Some of the nation’s leading entrepreneurs yesterday called on the government to revise insider trading regulations to facilitate the growing number of mergers and acquisitions in Taiwan.
Their call came after venture capital mogul Ko Wen-chang (柯文昌) was sentenced to nine years in prison for violating insider trading laws.
The ruling is final, after the Supreme Court on Friday last week upheld a Taiwan High Court ruling against Ko, chairman of private equity fund WK Technology Fund (普訊創業投資).
Photo: CNA
Ko in 2006 ordered his employees to buy shares in Taiwan Green Point Enterprise Co Ltd (綠點科技), after Green Point signed a non-binding letter of intent with US company Jabil Circuit Inc.
The Taiwan High Court said in its ruling that Ko and two other defendants knew Jabil Circuit would purchase Green Point and exploited the information to purchase Green Point’s stake over the course of several trading sessions, which violated Taiwan’s insider trading regulations.
Ko made NT$400 million (US$12 million at current exchange rates) in profit from trading Green Point shares, according to the ruling.
Acer Inc (宏碁) founder Stan Shih (施振榮), Delta Electronics Inc (台達電) founder Bruce Cheng (鄭崇華), Cathay Financial Holding Corp (國泰金控) chairman Tsai Hong-tu (蔡宏圖) and Pegatron Corp (和碩) chairman Tung Tsu-hsien (童子賢) urged judicial authorities to clarify the definition of insider trading.
“It is a mistake for the court considered purchasing a company’s shares after the firm inked a non-binding letter of intent as insider trading, as having a letter of intent does not guarantee an investment would actually take place,” Shih told a news conference.
“A non-binding letter of intent does not necessarily result in an investment. It is different from conducting due diligence prior to signing a business contract,” Shih said.
Due diligence is an investigation of a business prior to the signing of a contract — an important process undertaken before officially merging or acquiring a company, he added.
Shih said that, as mergers and acquisitions have become increasingly common, the court’s ruling in Ko’s case would hinder dealmaking.
Citing Powerchip Semiconductor Corp (力晶半導體) chairman Frank Huang’s (黃崇仁) case, Tsai said the Supreme Court in January upheld the High Court’s not guilty ruling because it deemed insider trading to be the selling or purchasing of shares on the stock market after due diligence is completed.
Tsai said the court should be consistent in defining insider trading, otherwise businesses would not know how to remain compliant when undertaking mergers or acquisitions.
Financial Supervisory Commission Chairman William Tseng (曾銘宗) said that the laws governing insider trading have long been established, adding that it has never been a cause of widespread concern among businesses.
In Ko’s case, the two companies had signed a non-binding letter of intent, but did not complete due diligence nor did they assess the price of the acquisition, Tseng said.
Business leaders should be well aware of the law, he added.
Additional reporting by Ted Chen
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