주제별 논단 : 기타 ; 은행소유 규제와 관련한 입법 기술상의 문제점 및 개선방안

서문식 ( Mun Sik Seo ) 한국금융법학회 2012 金融法硏究 Vol.9 No.2

When applying the current definition of “person who is not principally engaged in finance” of the Banking Act of Korea literally, even CITI group (the owner of the Korea CITI Bank) or SC group (the owner of Korea SC Bank) may be fallen into that category as well as the line star Fund which acquired the Korea Exchange Bank in 2003. This conclusion is very perplexing because CITI group or SC group is well Known international banking organizations.Embarrassed with this conclusion, the financial supervisory authorities announced that they will revise relevant parts of the Banking Act. confronted with this problem, we need to review the whole structure and manner of the Korean regulation restricting ownership of banks. Whether the intent of legislature is well reflected into the Act, or the intent is distorted due to the inappropriate use of legislature techniques, or the Act is unnecessarily hardly written to understand should be reviewed. Originality of the regulation restricting ownership of banks can be attributed to United States of America which has developed the rule of separation of banking and commerce for last 200 years. As a developing country, Korea must have consulted the American rule. However, there are big difference between Korean rule and American rule, which is not a problem by itself, but may be a problem if Korean rule does not provide appropriate answers to questions arising from the regulation. Thus, we need to analyze the problems arising from the Korean regulation on issues of the separation of banking and commerce, and then see how the American rule answer to the questions arising from Korean rule.

