The Crime Of Insider Trading In Taiwan

Taiwan securities market started very early, in1962founded the Taiwan StockExchange, in1968promulgated the " Securities and Exchange Law," has been morethan60years, with Taiwan ’s economic development, social change and progress ofthe times, in Taiwan " securities and Exchange Law " experienced a total of17alters.Taiwan “Securities Exchange Act” at a securities transaction should be clearlydefined in order to” develop the national economy and to protect the investment," forthe purpose for that purpose, stable stock market is particularly important. I believethat the destruction of the securities market stability in many crimes, the crime ofinsider trading is undoubtedly one of the minimum costs, the most harmful.Insider trading insider information refers people to master the use of insiderinformation for securities trading, the purpose is to obtain benefits or reduce losses.Fair securities market should have the following three characteristics:1, enablinginvestors to maximize access to market information;2, securities prices can quicklyand accurately reflect market information;3, through the market value of thesecurities is properly evaluated. But insider trading is the use of ordinary investors donot know the information to get the actual benefits on the stock market is a seriousviolation, not only violated the securities market fair, just and open three principles,seriously affecting the efficiency of the market, leading investors to the securitiesdistrust of markets, securities trading market is not conducive to normal operation.Countries around the world prohibit insider trading regulations prevalent, but notthe same as the theoretical basis of the Taiwan region has its unique theoretical system,the first chapter on theoretical aspects to be described.Taiwan, on the prohibition of insider trading doctrine there are five:1. The market theory. That: the overall observation from the market in order tofacilitate information flow, and promote rational allocation of resources, improve theefficiency of the securities market based investors should have equal rights of accessto information in order to maintain fair trade. For insider trading violations of this policy, serious damage to investor confidence, affecting the healthy development ofthe market and must be banned.2. The fiduciary relationship theory. That: the company, the “insiders “such asdirectors, supervisors, managers, etc., are liable for the company and its shareholdersfiduciary duty. In this context, if the use of the company’s insider information in thestock market for their own profit, equal to his own interests precedence over thecompany and shareholders, contrary to the fiduciary duty, should be prohibited.3. The misappropriation theory. That: when the perpetrator violated the trust of thesources obligation, to take the message privately for trading in the stock, constituteinsider trading.4. The special relationship theory. That: as long with a "special relationship" can getor touching internal message, the message is for corporate purposes instead of aprivate nature and use of information and knowledge of others to produce congenitalunfair trade fairs, shall be prohibiting insider trading behavior.5. The information advantage theory. That: Only when trading participants haveinformation advantage, then how are other traders diligence, are unable to overcomethe legitimate means, the trader will feel really unfair, namely insider tradinginformation that should be banned.I believe that the fiduciary relationship theory and misappropriation of absolutemarket has drawbacks. Mainly made of special relations theory, information theory,supplemented by the market on edge. That is, any person access to insider information,the source must be a special relationship with the premise of insider trading norms hasbeen justified. The so-called special relationship, by virtue of behavior anddistribution companies, public acquisition of companies, or other sources of speciallinks, resulting in recurrent News Contact pipes. When the perpetrator is through thisrelationship and get information superiority, this information must be prohibited, if theperpetrator use this information to conduct transactions, should be considered insidertrading.To make the securities market remained stable, fair and reasonable, Taiwan in1988," Securities Exchange Act " one new section157" prohibits insider trading regulations", the result of the Crime of Insider Trading flooded with many uncertainlegal concepts and economic criminal investigation of problems exist, increasing thedifficulty of court convictions, resulting in the suspect to escape legal sanction,seriously affecting the fairness of the securities market, causing public distrust causednational panic. In view of this, the21st century, Taiwan legislators referencesecurities authorities suggested that academic theories and judicial decisions,respectively, in2002,2006and2010carried out three changes to criminalprosecution and judicial organs of the legal proceedings to provide legal basis.Although Taiwan legislators perfect insider trading on the elements