The Financial Supervisory Commission (FSC) is to take a tougher stand on the publication of client notes written by securities houses about the stock prices of listed companies in a bid to curb price speculation, the regulator said yesterday.
The idea to impose the restrictions is a response to the practice by some brokerages of frequently leaking such notes to the media with the apparent aim of manipulating stock prices, in violation of securities transactions regulations, the commission said.
“We plan to require securities houses — domestic and foreign — to issue stock filings to clarify media reports on the earnings forecasts for listed companies,” said Wu Yui-chun (吳裕群), director-general of the commission’s Securities and Futures Bureau.
“The commission will take legal action against violators if necessary, as irresponsible circulations of earnings forecasts or comments may cause irreparable damage to the investors and companies involved,” Wu said.
After local media reported the news that the commission would tighten regulations on brokerages’ equity reports, the TAIEX dropped 1.34 percent, or 131.17 points, to close at 9315.85, Taiwan Stock Exchange data showed.
Foreign institutional players cut their local share holdings by a net NT$1.04 billion (US$34.6 million) yesterday, compared with a net increase of NT$8.3 billion a day earlier, stock exchange statistics indicated.
FSC Chairman William Tseng (曾銘宗) said in a press conference that he respected all brokerages’ investment strategies, shrugging off rumors that the sell-off on the bourse had anything to do with the announcement of the planned regulatory tightening.
“All we want is to make securities houses take full responsibility for their reports, which are intended for their clients, but repeatedly end up in the hands of the media,” Tseng said, refusing to name any of the offenders.
Under the planned restrictions, which would likely take effect by the middle of the month, brokerages should assert their intellectual property rights over the reports and issue clarifications if media outlets run stories based on their reports that are out of context, Tseng said.
Stock analysts make earnings forecasts on the condition that the company in question meets certain criteria, but media outlets on reporting these predictions frequently leave out those conditions and relevant time sensitivity, which can mislead investors, Tseng said.
The commission said it expects the move to correct the longstanding impression that it is soft on foreign securities houses and hopes the tightening does not encroach on the freedom of the press.
However, Wu said that share price, profit and revenue figures fall outside the protection of free speech, while stock ratings and comments on the industry’s outlook are harmless.
There is little the commission can do to offshore brokerages if they disseminate client notes on the share prices of Taiwanese companies through foreign media outlets, Wu said, as Taiwan has no authority over them.
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