On Oct. 14, the Supreme Court rejected a final appeal by former president Chen Shui-bian’s (陳水扁) son-in-law, Chao Chien-ming (趙建銘), and Chao’s father after 16 years of litigation over an insider trading case involving real-estate developer Taiwan Land Development Corp (TLDC) in 2005. The long-lasting trial has exposed a major flaw in the criminal justice system.
According to Article 171 of the Securities and Exchange Act (證券交易法), a person found guilty of insider trading “shall be punished with imprisonment for not less than three years and not more than 10 years, and in addition thereto, a fine of not less than NT$10 million [NT$359,170] and not more than NT$200 million.”
“Where the value of property or property interests gained by the commission of an offense under the preceding paragraph is NT$100 million or more, a sentence of imprisonment for not less than seven years shall be imposed, and in addition thereto a fine of not less than NT$25 million and not more than NT$500 million may be imposed,” the article further states.
The penalty is based on the reasoning that this kind of financial crime could hurt not just personal property, but the economy, and only the imposition of heavy penalties and depriving the offender of the illegal gains would be a deterrent.
However, the components of the offense have always been obscure. To avoid punishing innocent investors, the Legislative Yuan amended the act twice to restrict the elements of the offense during the 16-year trial of the TLDC case.
Article 2, Paragraph 1 of the Criminal Code states: “When the law is amended after the commission of an offense, the law in force of its commission shall apply; provided that when the amended law is favorable to the offender, the most favorable law shall apply.” The new law, which is favorable to the defendants in the TDLC case, is applicable in this case.
As for the components of an insider trading offense, Article 157-1, Paragraph 1 of the act states: “Upon actually knowing of any information that will have a material impact on the price of the securities of the issuing company, after the information is precise, and prior to the public disclosure of such information or within 18 hours after its public disclosure, the persons shall not purchase or sell, in the person’s own name or in the name of another, shares of the company.”
In terms of information that will have an impact on the company, the question is how clear the information must be and what time the information should be made public. Such questions are open concepts, and as it is difficult to find evidence, the defendants have more room for argumentation. The result is that it is difficult to prevent drawn-out litigation.
Even more attention should be given to the fact that insider trading is considered a major offense, as the minimum sentence in cases in which illegal gains exceed NT$100 million is seven years in prison. In the TLDC scandal, several people were jointly engaged in stock speculation, leading to the question of whether the illegal gains were individual profits or shared ones, in which case the amount would exceed NT$100 million, which would call for a heavier sentence.
Other questions are whether the NT$100 million legal requirement should include the defendants’ costs or not, and if that is the case, how should they be calculated. This was not only a focus of controversy during the drawn-out trial, but also the reason why the Supreme Court on five occasions ordered the lower court to hold a retrial.
In 2011, lawmakers passed the Criminal Speedy Trial Act (刑事妥速審判法), in which Article 7 states that in a case where no final judgement has been made more than eight years from the date it was subject to the jurisdiction of the first instance, the court shall reduce the sentence so as to protect the right to a speedy trial of the accused. In that case, the law has to a great extent lost the function of deterring insider trading.
In short, the question is how to make the components of an insider trading offense much clearer and better defined, and how to prevent a trial from dragging on for too long, like the TLDC case. With the Supreme Court finally issuing a final ruling, perhaps these are the issues that the criminal justice system should tackle.
Wu Ching-chin is a professor at Aletheia University’s Department of Law.
Translated by Eddy Chang
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