission to Deliberation Committee

The Governor shall prepare the submission bill to the Deliberation Committee on the matters necessary for deliberation of the Deliberation Committee and transfer it to the Chairman of the SFC where the supervision and mediation under Article 39 is finished.

§44. Notice of Deliberation Results

The Chairman of the SFC shall notify the Governor of deliberation results on the deliberation matters under Article 40 paragraph (2) by the Deliberation Committee.

Section 5.

Measures on Investigation Results

§45. Filing of Complaint

The Governor may file a report with, or notify, the investigative authority on persons having committed acts subject to criminal prosecution, which are discovered as a result of the investigation, pursuant to Article 54. <Amended October 30, 2002>

§46. Imposition of Surcharge

(1) The Chairman of the SFC or the Governor may, when any unlawful practice(s) is subject to an imposition of surcharge pursuant to the provisions under Article 206-11 of the Securities Act, recommend the FSC or the SFC to impose such surcharge.

(2) In recommending the imposition of surcharge under paragraph (1), the Chairman of the SFC or the Governor shall observe the standards prescribed in the annexed table 3.

(3) The Chairman of the SFC or the Governor may determine the specifics necessary for the implementation of the standards under the annexed table 3.

§47. Imposition of Negligence Fine

(1) The Chairman of the SFC or the Governor may, when the unlawful practice(s) is subject to an imposition of negligence fine pursuant to the provisions under Article 213 paragraphs (1) and (2) of the Securities Act or Article 101 paragraphs (1) and (2) of the Futures Act, recommend the FSC to impose such negligence fine.

(2) In recommending the imposition of negligence fine pursuant to the provisions under paragraph (1), the recommendation may be made in accordance with the negligence fine imposition standard prepared by the Chairman of the SFC or the Governor in consideration of the motivation and consequence of the violation.

§48. Correction Order

When any investigation reveals any of the following unlawful practice(s), the Chairman of the SFC or the Governor may issue a correction order pursuant to the provisions under Article 21-3, Article 200 paragraph (3), Article 200-3, Article 203 paragraph (3) of the Securities Act;

1. Purchase of stocks in violation of Article 21 paragraph (1) or Article 21-2 paragraph (1) of the Securities Act;

2. Acquisition of stocks of public corporations, which is in violation of Article 200 paragraphs (1) and (2) of the Securities Act;

3. Violation of the duty of reporting pursuant to the provisions under Article 200-2 paragraph (1) or (3) of the Securities Act;

4. Acquisition of shares, which is in violation of Article 203 paragraph (1) or (2) of the Securities Act.

§49. Necessary Measures for Disgorgement of Short-Swing Profits

(1) When any investigation reveals that any officer or employee of any listed corporation or registered corporation earned short-swing profits from trade(s) which should be disgorged to the corporation concerned pursuant to the provisions under Article 188 paragraphs (2) and (9) of the Securities Act, necessary measures for returning such profits may be taken.

(2) The measures pursuant to the provisions under paragraph (1) shall be taken in accordance with the procedure and method under the Regulation on Report of Shareholding Status of Officers and Principal Shareholders and Disgorgement of Short-Swing Profits.

§50. Warning

(1) When any investigation reveals that any institution to be examined or its officers and employees conducted any unlawful practice(s), any disposition pursuant to any of the subparagraphs of Article 36-5 of the Enforcement Decree of the Securities Act and Article 25-4 of the Futures Act.

(2) With respect to a practice of light violation deemed as not requiring actions  under Articles 45 to 49, warning, attention, collection of a memorandum, correction order, or other necessary measures may be taken.

§51. Concurrent Imposition

(1) When any investigation reveals that listed corporation or registered corporation has conducted unlawful practice(s), any disposition pursuant to the provisions under Articles 45 to 50 and disposition pursuant to the provisions under Article 193 of the Securities Act and Article 84-26 of its Enforcement Decree may be imposed concurrently.

(2) When any investigation reveals that any institution to be examined or its officers and employees conducted any unlawful practice(s), any disposition pursuant to the provisions under Articles 45 to 49 and Article 50 paragraph (1)  may be imposed concurrently.

(3) When it is necessary to take the measures under Articles 45 to 50 against a person to whom the provisions under paragraph (1) or (2) do not apply, the measures under each article may be taken concurrently.

§52 Special Case of Concurrent Imposition

(1) Notwithstanding Article 51, when filing a complaint to the prosecutory authority is made pursuant to Article 45, the imposition of surcharge or negligence fine upon the same unlawful practice(s) under Articles 46 and 47 may be exempted.