주제별 논단 : 기타 ; 우리나라 외환관리의 발전방향

서문식 ( Mun Sik Seo ) 한국금융법학회 2008 金融法硏究 Vol.5 No.2

Ⅰ. Introduction Since 1997 when Korea received bail out money from International Monetary Fund(IMF) Korea has expedited foreign exchange liberalization policy according to Memorandum of Understanding contracted between Korean government and IMF. Deregulation on foreign exchange control have some positive effects; it removes obstacles on transactions with nonresidents, reduces transaction cost, increases worldwide trades so that eventually contributes to global economic interest. However, liberalization makes a country give up her own policy measures to cope with deficit of balance of payments. Moreover, opening foreign exchange market or stock exchange market makes it difficult to protect her country from attacks by foreign capital. Korea experienced this kind of problems in September, 2008, when I am writing this thesis, as well as in 1997. Therefore, I think we need to examine the speed and priority of foreign exchange liberalization policy at this time. Ⅱ. Foreign Exchange Control in Korea The usual type of foreign exchange control which had been set up through the two World War looks like this; All foreign currencies resident acquired should be deposited or sold to government or his agent to a central pool in return for local currency at specified rates. Foreign exchange is then distributed from the pool, through licensing or similar devices, to those persons who meet the criteria of the particular governmental plan. Korea also adopted this structure in the Foreign Exchange Control Act of 1961. The act is based on three basic rules; 1. All foreign exchange should be pooled, 2. Foreign exchange can be used by only one who has actual demand, 3. All foreign transactions should be monitored by banks. There are various ways to pool foreign currencies; sales, deposit, custody and registration. Sales pooling can be said to be the strongest measure. Korea established sales pooling system in 1961. Afterward, the duty of pooling have been alleviated. One example is that government permits individuals to retain foreign exchange below 3,000 dollars in 1978. In February 1995, government abolished the duty of pooling foreign exchange, so that residents become to freely retain foreign exchange. The second rule, actual demand rule, is required to forbid insufficient foreign currencies to be wasted or to be used for speculative purpose. Foreign exchange can be bought from banks only when residents prove actual demand until in 1994 government allows corporation or individuals to buy foreign exchange without proving actual demand within a limited amount. This ceiling was eliminated in January, 2001, so that actual demand rule was abolished. Now a resident can buy foreign exchange without limitation even for the purpose of speculation. Actual demand rule in future, swap transactions was also abolished in April, 1994. The third basic rule is that all foreign transactions should be settled through banking system. This makes government be possible to monitor all foreign transactions, get statistics concerning outflow/inflow of foreign exchange. Thus, a bank that wants to do foreign exchange business have to equip certain physical or personal requirements and get a license from government. Moreover, the Foreign Exchange Control Act of 1961 of Korea was designed under the triple checking system copying the Foreign Exchange and Trade Act of 1949 of Japan. There are three barriers to pass in order to complete foreign transactions; barrier at the step of underlying transactions, barrier at the step of remittance or receipt, and barrier at airport or seaport. For example, one who want to export or import have to report to authorities with required documents. This is a regulation at the step of underlying transactions. When the person pays or receives money to/from counterpart, banks examine whether the underlying transactions were permitted or not. This is a regulation at the step of remittance or receipt. Besides these, one who carry foreign or domestic currencies through customs line should report to customs officers. This is a regulation at airport or seaport. Ⅲ. The progress of Liberalization of foreign exchange control Due to several liberalization measures since 1994, Korea has experienced drastic deregulation on foreign exchange control. All limitation on payments or receipt was abolished except some limitations on settlement methods such as write-off, paying to non-contracting party, or paying not through banks. In particular, the payment ceiling of individual was abolished, so that individual can remit or carry out foreign exchange for purpose of endowment, travel, foreign study, emigration, transferring property by emigrants, etc. without ceiling. Most capital transactions by corporations or banks were also liberalized. Foreign exchange outflow transactions such as overseas investment, purchase of foreign real estate, purchase of foreign stocks, deposit to foreign banks were allowed without meaningful restriction. Foreign exchange inflow transactions such as borrowing money from nonresidents, deposit or trust to domestic banks by nonresidents, foreign direct investment were allowed without real restriction. Specifically, domestic stock and bond market was totally opened to foreign investors in 1997. However, some discrepancies between press report and reality are found. Although Korean government announced that it completed transfer to Negative system from Positive system in capital transaction in 2001, there still be positive type regulation in capital transactions. Also, though the Foreign Exchange Control Act distinguishes "simple report" from "report should be accepted" and regards "simple report" as deregulated rather than "report should be accepted," in reality there are no difference, so both are treated to need to be accepted by authorities. Ⅳ. The speed and priority of foreign exchange liberalization Foreign exchange is the most important thing for Korea to develop its economy from the ruins of Korean War. Korea needs foreign currencies to import raw materials to make products and export them. Therefore, strict foreign exchange control is necessary and justified. However, as Korean economy has grown up the chronic deficit problem of foreign exchange is dissolved. Moreover, the strict regulations is sometimes criticized as an obstacles for corporations to expand their business to world. International institutions such as OECD, IMF have watched the progress of Korea`s liberalization measures with suspicious eyes. Here are the reasons we cannot help pursuing liberalization. However, the liberalization means that Korea will give up political powers on the problem of foreign exchange deficit and let the problem to market. Once it happens, fluctuating exchange rates replaces governmental powers and government will lose its sovereignty in maintaining economic stability. This is the state of Korea we see in 2008. Accordingly, the liberalization should not be done hastily surrendering to international pressure or being swept with current fashion. Liberalization measures should be pursued in consideration of Korea`s best interest and government have to tune up the speed and priority of liberalization within the scope that our economy can endure the deficit of balance of payments. Pertaining to the speed and priority of liberalization, I proposed some principles; first, the restrictions that are not relevant to outflow/inflow of foreign exchange but restrain corporation`s activity excessively, such as payment/receipt period regulations, should be deregulated first. Second, the transactions that can be used as speculative devices by foreign exchange speculators, such as domestic currency funding, should be restricted as last as possible. Third, capital transactions that have relatively low risk may get a priority in deregulation, however, capital transactions that have great risk such as derivative transaction should be restricted until last. Fourth, the transactions that can be used to avoid other restrictions, such as payment to non-contracting party, should not be deregulated hastily. Fifth, the monopolizing foreign exchange banking system that is the basis of current foreign exchange control should not be given up without thoughtful consideration.

