In a legal dispute where investors (the “Plaintiffs”) filed a securities-related class action against Tongyang Securities (now known as Yuanta Securities^[1]), Kim & Chang obtained a ruling in favor of Yuanta Securities. In this case, the issue initially emerged when Tongyang Inc. facilitated the issuance and sale of corporate bonds with Tongyang Securities acting as the organizing agent, and then filed for rehabilitation proceedings in 2013.

Despite its deteriorated financial solvency, Tongyang Inc. issued corporate bonds worth KRW 546 billion in total on seven occasions from October 2012 to August 2013 through public offerings by Tongyang Securities. Upon the initiation of rehabilitation proceedings for Tongyang Inc. in September 2013, corporate bond investors had been precluded from redeeming their bonds.

As a result, the Plaintiffs undertook legal actions against Tongyang Group, including filing the securities class-action in question, dispute mediation applications with the Financial Supervisory Service, other civil actions, and criminal complaints against the corporation’s executive officers and employees. As the legal representative for Yuanta Securities, we successfully defended the company in the securities-related class action that began in June 2014 and obtained a final and conclusive decision after approximately ten years. The lower court ruled in favor of Yuanta Securities in January 2023, followed by the appellate court also ruling in favor of Yuanta Securities in January 2024. The Plaintiffs’ appeal was ultimately dismissed in April 2024.

During the appeals trial, the court reviewed and accepted all of our arguments, ultimately determining that “the bond registration statement (alongside other relevant documents) of Tongyang Inc.’s corporate bonds, which were issued through public offerings arranged by Tongyang Securities, did not contain any false or incorrect description of material facts.”

The dispute for the approval of this securities-related class action lasted for approximately six years before the Plaintiffs were granted permission on July 5, 2018, when the Supreme Court reversed and remanded the previous appellate decision that had denied their application. Notwithstanding the existence of a guilty judgment for fraud in criminal court in connection with the corporate bonds subject to the class action, we successfully defended Yuanta Securities in the trial and obtained full dismissal by demonstrating that the company’s lack of financial stability had been clearly disclosed in the registration statements and other relevant documents concerning the corporate bonds. This legal defense was based on the contents of the registration statements of the corporate bonds as well as the legal principles outlined in the Securities-Related Class Action Act and the Financial Investment Services and Capital Markets Act. This case is unprecedented in that it is the first case in which the defendant prevailed after the court’s decision to approve the filing of a securities-related class action.

Notably, the securities-related class action in question had a claimed amount of KRW 113.5 billion, posing a substantial risk for compensation to be paid by Yuanta Financial Holdings. However, we effectively mitigated the potential risk for Yuanta Financial Holdings by successfully obtaining a conclusive favorable decision to this decade-long legal dispute.

^[1]   Tongyang Securities, which was an affiliate of Tongyang Group, was acquired by Taiwan’s Yuanta Financial Holdings in 2014. Tongyang Securities was renamed to Yuanta Securities in 2014.