(2) Notwithstanding Article 51, when any surcharge is imposed pursuant to Article 46, measures such as filing a complaint to the prosecutory authority under Article 45 and the imposition of negligence fine under Article 47 may be exempted.

(3) Notwithstanding  Article 46, when negligence fine is imposed pursuant to Article 47, measures to be imposed upon the same unlawful practice(s) may be lightened or exempted

§53. Aggravating or Lightening of Disposition

(1) In case any person, who has been disposed under this regulation, commits unlawful practice(s) again, or he(she) commits two or more unlawful practice(s), the disposition against such person may be aggravated.

(2) In case the degree of unlawful practice(s) is negligible or there is any reason to consider extenuating circumstance, for instance when such unlawful practice(s) are voluntarily declared and corrected, the disposition against the party may be lightened.

(3) In case it is confirmed that any person, who has actively supported in finding any unlawful practice(s) such as by providing decisive information, has involved in such unlawful practice(s), the disposition against such person may be lightened or exempted in consideration of the extenuating circumstances.

§54. Standards of Disposition

In taking measures with respect to any unlawful practice(s) found as a result of investigation, the standards stipulated in the the annexed table 4 shall be applied in principle. However, when there is any justification in comprehensive consideration of the items in the following subparagraphs, the FSC may take different measures from such standards by presenting the reasons thereof:

1. Whether such unlawful practice(s) is corrected or recovered;

2. The nature of fairness with the measures taken on similar cases;

3. Influence of such measures on the future participants in the securities and futures markets.

§55. Partial Delegation of Power of Disposition

(1) The Chairman of the SFC or the Governor may, in any of the following cases, take measures following the provisions of this Regulation:

1. Refusal to receive an investigation pursuant to the provisions under Article 206-3 of the Securities Act or Article 81-2 of the Futures Act;

2. Cases which violate Article 186 or Article 188 paragraph (6) of the Securities Act with no suspicion in violation of Article 188-2 paragraph (1), (3), Article 188-4 of the same Act;

3. Cases of short-swing profits applicable under Article 188 paragraphs (2) and (9) of the Securities Act, whose amount is less than 100 million KRW;

4. Where applicable for disposition by the notification of the investigative authority pursuant to Article 45 or 50

5. Cases, which violate Article 200-2 paragraph (1)·(3) of the Securities Act, are deemed an error rather than intentional violation;

6. Cases where the power of disposition is delegated to the Chairman of the SFC or the Governor under other regulations prescribed by the FSC or the SFC.

(2) Where dispositions against any unlawful practice(s) to be imposed by the FSC, the SFC and the Chairman of the SFC · the Governor are mixed, dispositions shall be imposed in the order of disposer by the FSC, the SFC and the Chairman of the SFC·the Governor.

§56. Ex Post Restriction

(1) The Chairman of the SFC or the Governor may have a person under disposition report the implementation status on the measures taken as a result of an investigation in order to confirm the actual implementation thereof.

(2) The Chairman of the SFC or the Governor shall, when he deems that a person under disposition pursuant to this Regulation fails to implement the measure or does not properly implement it, take necessary measures.

§57. Hearings

(1) In taking measures pursuant to this Regulation, any person subject to disposition or his proxy shall be given an opportunity to express an opinion in advance until 10 days before the scheduled date of the disposition. However, this may be omitted, in case such opportunity cannot be provided because his address is unknown. When any person subject to disposition or his proxy fails to express an opinion within a specified time without any justifiable reason, he shall be deemed to have no opinion.

(2) In expressing an opinion under paragraph (1), any person subject to disposition or his proxy may proceed verbally or in writing.

(3) In case any person subject to disposition or his proxy expresses an opinion under paragraph (2), this opinion shall be considered sincerely.

§58. Notification of Objection Procedures

In case measures are taken under this Regulation, the concerned person shall be notified of the necessary information regarding the right to object the disposition and procedure to bring an administrative litigation thereon.

§59. Exclusion of Application of Hearings

With respect to the matters conducted under the criminal-related statutes, a notification of hearing or objection procedure pursuant to the provisions under Articles 57 and 58 may be omitted, and when there is a considerable reason, in the light of the nature of the measure, that it is apparently difficult or clearly unnecessary to have a hearing pursuant to Article 57, it may be omitted.

§60. Request for Reopening of Procedure

When a person who has received a disposition under this Regulation deems that the disposition is unlawful or unfair, he may request a reopening of the procedure within one month from the date of receiving such disposition.