주제별 논단 : 기타 ; 감독자에 대한 제재의 법 이론

서문식 ( Mun Sik Seo ) 한국금융법학회 2007 金融法硏究 Vol.4 No.1

Financial Supervisory Commission (FSA) and Financial Supervisory Service (FSS) of Korea have taken enforcement actions against employee, employer or financial companies who violate financial laws of Korea. This enforcement actions, such as suspension order, removal order, civil money penalty etc. apply not only to the offender but also to the supervisor of the offender. About 30 Acts regarding financial business regulation in Korea, however, have no statement at all about the liability of supervisor even though there are lots of legal issues that should be decided when FSA, FSS actually takes enforcement measures against supervisor. Until now, the actions have been taken according to the precedents without through studying on the liability of supervisor. This paper is to study theoretical base of the liability of supervisor and to propose the proper prima facie cases (i.e., elements) on the liability of supervisor. Liability of supervisor can be subdivided into civil, penal, and administrative liability. Administrative liability means the enforcement measures taken by FSA, FSS. The research conducted on all kind of supervisor liability in Korea and America found 5 types of supervisor liabilities; torts vicarious liability in Korea, torts vicarious liability in America, controlling person liability in Security Act of 1933, Securities Exchange Act of 1934 in America, liability based on failure to supervise in Securities Exchange Act of 1934 in America, and Responsible Corporate Officer doctrine in America. At first, it is studied whether each liability is based on personal culpability or vicarious liability. This distinction is very important in that most issues in supervisor liability are originated from this distinction. The research found that all vicarious liability is not the same, thus some vicarious liability can be exempted by some defenses while others cannot. Pure vicarious liability apply to torts vicarious liability in America, Responsible Corporate Officer doctrine. Defense attached vicarious liability apply to torts vicarious liability in Korea, controlling person liability in Security Act of 1933, Securities Exchange Act of 1934. Personal culpability apply to liability based on failure to supervise in Securities Exchange Act of 1934. Next, prima facie cases of each liability are analyzed. Through this I proposed "controlling person liability in Security Act of 1933" as a model for Korean financial supervisory authorities to execute enforcement actions against supervisor of offenders. This liability is based on personal culpability so that it can avoid dispute concerning constitutionality. In addition, the prima facie cases of this liability is so similar to current practice of FSA, FSS that they, I think, can be harmonized with current practice without difficulty.

외국환거래법상 제3자지급 규제의 연혁

서문식 ( Mun Sik Seo ) 한국금융법학회 2014 金融法硏究 Vol.11 No.3

The Foreign Exchange Control Act of Korea has a unique regulationwhich imposes reporting obligation on Korean residents when they remit/receivefunds to/from a resident or nonresident who is not a counterparty of atransaction. Applying this regulation to actual cases is never easy because itsliteral application may lead to unacceptable results from a common senseperspective. First, determining “a counterparty of a transaction” is not as easy asone may initially think. Next, it is very difficult to understand why settlementby or through agents should be regulated and why a settlement companylegitimately engaging in business should be regulated. Above all, it is hard tounderstand why this regulation is necessary to control foreign exchange. I traced the legislation history of this regulation, and eventually foundthat this regulation might be a product of misunderstanding and human error. There is a big difference between Japan`s 1979 foreign exchange control lawsand the corresponding Korea`s 1991 laws which were modelled on the 1979Japanese laws. Under section 17 of the 1979 Japanese Foreign ExchangeControl Act and the 1980 Ministerial Decree on Special Settlement Methods,Japanese residents had an obligation to report only when they remitted/received funds to/from other residents who were not contracting parties for the settlementof transactions between residents and nonresidents. However, under section 18of the 1991 Korean Foreign Exchange Control Act, a Korean resident had anobligation to report not only when they remitted/received funds to/fromresidents but also when they remitted/received funds to/from nonresidents. Asa result of this legislation, even cross-border remittance/receipt by or throughlegitimately authorized foreign exchange banks were included in restricted anddiscouraged behaviors. It seems that people who were involved in amending the KoreanForeign Exchange Control Act before 1991 might not have correctly understoodthe purpose of section 22 (DAESANG JIGEUB) of the then effective Act whichprohibited HWANCHIGI, thus unintentionally enlarging regulated behaviors whenthey paraphrased the wording in section 22 of the old Act to section 18 of thenew Act. As a result, Korea came to have a law regulating even cross-borderremittance/receipt by or through foreign exchange banks. However, thislegislation is far from the original purpose of regulating HWANCHIGI.

