The Financial Supervisory Commission (FSC) on Thursday said that it would add execution of stock buyback schemes to metrics used to assess corporate governance, in a move to deter market manipulation.
Concerns about market manipulation were raised by lawmakers at a meeting of the legislature’s Finance Committee after Acer Inc (宏碁) did not carry out a NT$35.44 billion (US$1.16 billion) stock buyback scheme as planned.
Lawmakers said Acer did not repurchase a single share of the 100 million shares it said it would buy at between NT$10 and NT$19 per share on the open market between Dec. 21 last year and Feb. 20.
Acer announced the repurchase scheme in December last year after it revealed that it was facing a NT$6.34 billion intangible asset impairment.
“As there were no significant movements in the company’s stock following the announcement, Acer was within its rights to hold off on the buyback,” Securities and Futures Bureau Deputy Director-General Wang Yung-hsin (王詠心) said at a question-and-answer session during the committee meeting.
Acer’s share buyback scheme was among the five largest announced last year.
Wang said that shares in companies that have announced buybacks are logged into a monitoring system and any irregularities would have prompted an investigation into insider trading.
Overall, executions of share buybacks in the past few years have been within expectations, she added.
Among the 830 buyback programs announced from 2014 to last year, 293, or 35 percent, failed to reach at least half of the amount of shares that the companies had promised to repurchase, data released by the commission showed.
Lawmakers also questioned the rise in the number of companies initiating capital reductions, saying such a recapitalization practice could be used to refund cash to shareholders and bypass dividend taxes and health insurance supplement premium obligations.
Capital reduction can be used by companies to offset past cumulative losses, or bolster their capital structures in the face of diminished earning prospects. This practice reached a peak level during the 2008-2009 global financial crisis.
Last year, there were 23 capital reduction programs that resulted in share cancelations and cash refunds to shareholders, a record high compared with virtually none prior to 2004, the data showed.
Taiwan Stock Exchange chairman Shih Jun-ji (施俊吉) said last year that the practice reflected businesses’ conservative outlook on growth, investments and capital expenditure.
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