CHAPTER 5.

UNFAIR TRADE INVESTIGATION·SUPERVISION INSTITUTION CONSULTATION COMMITTEE.

§61. Unfair Trade Investigation·Supervision Institution Consultation	Committee

For the wide and orderly cooperation of business among the institutions in charge of investigation or supervision of the unfair trade in securities and futures market, the SFC may operate the Consultation Committee of Investigation and supervision Institution for Unfair Trade(hereinafter, "the Consultation Committee") which the relevant people of the SFC and the FSS (hereinafter, "the investigation institution") and the Securities Exchange, the Securities and Dealer's Association and the Futures Exchange (hereinafter, "the supervision institution").

§62. Composition of Consultation Committee

The Consultation Committee shall consist of the members falling under any of the following subparagraphs and the Chairman of the Consultation Committee( hereinafter, referred as the Chairman.) shall be a member falling under subparagraph 1.

1. The standing commissioner of the SFC

2. The legal advisor of the FSC

3. The director of enforcement planning division of the FSC.

4. The director of the investigation department of the FSS

5. The assistant vice chief director in charge of supervision of the Securities Exchange.

6. The managing director in charge of supervision of the Securities and Dealers' Association.

7. The managing director in charge of supervision of the Futures Exchange.

§63. Duties of Consultation Committee

The Consultation Committee shall consult the matters falling under any of the following subparagraphs in relation to investigation or supervision of unfair trade by the investigation ·supervision institution.

1. Matters concerning the policies and directions of investigation.

2. Matters concerning the support of manpower and contribution of affairs in relation to joint investigation by the investigation·supervision institution.

3. Matters concerning the improvement of the system and custom of the investigation or supervision.

4. Matters concerning the standards for disposition of the supervision results by the supervision institution.

5. Matters concerning market monitoring by the investigation ·supervision institution.

6. Matters that the Chairman deems necessary.

§64. Opening a Meeting

(1) It is a rule that the consultation committee should be opened every two weeks.

(2) Notwithstanding paragraph (1), the opening period may be adjusted in consideration of the submission bill and the Chairman may open the consultation committee whenever he deems necessary for opening the consultation committee.

§65. Contribution of  Affairs between Investigation ·Supervision Institution.

(1) Where important cases falling under any of the following subparagraphs are found under supervision  or as a result of an supervision by an supervision institution or under investigation by an investigation institution, a forceful investigation, a combined investigation or a joint investigation shall be used in investigation.

1. Where many people systematically change the price of many items and disturb the order of the stock market.

2. Where many of the suspects once conducted unfair trade practices.

3. Where unfair trade is interlinked between the spot market and  future market, the domestic market and overseas market, other many markets.

4. Where unfair trade is deemed to give rise to public criticism or have an adverse effects on the public confidence of securities·futures business.

(2) The FSS shall investigate the cases of which are requested the investigation institution for investigation or which are acknowledged by the FSS itself on the standards for disposition of the supervision results under Article 63 subparagraph 4 excluding the case applicable under the proviso of Article 10 paragraph (1).

(3) A negligible case not prescribed in paragraphs (1) and (2) shall be disposed within the limit of its authority by the supervision institution.

§66. Confidentiality

Every attendant to the Consultation Committee shall not divulge or make use of information obtained in the course of conducting affairs.

§67. Detailed Matters.

The Chairman may determine different detailed matters concerning the operation of the Consultation Committee.

CHAPTER 6.

BOOKS AND KEPT DOCUMENTS

§68. Books and Kept Documents

(1) The Chairman of the SFC  or the Governor shall manage the books and documents falling under any of the following subparagraphs (hereinafter, "the books") in writing or by computer.

1. A Case record file

2. An investigation(on-site investigation) notice file

3. An issuing ledger of attendance request forms

4. An issuing ledger of data request forms

5. An issuing ledger of written orders of investigation.

(2) The Governor shall manage the books falling under any of the following subparagraphs other than those prescribed in paragraph (1) in writing or by computer.

1. Case Acceptance copy

2. Statistics file

(3) The Governor shall file all kinds of statistical data on the investigation in the statistics file under paragraph (2) subparagraph 2 and  the director of the investigation department shall dispose the final disposition contents and immediately let the director of investigation department know in order to keep all kinds of statistics related to investigation.

§69. File of Case Record

An investigator shall file the records of a case prepared or received under investigation and other data in the case record file; provided however, that the data has no direct connection with the proof of the unlawful practices (except the written questions and answers and the written statement) , they may be abolished after the details and reasons for abolishment are specified and the Chairman of the SFC or the Governor approves the abolishment.

