The Control Yuan has admonished the management of the government's National Stabilization Fund (
The censure also criticized the lack of professional experience among the fund's decision makers, who lost NT$939 million trading futures contracts last year in a failed attempt to support the nation's stock market.
In addition, the Control Yuan lambasted the fund for failing to keep its operations secret, noting that its actions were transparent to market investors -- despite elaborate procedures to keep secret what shares the fund was buying.
Tuesday's censure, which was passed by the Control Yuan's economic and finance committee, was the first time the National Stabilization Fund has been criticized by the government's watchdog. Although the censure doesn't penalize government officials, it does suggest that the fund's management should consider mending its ways.
Specifically, the Control Yuan took the stabilization fund's management to task for its lack of real-world, professional market experience. In all, the fund's management committee has 13 members -- seven from the government, six from academia and all lack experience managing a huge sum of money such as the NT$500 billion National Stabilization Fund.
By comparison, the Control Yuan noted, the typical NT$100 billion equity fund in the private sector boasts as many as 100 research professionals.
The fund was also criticized for failing to keep its actions in the market well concealed.
When Ministry of Finance officials buy shares in the market, they are required to enter the finance minister's office 30 minutes prior to the stock market's open and are forbidden to leave or communicate with any outside person until the session closes.
But despite the precautionary measure, the National Stabilization Fund winds up tipping its hand to investors anyway by placing large buy orders in the market, normally 500,000 shares in size.
When investors see a buy order for 500,000 shares popping up on their trading screens, everyone knows who the purchaser is.
Still, the Control Yuan stopped short of accusing officials or the fund's 12 stock brokers of leaking to investors what shares were favored by the fund, saying the matter needed to be investigated further.
The Control Yuan also questioned the role of the Ministry of Finance in overseeing the fund. Control Yuan members said the finance ministry's role as a market regulator was compromised by it also being a market participant.
In addition, whether the stabilization fund should be abolished and how it plans to dispose of its NT$170 billion in shareholdings also needs to be addressed, the Control Yuan said.
"The Executive Yuan should review deficiencies regarding the stabilization fund's operations," the censure said. "If there are any regulations that need to be revised, the Executive Yuan should amend the regulations as needed."
Su Tzen-ping (蘇正平), director-general of the Government Information Office, said the Executive Yuan would work with the finance ministry to improve the stabilization fund's operations.
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