of the crime tomake many changes, but there are still many loopholes article from Chapter II toChapter V, respectively, Taiwan crime of insider trading on the subjective, subject,object, elements of such an objective discussion on related issues and reasons for theauthor’s views.The second chapter of the crime of insider trading subjective men’s read sub-section discusses the following two:First, what is known? I believe that knowledge is the message recipient knows whohas a special status messaging. That is the message recipient’s identity for messagingshould know, even if people knew messaging is probably the law of a specific person,is known. In other words, it knows not only includes direct intent, indirect intent canbe established.Second, the perpetrator knows the message is still holding penalties should be usedbefore being punished? I agree with the use of said view. The perpetrator was awareof the message and the transaction should be causal relationship between behavior canconstitute insider trading. If the investor becomes aware before the investment planhas been drawn up, invest their discretionary trading or entrust others to trade, notbecause it knows the message and for the trading of stocks, such as the requirementbecause he knows the news to prohibit the sale of stock, will enable the investor’sinvestment plan prepared in advance stalled, it is over when.Chapter III of the crime of insider trading body, divided into the following fivesections are discussed: First, the traditional insiders, that company directors, supervisors, managers, alsoincludes Taiwan,"Company Law" the first paragraph of Article27of the exercise bythe designated representative of the company and the jobs of more than per cent stakein the company ten shareholders.Second, the quasi-insider, which is based on informed professional relationshipbased on control messages between people and the people who received the news.What is “aware of the professional relationship based on message”? I deliberatetheories and doctrines made after judicial practice: the professional content has to beaware of the possibility of unforeseen elements of the message, but not theoccupation has a direct relationship with the inside information is limited, and peopledo not act with the shareholders of listed companies to have a relationship of trustlimit, as long as based on the " professional" to have access to confidentialinformation of listed companies, including government regulatory authorities in thecivil service. Simply put, as long as the perpetrator to obtain confidential informationis not disclosed on the professional relationship, is included in the scope of thisparagraph.Third, the former insiders, that people at the loss of identity within the companyafter a certain period, usually remain on the company’s financial, business familiarityor influence, so Taiwan " Securities and Exchange Law" states: directors, supervisors,managers,, majority shareholder and relations based on occupation or control of thepeople, in the six months after the loss of identity is still considered corporate insiders.If the aforementioned person whiles their spouse, minor children or the use ofcompany stock trading in the name of others who are also applicable to this sectionprohibits insider trading.Fourth, the message recipient, namely Taiwan," Securities and Exchange Law"Article157of Section1, paragraph5, from the traditional insider, quasi-insiders,former insiders who know the message, the message recipient, will be the section ofthe people as the scope of prohibition, would prohibit insider trading broader level,the maintenance of a sound and fair securities market more help. Among them,whether to include indirect recipient? I learned from the legislative provisions righteousness, insights and practical insights theory analysis suggested that themessage recipient ’s responsibility does not in breach of the obligations inside passinside information as requirements, as long as the message recipient subjective ableto recognize the message as a significant impact on price and unpublished, and usethis great news trading stocks, already damaged the fairness of the securities marketshould be regulated, therefore indirectly lead people also included.Five, spouses, minor children and the use of another person’s name holders. Amongthem, how to judge people for the internal use of the case of securities held on behalfof others? In simple terms, the internal man and the account to be used if both thesupply relationship between the control and profit and loss attribution affiliation, thenthe account will be considered for the use of the account held in the name of others.The author believes that the company’s directors, supervisors, managers, and holdsmore than10percent of the company shares to shareholders if the use of stocks heldin the name of others, but there is the case of insider trading, the company that bearsinsider trading insider responsibility. As for whether the use of human knowledge oftheir different responsibilities, such as the use of human and human behavior andconduct liaison with men’s read share for the common principal