주제별 논단 : 기본적 상행위로서의 금융거래와 법 ; 미국의 신탁법리 -우리나라의 신탁법과의 차이를 중심으로-

서문식 ( Mun Sik Seo ) 한국금융법학회 2008 金融法硏究 Vol.5 No.1

This study is to introduce Legal principles of Trust in America to Korea. Trust was born in England and grown up in America. England has developed peculiar two concurrent legal regimes which are common law and equity law. Trust is said to be the best creature English equity law has made. The reason of why trust structure is so useful to meet various needs of human society is explained as follows; insolvency protection, conduit taxation, fiduciary regime and flexibility in design. Continental countries that have developed civil law system have tried to introduce trust to their legal system, acknowledging the availability of trust. However, it is not easy to explain trust principles harmoniously in the civil law system. Korea enacted the Trust Act in 1961 which copied the Trust Act of Japan of 1922 which also copied the California Civil Code of 1872 and the India Trust Act of 1882. Introducing trust principles, Japan modified some basic rules of English-American trust which should be appreciated as endeavor to absorb trust principles into Japan legal system. However, such endeavor, I think, made trust in Korea less available than that of common law countries. To maximize the availability of trust, it is necessary to correctly understand the legal principles of trust in America and to introduce them without modification. This paper is composed of following chapters; 1. introduction, 2. the concept of trust, 3. creation of trust, 4. fiduciary regime of trust, 5. transferability of beneficiary`s right, and 6. termination of trust. At the second chapter, I described the concept of trust as "A transfer property to B for the benefit of C,"where B has legal title of the property and C has equitable ownership of the property. Then, I introduced some basic trust rules; 1. A same person can possess three positions (settlor, trustee, beneficiary) at the same time as long as there is another trustee or another beneficiary, 2. A trust is not created until it is funded, 3. A trust will not fail for want of a trustee, and 4. Cotrustees must agree on action. At the third chapter, the four requirements to create a valid trust is explained as follows; 1. The settlor must have the intent to create a trust, 2. There must be funding (property transferred to the trustee), 3. The beneficiaries must be ascertainable, and 4. The deed of trust must be writing if trust property includes real property. Also precatory trust, honorary trust is distinguished from trust, and resulting trust and constructive trust is explained as well. At the fourth chapter, I said the fiduciary duty is composed of duty of loyalty (duty to avoid conflict of interest, self-dealing), duty to care, duty not to delegate and duty to be impartial. As for duty to care, the historical evolutionary process is also introduced. The theory of duty to care has evolved from Court List Rule, through Prudent Man Rule, to Prudent Investor Rule. At the fifth chapter, I explained the spendthrift trust. A settlor can restrict a beneficiary`s ability to transfer his or her interest by including what is known a spendthrift clause in the trust. The clause will bar a beneficiary`s ability to transfer his or her interest voluntarily (by sale or gift) or involuntarily (by foreclosure). In New York, a beneficiary`s interest is presumed nontransferable unless the trust expressly provides otherwise. However, this clause is invalid in settlor-beneficiary trust and there are many legislative or judicial exceptions to this rule. These are to protect creditors from settlor who fraudulently transfer his or her property to avoid repaying debt. At the sixth chapter, I explained the cause of termination of trust. Trust can be terminated not only by natural causes such as the fulfillment of trust purpose, or exhaustion of trust property, but also by agreement of parties. Two parties``(settlor and beneficiary) agreement is enough to terminate trust because trustee has no interest in trust. When beneficiary want to end trust, trustee disagree and settlor dies, the court will decide whether to terminate trust considering the remaining purpose of the trust according to the Claflin doctrine. At the end of each chapter, I compared the Korean Trust Act with American rules. First, there is no mention about the spendthrift trust in Korean Act, thus, under the general rule, the transferability of beneficiary`s interest is not barred. I indicated this is the main reason of why the trust for minors or handicapped persons is not activated in Korea. Second, the settlor-trustee trust is not permitted in Korea. It is due to that the Korean Act provides that trust can be created only by contract or will. This made inter-vivos unilateral creation of trust impossible in Korea. Third, Korea`s scope of protection for third party who acquired the trust property from ultra-vires trustee is wider than that of America. American Act protect only bona fide purchaser who paid value for the trust property, but the Korean Act does not inquire whether the third party paid value or not. Lastly, as Korean Act provides that trust can be created by contract, under the general contract rule, trust can be terminated by unilateral act of trustee if settlor and trustee agree on doing so. However, this is not proper for the method of trust termination because trust is designed to serve beneficiary`s interest, not to serve trustee`s interest.

