Academia Sinica President Wong Chi-huey’s (翁啟惠), daughter, Wong Yu-shioh (翁郁秀), has been accused of insider trading over her alleged purchase of 3 million OBI Pharma Inc shares, worth more than NT$100 million (US$3.08 million). However, the law makes it incredibly difficult for anyone to be found guilty of insider trading.
Under Article 171, paragraph 1.1 of the Securities and Exchange Act, (證券交易法) a person convicted of insider trading can be jailed for between three and 10 years, and fined between NT$10 million and NT$200 million.
According to Article 157-1, paragraph 1 of the act, insider trading is defined as the purchase or sale of stock, in the person’s own name or in the name of another, by a person in a managerial position of the company or a close associate of this person, while actually knowing accurate information that is certain to have a significant impact on the price of such stock, prior to the public disclosure of such information or within 18 hours of its public disclosure. A person can be found guilty of insider trading only when all these elements are proven.
That the law — which is supposed to define insider trading — does not fully explain several key terms, such as what it means by “actually knowing,” or what constitutes “accurate” information that is “certain to have a significant impact” on a stock price — has created room for debate as well as sophistry. In addition, defendants have often managed to justify their trades and avoid convictions by arguing that material information has already been disclosed to the public in the media, or that the stock price had not been “significantly” impacted.
With what constitutes the offense extremely unclear, the judiciary has been relying on an increasingly strict criteria to convict defendants of insider trading, especially in terms of what constitutes material information, in the hope of preventing undue punishment being meted out to defendants.
In the case involving OBI Pharma Inc, although the company’s stock price was affected by the news that its cancer drug had failed second and third-round clinical trials, it is a well-established fact that the outcome of pharmaceutical products under development is extremely unpredictable.
Therefore, when the legal definition of material information is understood in a strict sense, the knowledge of such clinical results might not qualify as information “certain to have a significant impact” on the stock price. Even if such information qualifies as valid material information, prosecutors would still need to prove that Wong’s daughter — not Wong himself — had known the information before it became public, and that she used her account as a nominee account for her father.
In addition to that, the time of the trade must have been within 18 hours after the information became publicly known, otherwise it would still be difficult to legally define it as insider trading. Such is the situation facing prosecutors, who have found themselves mired in problems that prevent them from indicting suspects.
Anyone with enough understanding of these loopholes and an awareness of the judicial affinity for avoiding handing out undue punishment can engage in stock manipulation and insider trading, and easily escape imprisonment.
On the other hand, ordinary investors might end up in jail because of an insufficient understanding of the law.
Whether the law is actually punishing insider traders or ambitious investors who simply do not know how to take advantage of the loopholes is unclear.
Wu Ching-chin is an associate professor and chair of Aletheia University’s law department.
Translated by Yu-an Tu
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
Former president Ma Ying-jeou’s (馬英九) trip to China provides a pertinent reminder of why Taiwanese protested so vociferously against attempts to force through the cross-strait service trade agreement in 2014 and why, since Ma’s presidential election win in 2012, they have not voted in another Chinese Nationalist Party (KMT) candidate. While the nation narrowly avoided tragedy — the treaty would have put Taiwan on the path toward the demobilization of its democracy, which Courtney Donovan Smith wrote about in the Taipei Times in “With the Sunflower movement Taiwan dodged a bullet” — Ma’s political swansong in China, which included fawning dithyrambs