One of the most contentious issues on the offense of insider trading under Article 157-1 of Taiwan’s Securities and Exchange Act is to determine when the information shall be considered to be "of a precise nature." The competent authority has stipulated Article 5 of the Regulations Governing the Scope of Material Information and the Means of its Public Disclosure Under Article 157-1, Paragraphs 5 and 6 of the Securities and Exchange Act, stating that “the date of existence of the information described in the preceding three articles shall be the date of the fact, agreement, contract signature, payment, request, execution of transaction, transfer of title, resolution of the audit committee or board of directors, or other precise date based on concrete evidence, whichever comes first.” Despite of the attempt to clarify when should the information become precise, the competent authority has actually made such element even more ambiguous with this article.

For instance, in the case of Advanced Semiconductor Engineering, Inc. (“ASE”), the prosecutor argued that since on August 7, 2015, the chairman and the CFO of ASE have signed the proposal for the tender offer for Siliconware Precision Industries Co., Ltd ( “SPIL”) at the price of NTD 45 per share, the information has become of a precise nature at that point. Subsequently, ASE’s insiders should have committed the offense of insider trading because they traded SPIL’s shares during the period of August 7, 2014 (when ASE’s insiders knew the information of the tender offer) to 10:35am August 22, 2015 (to clarify, ASE publicly disclosed the tender offer on the Market Observation Post System at 4:35pm on August 21, 2015).

However, the court of first-instance has ruled otherwise, stating that “this tender offer must comply with relevant laws and regulations of Taiwan and the U.S. In this tender offer, ASE was facing problems such as regulation inconsistency between Taiwan and the U.S. and finding an U.S. agency. If these problems were not resolved, this tender offer might not be able to go forward due to violations of Taiwan or U.S. laws. Hence, the information of this tender offer should only be considered to be of a precise nature until early morning of August 21, 2015, when ASE confirmed that the above two problems have been resolved.” (see Kaohsiung District Court Criminal Judgement No. 106-Jin-Su-Zi-9)

In contrast, in the civil proceeding of the same case, the court agreed with the prosecutor’s argument and ruled that on August 7, 2015, when the chairman and the CFO of ASE have signed the proposal for the tender offer for SPIL, the information has already become of a precise nature. (see Intellectual Property and Commercial Court No. 110-Shang-Su-Zi-1 Civil Judgment). There is an apparent split between the civil court and the criminal court.

Determining when insider information shall be considered to be "of a precise nature" is like a spectrum, with one end being white and the other being deep red. With different case facts, courts may rule differently. From the perspective of regulatory purpose, if: (i) the formation of the information is a gradual process; (ii) the information is highly probable to come into existence; and (iii) the information could have influenced the public's willingness to purchase shares, then the information is likely to be deemed to be of a precise nature.

The rulings in Supreme Court Criminal Judgment No. 106-Tai-Shang-Zi-1503 could also serve as reference, which states “before the information related to insider trading reaches the stage where it should be disclosed according to the law or suitable for disclosure by itself, it often requires a series of procedures or time to come into existence. Such development may vary with different case facts. Therefore, when determining the formation of information in a case where there are multiple timing at issue, the criteria set forth in the Regulations Governing the Scope of Material Information and the Means of its Public Disclosure Under Article 157-1, Paragraphs 4 of the Securities and Exchange Act (now the Regulations Governing the Scope of Material Information and the Means of its Public Disclosure Under Article 157-1, Paragraphs 5 and 6 of the Securities and Exchange Act) should be taken into consideration. That is, the court should comprehensively consider the development and results of relevant events, make an objective overall observation, and decide when is the specific timing that the information would definitely come into existence. At that point, the information should be considered to be of a precise nature.”

(The article is originally in Chinese which can be found here.)