주제별 논단 : 연구논문 ; 해외직접투자 정의와 관련한 제 문제

서문식 ( Mun Sik Seo ) 한국금융법학회 2015 金融法硏究 Vol.12 No.3

Today when most advanced countries have abolished foreign exchange control regulations, the definition of foreign direct investment in such countries has meaning only for the purpose of statistics. In principle, each country should pay regard to the globally recommended standard definition for foreign direct investment. However, the Korean situation is not so simple. Given its ongoing foreign exchange controls, Korea needs a definition that serves the purpose of its foreign exchange controls. Though Korea has applied the same definition to both statistics and foreign exchange regulations, we may need two definitions each for statistics and foreign exchange control. The current Korean definition of foreign direct investment is somewhat different from that of the OECD Benchmark Definition, so it is not statistically comparable with other OECD countries. On the other hand the Korean definition also cannot satisfy Korean``s own purpose, foreign exchange controls because it reflects many characteristics of the OECD Benchmark Definition which are not relevant from the viewpoint of foreign exchange control. The examples for the former are : (1) the fact that a Korean parent company``s acquiring debt securities issued by foreign subsidiaries is excluded from foreign direct investment in Korea``s definition, but included in the OECD definition, and (2) the fact that foreign construction services, overseas flight or transportation services, etc. undertaken by a foreign branch of a resident company are excluded from Korea``s definition, but included in the OECD definition. An example for the latter is the inclusion of lower level affiliates of foreign direct investment companies into foreign direct investment enterprises even though such affiliates have little meaning for the purpose of foreign exchange controls.

주제별 논단 : 기타 ; 외국환거래법상 거주성 판정기준과 관련한 제 문제

서문식 ( Mun Sik Seo ) 한국금융법학회 2011 金融法硏究 Vol.8 No.1

Residents and non-residents are the most important concept in foreign exchange control laws because the laws based on classification of residents and non-residents in regulating activities of people. Nowadays many people become to have two or more residences in domestic and foreign countries according to development of transportation and telecommunication, which was not imaginable in the past. Thus, the classification criteria are becoming more and more important. However, the criteria are not clear, and have many problems in applying to real cases. Thus, I write this paper to provide interpretation & application guideline about the criteria with foreign exchange experts working at banks or government. At first, I see the current criteria and raise some issues in interpretation. Then, I look over the history of changes of the criteria with introducing Japanese criteria that was a model law in making our law. Then, I review judgments of Korean court to examine how the criteria are actually applied in real cases.