내부자거래와 이해상충 통제 및 관리수단으로서의Chinese Wall의 法的 機能에 관한 연구 - 영미에서의 운용과 자본시장법상의 기준에 대한비교검토를 중심으로 -

Abstract

Chinese Wall policies and procedures have been a concrete regulatory requirement for the US brokerᐨdealers pursuant to the strengthened requirements of the Insider Trading and Securities Fraud Enforcement Act of 1988 (“ITSFEA”). ITSFEA specifically requires that all brokerᐨdealers to establish, maintain, and enforce written procedures reasonably to prevent misuse of material, non public information by employees and proprietary accounts. Main purpose of Chinese Wall policies and procedures as mandated by the US regulators is to prevent insider trading and to provide a means by which financial firms can identify, manage or control actual and potential conflicts of interest among clients or among clients and the financial firm in question. Today Chinese Wall policies and procedures have been widely adopted by global financial firms, including brokerᐨdealers, investment banks, commercial banks, bankᐨholding companies and financial conglomerates that provide multiple services to multitudinous clients (both corporate and retail) as well as engaging in their own proprietary trading activities. Financial firms routinely come to possess insider or confidential information (“Inside Information”) concerning their clients or related parties in the course of providing financial services to their clients. Financial firms owe several legal obligations to their clients, namely duty to refrain from insider trading, duty to use confidential information received from the clients only for the clients’ benefit, duty to provide the clients with recommendations or investment decisions based upon the best available information, among others. Most of all, financial firms have duty not to use the information to further their own interests or the interests of their other clients. In practice, Chinese Wall serves to allow financial firms to provide services (“Private Side Services”) that necessarily involve exposure to, use of, or creation of, Inside Information while contemporaneously engaging in services that require the same financial firms to operate in the public financial markets (“Public Side Services”). Public Side Services are those services that not only do not require Inside Information, but also those services that may not be performed if the firm is in possession of Inside Information. This result of the financial firms being able to provide concurrently the Private Side Services and Public Side Services is achieved by allowing Inside Information possessed by a financial firm only to those individuals or groups (“Private Side”) within the financial firm that legitimately need it to provide Private Side Services, thereby making it inaccessible to those providing Public Side Services (“Public Side”). Specifically, Private Side Services refer to investment banking, capital markets and corporate advisory services provided to corporate clients. They include provision of corporate loans, financing or advising on tender offers, leveraged buyᐨouts, and going private transactions, private placements and mergers and acquisitions. Public Side Services refer to brokerage, sales trading, investment management or investment advisory services, provision of research reports on listed companies, and proprietary trading. In theory, without a Chinese Wall separating the Private Side from the Public Side of a financial firm, the presumption is that the firm may not engage in Public Side Services in respect of the securities which are subject of or related to transactions undertaken by the Private Side. The rationale for this is that the firm’s Private Side’s knowledge of the Inside Information concerning these securities would be imputed to the Public Side of the firm, thereby rendering any trading in, sales or solicitation or investment recommendation of the same securities by the Public Side of the firm insider trading which is illegal. However, a robustly erected and tightly implemented Chinese Wall would allow a financial firm the ability to assert that the Public Side of the firm does not have any Inside Information that is in possession by the Private Side of the firm, unless the party claiming insider trading on the part of the firm is able to prove that, notwithstanding the Chinese Wall, employees on the Public Side actually have access to Inside Information. As can be inferred from the foregoing, Chinese Wall imparts substantial benefits to the financial firms that adopt and administer it by allowing them an effective means to protect, if not legally defend, themselves against insider trading, breach of client confidentiality and conflicts of interest claims. The circumstances that gave rise to the adoption of and reliance on the Chinese Wall policies by the regulators, selfᐨregulatory organizations (“SROs”) and the financial firms are also present in Korea today with the promulgation of the Financial Investment Services and Capital Markets Act (“Capital Markets Act”) which allows Financial Investment Firms (“FIF”금융투자회사) to engage concurrently in multiple financial businesses such as investment banking, trust, asset management, brokerage, sale of investment products, among others. As a result, the need to protect customers of FIFs from losses or damages suffered by conflicts of interest issues has now become greater than ever. The Capital Market Act specifically allows the investors and customers of FIFs to bring an action against the FIFs to seek compensation for damages suffered as a result of conflicts of interest not resolved by the FIF. The Capital Markets Act required the FIFs to adopt and implement Chinese Wall policies and procedures by May, 2009. Chinese Wall policies and procedures adopted by Korean FIFs largely as a result of the industry’s effort to formulate an industry standard are quite different from the Chinese Wall practiced by global financial firms. The main purpose of this paper is to juxtapose and highlight the important features of the different Chinese Wall policies and procedures adopted and implemented by the global financial firms on the one hand and the Korean FIFs on the other hand so as to enable the readers to understand the main similarities and differences, as well as strengths and weaknesses, between the two different Chinese Wall systems