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Stricter rules in store against insider share trading

TAIPEI,T aiwan -- The finance committee of the Legislative Yuan yesterday completed the first reading of a set of revisions to the Securities Trading Act, imposing stricter regulations against insider share trading.

Under the revised rules, those company-associated people who learn of the firm’s major corporate news or plans will be prohibited from conducting trading of the company’s shares before news or plans are unveiled or within 18 hours after the news or plans are publicized, an extension from the existing 12 hours.

It will be up to the competent authorities to define “major corporate news or plans.” Basically, such news or plans will be referred to those that can affect a firm’s ability to honor principal and interest payment.

Meanwhile, it will also be up to competent authorities to define “company-associated people.” Normally, these people should include members of the board of directors, accounting staffers, sales staffers, general manager, and relevant staff in charge of relevant documents, as they can easily learn of any major positive or negative corporate news that can greatly affect the performances of the firm’s business and share price.

Violators of the revised regulation will be deemed illegally engaged in “insider share trading” no matter whether the trading practice is done by themselves or via surrogate accounts.

In addition, firms listed on the Taiwan Stock Exchange or the over-the-counter securities market will be required to publicize their annual financial statements in every March, one month ahead of the current schedule of every April.

Lawmaker Lai Shih-bao of the ruling Kuomintang said at the finance committee session that it’s imperative for the Securities Trading Act to incorporate clear-cut rules governing insider trading, so as to effectively bring those who are engaged in illegal insider share trading to justice.

Lai said there were a total of 169 indictment cases concerning insider share trading in the past eight years, but only 11 cases were up for the first trial, including six found guilty and five innocent, due mainly to the ambiguous definition of the insider trading.

In related news, Chen Shu, chairman of the Cabinet-level Financial Supervisory Commission, yesterday said at the finance committee meeting that the FSC has joined forces with prosecutors and investigators to zero in on 10 insider trading cases, trying to bring them to justice for illegal practices, including manipulating share prices, maliciously spread rumors to undermine business operations of listed firms. But Chen declined to elaborate.

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