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Taiwan: Stricter Regulation of Insider Trading Proposed

(Dec. 8, 2008) On November 26, 2008, the Finance Committee of Taiwan's Legislative Yuan did an initial consideration of certain revisions to the Securities Exchange Act that would tighten the regulation of insider trading. Highlights of the proposed changes are as follows.

  • The current 12-hour ban on “company-associated people” trading company shares before “major corporate news or plans” (to be defined by the relevant authorities) are unveiled, imposed on persons associated with the company who know in advance of such corporate news or plans, would be extended to 18 hours.
  • The competent authorities will define “company-associated people” and “major corporate news or plans.” The former “should include members of the board of directors, accounting staffers, sales staffers, general manager[s], and relevant staff in charge of relevant documents,” because such persons “can easily learn of any major positive or negative corporate news that can greatly affect the performances of the firm's business and share price.” The latter would basically refer to news or plans “that can affect a firm's ability to honor principal and interest payment.”
  • Those who violate the revised provisions would be deemed to have illegally engaged in insider trading, whether they themselves carried out such activity or did it by means of surrogate accounts.
  • Companies listed on the Taiwan Stock Exchange or the over-the-counter market would be required to make their annual financial reports public in March of every year, instead of in April.

(Stricter Rules in Store Against Insider Share Trading, THE CHINA POST, Nov. 27, 2008, available at

According to legislator Lai Shi-bao, in the past eight years there have been 169 indictments against insider share trading, but only 11 cases came to trial and of those cases only six defendants were found guilty, “due mainly to the ambiguous definition of … insider trading.” At the November 26 Finance Committee meeting, Chen Shu, Chairman of the Financial Supervisory Commission (FSC), stated that the FSC members, in concert with prosecutors and investigators, have focused their efforts on prosecuting 10 insider trading cases involving charges of illegal practices, including manipulation of share prices and malicious spreading of rumors to undermine listed firms' business operations. (Stricter Rules in Store Against Insider Share Trading, id.; for other proposed changes to the Securities Exchange Act, see also Proposed Consolidation of Securities Exchanges, New Shariah Index, GLOBAL LEGAL MONITOR (Dec. 4, 2008), available at