萬國法律事務所

On May 30, the Financial Supervisory Commission promulgated Regulations Governing the Scope of Material Information as Included in Article 157-1, Paragraph 4 of the Securities and Exchange Act and Means of Its Disclosure.  The new law provides judicial agencies with more precise criteria that is hope will strengthen the prevention of insider trading.  It stipulates that “material information” includes information about the company’s financial or business affairs or information that will create changes in the supply of shares.

“Material Information” is further defined as follows

1. Information concerning a company’s financial or business affairs:

(a) Matters that have a significant impact on shareholder rights or the price of shares, as stipulated in Article 7 of the Securities and Exchange Act Enforcement Rules.

(b) Major public issuance or private placement of securities that have the nature of equity, reduction of capital, merger, or major changes in items listed above.

(c) Corporate reorganization, bankruptcy, dissolution, application for de-listing of stock, or halting of dealing at the place of business of securities brokerages, or major changes in the items listed above.

(d) The board of directors is unable to carry out its duties normally due to directors being subjected to provisional measures or the dismissal of all independent directors.

(e) Major damage caused to the company by disaster, strike, or other major event, or stoppage of work or business, or cancellation of permits, by government order.

(f) Dishonoring of checks by the company’s concerned party or major debtor, or declaration of bankruptcy; or the inability of a major debtor to pay off a mature debt for which the company has co-signed or served as guarantor.

(g) Occurrence of internal controls fraud or similar event; or cessation of business, in whole or in part, with a major customer or supplier.

(h) The company’s financial reports have not been submitted in accordance with regulations, or contain errors or omissions that require restatement; or for which auditors present auditing or verification reports other than reports without reservation or amended without reservation.

(i) Major differences exist between financial forecasts and actual performance, or between revised financial forecasts and original forecasts.

(j) The repurchase by the company of its own shares, institution or cessation of public purchasing, or acquisition or disposal of important assets.

(k) Issuance by the company of overseas securities and occurrence of significant events that, under the laws and securities transaction regulations of the country where the securities are listed, must be immediately announced or reported.

2. Material information involving the supply of securities in the market:

(a) Institution or cessation of public purchasing of securities issued by the company.

(b) Major changes in the equity of a subsidiary company under the company’s control.

(c) Occurrence of public bidding, auctioning, or significant breach of settlement contract of securities issued by the company.

According to the new Regulations, the date of the agreement or the date that the facts actually occurred will be the date of such information.  If there is any discrepancy, however, the earlier date will rule.

Under the current law, insider trading is punishable by imprisonment for 3 to 10 years in addition to a fine of NT$ 10 million to NT$ 200 million.