offender; although ifthey are informed by human, but only account for the behavior of people use withoutmen’s read Contact and behavior-sharing, to help offenders; such person’s account isbeing used instead of insider theft, not a crime.Chapter IV of the crime of insider trading objects is discussed. Theory of criminallaw in Taiwan, the “object of a crime “is equivalent to China mainland criminal object.Therefore, this chapter mainly from the angle of the object of crime is discussed forease of reading; it will be unified with the “object of crime “in statements.In this chapter, the meaning of " other equity securities that " the doctrine andpractice of the author deliberate made after opinion, as long as there attend theshareholders ’meeting, dividends and surplus property, and the other for theprotection of minority shareholders’ rights in the case of other equity-type securities.In other words, if the securities have no voting rights or equity based on any of therights proceeds, is not part of the insider dealing specification objects. Chapter V focuses on the thesis, this chapter will Crimes objective elements ofinsider trading in the major news, divided into the following three parts are discussed:First, the big news of the judgment. Materiality of insider information is convictedfor us to judge whether insider trading is the most important and most controversial ofthe constituent elements, through the analysis of this article can be found in Taiwanjudicial practice materiality judgments of the message, and the United States TSCIndus. V. Northway, Inc. cases taken " reasonable shareholder on all matters that maybe considered important " and Basic Inc. V. Levinson cases taken " in accordance withthe probability of events and event operations for the company’s overall degree ofinfluence two factors determine " the same standard, so this article will first analyzetwo cases and two cases of this judicial practice in Taiwan, the impact on the proposedinstructions. Taiwan doctrine says that in theory pass judgment on materiality shouldbe taken to be able to make vague standards for different court cases actually usedflexibly to avoid excessive or norms regulate the shortage occurred.But I do not agree doctrine Tong said, the other big news of the proposed standardshould be clarification. There are three reasons: one, clearly defined within thecompany not only allows people to understand what the message is public beforetrading, investors will be more trusted public information is correct, enhance investorconfidence in the securities market.2, the criminal offense of insider trading higherby “major news judgment should have a certain degree of flexibility” as the reason isnot sufficient, what kind of things should be open to trade, should be clearly aware ofthe company and investors.3, the competent authority may authorize the legislature orthe stock market trends with the trend of the times and amended at any time in a listformat. Perhaps the lack of standardized methods listed mining, but rather due to lackof norms is not punishable, neither shall regulate vague and people are brought to thecrime of insider trading.Second, the major type of message. Taiwan insider dealing significant impact onstock prices said the news is related to corporate finance, business and market supplyand demand specific securities, tender offer, the specific content of a particular stockprice have a significant impact on legitimate investor or investment decisions have important implications for the message. The major type of message, according toTaiwan "significant message management approach" requirement can be divided intotwo categories, the first category is related to corporate finance, business news, andthe second category is related to the securities market supply and demand information,and the application of different open manner. Whether it is " involved in corporatefinance, business news " or " supply and demand in a particular stock market news"must achieve " the company’s stock prices have a significant impact " or " legitimateinvestors for investment decisions have a major impact " as the standard, insidertrading norms is prohibited.Third, the establishment of major news and public point of identification.Establishment of major news point to develop the significance of defining an interiorperson shall materially messages clearly; the message is not publicly disclosed beforeor after a certain period of time, the sale of shares or other securities with equitycharacteristics. In Taiwan, China “Securities Exchange Act” of that, the point is theestablishment of a “multi-point, the first time “approach to computing. I believe thatany material information has formation process, and the message of theestablishment, and sometimes wait for the views of the two completely HUD or anycontract form, if the stick to rigid criteria established formal standards identified thetiming of the message that the program has not been completed, the message insteadof inside information has not been determined, but fear not deviate too rigid facts,and even lead some people deliberately delay the message point