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Editorial: FSC scandal endangers regulation

During its past 12 months as the nation's top financial regulator, the Financial Supervisory Commission (FSC) has turned out to be something of a surprise. On Friday -- also the first anniversary of the FSC's formation -- the commission announced that it will form a task force to investigate whether any of its officials or their family members were involved in the alleged insider trading of Power Quotient International Co (勁永國際) shares.

While the FSC claimed this move was a "race" with the Taiwan High Court Prosecutors Office's anti-corruption task force -- the Black Gold Investigation Center (查緝黑金中心) -- to see which body can take the lead in nailing down so-called "vulture investors" involved in insider trading scandals, the core of the activity is to produce evidence proving the innocence of Lee Chin-chen (李進誠), the head of the FSC's Examination Bureau, for his alleged involvement in the manipulation of Power Quotient stock prices.

The FSC should have been celebrating its achievements over the past year, as it has successfully integrated various government agencies which were previously under the Central Bank of China, the Central Deposit Insurance Corp and the Ministry of Finance, into one umbrella agency. But the accusations against Lee, who was a prosecutor before he took the FSC post in January, for his role in the alleged insider trading are ironical, to say the least.

During the past few days, both the FSC and prosecutors have been trading barbs, as prosecutors claim they have uncovered a note allegedly handwritten by Lee in the office of an individual stock player, Lin Ming-ta (林明達), in which Lee asked Lin to borrow money to buy back Power Quotient's shares for him. To fight back, the FSC began its own probe indicating dubious links between investors' short-selling of stocks and prosecutors' three raids on Power Quotient between Feb. 22 and March 15.

Since the Power Quotient case is complicated and a senior FSC official is being investigated for his alleged involvement in the scandal, both the FSC and prosecutors should stay calm in dealing with the case and refrain from engaging in a war of words. Since both sides agreed that the details of the investigation won't be made public, there are many conspiracy theories about the investigation being published in newspapers.

So far, we have no clue to what extent Lee is involved in the scandal, but one thing for sure is that the verbal fight between the FSC and prosecutors is really a distraction from other things the government should be doing.

Meanwhile, the partnership between the FSC and the Ministry of Justice is under pressure in the collaborative fight against financial crime. In May, the Ministry of Justice agreed to have a prosecutor stationed at the FSC to help gather and preserve evidence while investigating financial crimes, but the latest inter-agency bickering does not bode well for future collaboration.

And lastly, the general public, influenced by the media, has grown a tendency to demonize what they call "vulture investors" as a gang of bastards manipulating stock prices.

Though people like Lin are under investigation for insider trading, other vulture investors are simply people who purchase out-of-favor securities from troubled companies, and then hope to sell out fast and high for a profit. As the name suggests, vulture investors are metaphorically like circling vultures, patiently waiting to pick over the remains of rapidly weakening firms, but they do play an important role in helping to reorganize businesses, which deserves our recognition.
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