Harsher penalties announced for firms withholding info

The penalties against asymmetric information came after TDRs issued by Hong Kong-listed Kith Holdings Ltd. last month continued being traded in Taiwan for two days despite the fact that the Hong Kong Exchange suspended trading of Kith's shares because one of its major customers filed for bankruptcy protection in the U.S. Kith was fined NT$50,000 by the TWSE for delayed trading information disclosure.

The TWSE also corrected medical supply company Medtecs International Co. Ltd. in August 2009 for releasing information concerning a major order five days in Taiwan after the same information was publicized in Singapore, where the company is listed.

While stressing that Taiwan will not change its position in TDR trade due to individual cases, TWSE chairman Schive Chi (薛琦) said that after the Kith incident TWSE has worked with foreign markets that have signed financial memorandums of understanding (MOU) with Taiwan to enhance simultaneous information disclosure and trade suspension mechanisms.

The TWSE pointed out that even though the current regulations already carry a maximum of NT$1 million fine for information asymmetry by TDR issuing companies, the maximum penalty was rarely handed out by the TWSE. The regulator will in the future use such punishment to companies that withhold important information.

The TWSE will also punish serious information asymmetry by banning the guilty company from issuing additional TDRs for one to two years. In the most serious cases, the TWSE will issue cease trade orders to violating companies.

In response to the Financial Supervisory Commission's reservation to simultaneous TDR trade halts in Taiwan and the issuing company's listing market, Schive said that the issue should be discussed and analyzed. It is debatable, for example, as to whether it is good to continue trading a TDR in Taiwan if the issuing company is suspended in a foreign market on issues” pending clarification,”Schive said.

However, Schive also added that there are technical difficulties in executing trade halts such as including the different opening time of different markets.

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