or likely to give upinfluential insider manipulation point space for insider trading operation leaving asidemore space insider trading is more difficult to judge.On this issue, the author analyzes the theory and doctrine of judicial practice of thevarious viewpoints put forward, major news points should be established promptlyconsider the following three criteria:1, materiality: Be the illegal insider tradingnews, be on the investor ’s investment decision significant impact;2, the specificnature: If company has other aspects for future investment objectives or stepped up tomake major investments in new areas and therefore will require a lot of capital, butinvestment, replenishment time and size of the schedule has not yet decided such messages do not have the specific nature;3, certainty: As news of illegal insidertrading, not just a mere imagination or speculation, if belonging to the companyforecast earnings changes, although the forecast for the future development, muststill have occurred based on the fact that the calculated number before they can thinkwith certainty.The author proposed a significant impact on the stock price of the message shouldbe clear, legislators can refer cases of advanced national legislation and courtdecisions, the relevant message " materiality "," concrete " and " certainty " that thejudge based on the gradual view, will major news abstractions be " specific " and "typed " seek judicial or administrative interpretation can be more clear.Chapter VI of the crime of insider trading liability, sub-section discusses thefollowing two:First, the civil liability. There are three issues worth discussing:1, the obligation of reparation. If there are multiple people who compensatoryobligations, whether among them bear joint and several liability? The author believesthat Taiwan " Securities Exchange Act " is only the fourth to the first157people withthe message provides messaging recipient jointly and severally liable, together forinsider trading for the number of people in Taiwan," Securities Exchange Act " hadno jointly and severally liable to the provisions comply with Taiwan Area " CivilCode " on page272of the regulations, the establishment of joint debt, in addition tothe debtor expressly outside, as expressly provided by law is limited, and the Taiwanregion," securities Exchange Act " on page179about the behavior of the person incharge on behalf of the company from criminal liability provisions, whether theperson should be held responsible for civil liability, it would take another judge.Therefore, in order to clear in order to avoid controversy, the author proposes,should be directed at Taiwan," Securities and Exchange Law" Article157of the thirdparagraph after the addition of people together for the insider trader, bear joint andseveral liability, in order to protect the interests of investors.2, the claimant. Engage in insider dealing in good faith with the opposite tradingpersons and companies had to act in violation of the prohibition against insider trading obligation to compensate people to seek compensation, including controversial iswhether to seek compensation for securities brokers? I believe that, according to theprinciples of civil law damages have to seek compensation for damages, securitiesbrokers, although the parties to the contract of sale, but because the securities brokercommissioned only by investors in securities trading market for investors to tradestocks, to invest who charge a fee, gain or loss does not actually bear stock tradinggains and losses, securities brokers and therefore will not be harmed as insidertrading, securities brokers neither damage occurs, of course, cannot claimcompensation from the perpetrator.3, the compensation is calculated. According to Taiwan," Securities and ExchangeLaw" Article179provides that illegal insider trading, if the circumstances areserious, the court may reverse a merchant engaged in bona fide request, will beincreased to three times the limit of liability. The author believes that the court maybe increased to three times the amount of compensation, this provision have apunitive character, if adopted leniency finds that as long as the perpetrator is notsimply open the message, is guilty of serious nature, are too harsh for the perpetrator,and the in the majority of insider trading cases, the behavior is simply not themessage everyone publicly, will lead to increase of3times compensation willbecome the norm, rather than legislative grounds only have to use a special episode.To avoid this from happening, the author proposes a so-called narrow interpretationshould be taken serious nature, should only be one intentionally delaying insideinformation disclosure only when the circumstances are significant.Second, The criminal liability. There are three issues worth discussing:1, calculate the proceeds of crime. Theoretical and practical circles in Taiwan onthis issue in the following three different perspectives:(1) Pro forma said. Pro formafor the transactions in that is calculated, this is the reference in Taiwan," Securitiesand Exchange Law" Article157of the second civil liability provisions, market-basedtransactions reasonable price, calculated as a pro forma transactions in the basis, whilethe so-called market trading price reasonable basis, is the big news was made publicon the10th of the average price.