CHAPTER 7.

SUPPLEMENTARY PROVISIONS

§70. Provisions of Mutatis Mutandis Application

The Regulation on Examination of Financial Institutions and the Regulation on Disciplines against Financial Institutions shall apply mutatis mutandis to any of the following subparagraphs:

1. Matters concerning the standard and procedures for imposing negligence fines  under Article 47;

2. Matters concerning the measures against an institution to be examined or its officers and employees under Article 50 paragraph (1) and Article 51 paragraph (2);

3. Matters concerning hearings under Article 57, notification of objection procedures  under Article 58 or the method and procedures of reopening of procedures under Article 60;

4. Matters concerning discipline against an institution to be examined or its officers and employees that have violated the Act on Real Name Financial Transactions and Protection of Confidentiality and its Enforcement Decrees.

§71. Notice to Relevant Institutions

The Chairman of the SFC or the Governor may, when deemed necessary in order to secure the effectiveness of an investigation, notify the result thereof to any relevant institution including government organizations, in addition to taking measures under this Regulation.

§72. Payment of Expenses

When a reference person who is clearly not suspected to be involved in the unlawful practice(s) makes an appearance to make a statement, except the following cases, his expenses may be paid within the budget limit of the SFC or FSS.

1. Cases where a reference person makes a false statement or reject to make a part or all of the statement.

2. Cases where payment of mileage is actually impossible because the relevant investigator rejects to receive mileage when asked of giving mileage.

§73. Commendations

For person(s) who has significantly supported the investigation under this Regulation by providing necessary information or notifying the suspicion of violation, the Governor may award him(or her) or reward them within the budget of the FSS.

§74. Secret Protection of Informers

Unless there is informer's written consent, an investigator  and other investigation- related people shall not offer or divulge a personal character and any information of an informer to any other person.

§75. Public Relations and Training

The Governor may occasionally conduct public relations activities and training in order to prevent unlawful practice(s) with the cooperation of the Korea Securities and Dealer's Association, the Korea Listed Companies Association,  the KOSDAQ Registered Corporations Association and the Korea Futures Association.

§76. Delegation of Powers

(1) Duties concerning receiving and processing of information, petition, and other documents related to unlawful practice(s) to be submitted to the FSC or the SFC by the Stock Exchange, the Securities and Dealer's Association, the Futures Exchange and other investors shall be delegated to the Governor.

(2) The matters received and processed by the Governor pursuant to the provisions under paragraph (1) and the actions taken by the Chairman of the SFC or the Governor pursuant to the provisions under Article 55 paragraph (1) shall be reported to the FSC or the SFC on a quarterly basis.  Where actions are taken against any securities related institution (including the futures related) or its officer or employee, a report shall be made to the SFC before they are taken with the exclusion of the notification of the investigative authority pursuant to Article 45.  <Amended October 30, 2002>

(3) The Chairman of the SFC or the Governor may otherwise determine the detailed matters necessary for the implementation of this Regulation.

Addenda

§1. Effective Date

This Regulation shall be effective on the date of promulgation.

§2. Repeal of Previous Regulations and Detailed Enforcement Regulations and Consequent Interim Measures

(1) On the effective date of this Regulation, the Regulation on Investigation of Securities and Futures Commission by the Securities and Futures Commission (hereinafter, "previous Regulation") and " Detailed Enforcement Regulations for the Regulation on Investigation of Securities and Futures Commission by the Securities and Futures Commission shall be repealed.

(2) Investigation and disposition conducted under the previous Regulation and Detailed Enforcement Regulations before the enforcement of this Regulation shall be deemed to have been conducted under this Regulation.

Addendum

(October 30, 2002)

This Regulation shall be effective on the date of promulgation.

Addenda

(August 27, 2003)

§1. Enforcement Date

This Regulation shall be effective on the date of promulgation.

§2. Interim Measures

Surcharge shall be imposed against acts committed in violation prior to the enforcement of this Regulation as follows;

1. As for the acts committed prior to the enforcement of this Regulation, the lesser of the amounts computed in accordance with the previous and the current Regulation shall be imposed.

2. As for the acts committed and of the identical type before and after the enforcement of this Regulation, the greater of the following amounts computed shall be imposed;

a) Amount computed in accordance with the the provisions of paragraph (1) for the acts committed prior to the enforcement of this Regulation; and

b) Amount computed in accordance with this Regulation for the acts committed since the enforcement of this Regulation.