萬國法律事務所

In order to prevent insiders from maneuvering trust arrangements, Taiwan’s Financial Supervisory Commission (FSC) issued an official notice on 4 January 2010 prohibiting insiders of a public company, such as directors, supervisor, and executives, from loaning the shares issued by the company even if those shares have been put into trust. 

According to trust agencies, the rate of return on the loan of shares is approximately 4% on average. The actual rate of return depends on the demand of the shares in the market; some may be as high as 7~8% while others may only be around 2~3%.

However, the calculation for the rate of return on the loaning of shares may be different if those shares are held in trust. The beneficial owners of the shares on the one hand will be charged transaction processing fees by the trust agencies but on the other hand they may enjoy a higher rate of return due to the trust agencies’ professionalism in managing the trust property.

FSC officials indicate that it has long been the Commission’s policy to prohibit insiders of a public company, from loaning the company’s shares. However, trust agencies have recently planned to launch a series of trust-related products to enable insiders to achieve the goal of loaning the company’s shares that they own by transferring the legal title of the shares to the trust agencies.

The FSC, responding to this scheme, has issued an official notice specifically banning insiders of a public company from loaning their shares even if those shares have been put into trust. The notice applies to directors, supervisors, executives and shareholders who hold 10% or more of the issued shares of public company.