(2) Causation said. Advocates causality interrupt -based, as determined in accordance with causality, emphasizing the resultsimputation, the perpetrator’s behavior and results to a causal relationship, this resultcan be attributable to the behavior of people, so as to causation interrupt pointcalculation crime the resulting benchmark causality price movements after theinterruption, has nothing to do with the behavior of people, cannot ask the perpetratorresponsible.(3) distinguish said. If you sell the stock, using the effective fullpurchase amount minus the amount sold, the proceeds of crime is a profit; if stock isnot fully sold, places to sell the stock average net purchase price is calculated basedon the average price.I believe that the impact of price changes on the stock market due to many factors,if a criminal case in accordance with generally recognized way to determine causationPrice Change whether the major news disclosed a causal relationship, it will causedifficult to judge, so the pro forma transactions shall be calculated by indeednecessary, but the court judgment in the actual case inference should be consideredreasonable, the defendant should be allowed to put forward evidence to the contrary,proof of the message after the publication of a major impact securities violations, orthere are other factors that affect stock price movements, enough to break the causalrelationship. The amount of the proceeds of crime involving the severity ofpunishments, in order to avoid calculations in different ways, leading to differentsentencing result, based on fairness and the principle of legal certainty, the authorproposes should amend existing laws, transactions shall be clearly defined in order topro forma amounts as deemed proceeds of crime way.2, complicity between the proceeds of crime should be aggregated. The authorsuggested that the proceeds of crime should be limited to the actual perpetrator of theproperty taken from the crime, such as other actors obtained through legitimatemeans should not the proceeds of crime, from which the others cannot be combinedincome as their income, otherwise there lost " income" of significance. And the crimeof insider trading by the investor in the form of major news recipient trading behavior,basically the perpetrator is self-financing, with no subjective intent to share theproceeds of crime. If human behavior for their respective contributions, self-dealing, self-financing situation, should not be combined proceeds of crime. On the contrary,such as human behavior jointly decided from the beginning that the transaction price,trading point and then jointly allocate the proceeds of crime, have to share with othersthe subjective intention of proceeds of crime, the perpetrator were traded allocation isto avoid the securities owned by the regulatory authority, the should only be combinedproceeds of crime.3, the administrative responsibility of the feasibility of alternative criminal. Theauthor suggested that although the administrative penalty process quickly, you canquickly reach the effect of sanctions against the perpetrator, unlike criminal penaltiesto go through a lengthy court process, but to completely replace the criminaladministrative responsibility seems to be wrong. Because insider trading mostlypremeditated crime, discover and collect relevant evidence of the difficulties, and theTaiwan judicial administrative organs of investigation does not seem permission, sothe investigation more difficult than the judiciary, and if the perpetrator insidertrading the fact cannot be determined, according to Taiwan " administrativeProcedure law" Article136provides that the administrative authority may actstipulated by the reconciliation with the contract to replace the administrativesanctions, so the perpetrator can " buy crimes" to absolve themselves of liability.Thus, simply to administrative penalties to curb insider trading means are insufficientto achieve the purpose, but it can be administrative penalties as an additional means ofcriminal punishment. Therefore, I propose, should be in the current criminal and civilliability, the introduction of administrative responsibility, for example, the originalcivil judge can confer significant or not depending on the circumstances, will beincreased to three times the damages provisions changed to administrative finesbecause the terms of civil liability provisions of whom, significantly higher than theinvestor compensation extent of the damage, so to make a request for compensationbut there are investors who are suspected of unjust enrichment, and administrativefines have a punitive character, can achieve curb insider business crime efficacy, butalso to avoid the claimant unjust enrichment of the situation.The last chapter is the conclusion. The chapter concludes the paper, how to improve the proposed basic theory insidertrading in Taiwan, Components and China criminally recommendations.