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Article 18
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(Approval for Operation)
Approval from the Competent Authority is required for the operation of any securities finance enterprise, securities central depository enterprise, or any other securities-related service enterprise.
Regulations governing the conditions for establishment, application and approval procedures, finances, operations, management, and other matters for compliance with respect to the securities enterprises referred to in the preceding paragraph shall be prescribed by the Competent Authority.
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Article 20
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(Duty of Good Faith and Liability for Damages (1))
During the public offering, issuing, private placement, or trading of securities, there shall be no misrepresentations, frauds, or any other acts which are sufficient to mislead other persons.
The financial reports or any other relevant financial or business documents filed or publicly disclosed by an issuer in accordance with this Act shall contain no misrepresentations or nondisclosures.
Anyone who violates the provisions of paragraph 1 shall be held liable for damages sustained by bona fide purchasers or sellers of the said securities.
The principal who commissions a securities broker to purchase or sell securities as a commission agent shall be deemed as a "purchaser" or "seller" for the purpose of the preceding paragraph.
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Article 32
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(Liability for False Information or Omission in the Prospectus)
In the event the prospectus referred to in the preceding Article contains false information or omissions in its material contents, the following persons, within the scope of their responsibilities, shall be held jointly liable with the issuer to any bona fide counterpart for damages resulted therefrom:
- the issuer and its responsible persons.
- any employees of the issuer who has signed and affixed his/her seal on the prospectus to certify its accuracy in whole or in part.
- any underwriter with respect to such securities.
- any certified public accountant, lawyer, engineer, or any professional or technical person who has signed and affixed his/her seal to certify in whole or in part, or to present his/her opinion, on the correctness of the prospectus.
With the exception of the issuer, the persons referred to in subparagraphs 1 through 3 of the preceding paragraph shall not be held liable if he/she can prove that he/she has exercised reasonable care, and that he/she has just cause to believe that with respect to portions of materials not certified by a person referred to in subparagraph 4, the material contents have no false information nor omissions, or that he/she has just causes to believe that the portion he/she certified was accurate; the persons referred to in subparagraph 4 of the preceding paragraph also shall not be held liable if he/she can prove that reasonable investigation has been exercised and that he/she has just causes to believe that the certification or the opinions rendered thereto were accurate.
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Article 44
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(Approval for Business and Approval for Establishment of a Branch Unit)
The approval and certificate of license from the Competent Authority are required for the operation of securities business by a securities firm; the operation of securities business by persons other than securities firms shall be prohibited.
Approval from the Competent Authority shall be required for the establishment of branch units by a securities firm.
The establishment of branch units by a foreign securities firm within the territory of the Republic of China shall be prohibited without the approval and a certificate of license from the Competent Authority.
Standards for establishment of securities firms governing matters including the conditions for establishment of securities firms and their branch units, the types of business in which they may engage, application procedures and documents to be attached, and regulations governing their finances, operations and other matters for compliance shall be prescribed by the Competent Authority.
The Competent Authority shall consult with the Central Bank of China when it adopts or amends provisions of the regulations referred to in the preceding paragraph regarding foreign exchange business.
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Article 96
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(Restrictions on Eligibility to Operate)
Unless acting pursuant to this Act, no person shall engage in the operation of business similar to that of providing a centralized securities exchange market; this provision shall also apply to anyone which provides business premises or facilities for such proposes.
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Article 155
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(Conduct Prohibited With Respect to Listed Securities)
The following actions with regard to securities publicly listed on a stock exchange shall be prohibited:
- To order or report a trade on a centralized securities exchange market and to fail to perform settlement after the transaction is made, where such act is sufficient to affect the market order.
- (Deleted)
- To conspire with other parties in a scheme such that the first party buys or sells designated securities at an agreed price, while the second party sells or buys from the first party in same transaction, with the intent to inflate or deflate the trading prices of said securities on the centralized securities exchange market.
- To continuously buy at high prices or sell at low prices designated securities for his own account or under the names of other parties with the intent to inflate or deflate the trading prices on said securities traded on the centralized securities exchange market, when there is a likelihood that market prices or market order will be affected.
- To continuously order or report a series of trades under one's own account or under the names of other parties, and to complete the corresponding transactions with the intent of creating an impression on the centralized securities exchange market of brisk trading in a particular security.
- To spread rumors or false information with the intent to influence the trading prices of designated securities traded on the centralized securities exchange market.
- To perform directly or indirectly any other manipulative acts to influence the trading prices of securities traded on the centralized securities exchange market.
The provisions of the preceding paragraph shall apply mutatis mutandis to transactions conducted on the over-the-counter markets.
Persons who violate the preceding two paragraphs shall be held liable to compensate the damages suffered by the bona fide purchasers or sellers of the said securities.
The provisions of paragraph 4 of Article 20 of this Act shall apply mutatis mutandis to the preceding paragraph.
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Article 157
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(Right of Disgorgement)
In the event that any director, supervisor, managerial officer, or shareholder holding more than ten percent of the shares, of a stock issuing company sells listed stock of the company within six months after acquiring it, or repurchases listed stock of the company within six months after selling it, the company shall claim for the disgorgement of any profit realized thereby.
If the board of directors or the supervisors of the company fail to exercise the right of claim for disgorgement under the preceding paragraph on behalf of the company, its shareholders may request the directors or the supervisors to exercise the right of claim within thirty days; upon the expiration of such period, if no action has been taken, such requesting shareholders shall have the right to claim for disgorgement on behalf of the company.
The directors and supervisors shall be jointly and severally liable for damages suffered by the company as a result of their failure to exercise the claim provided under paragraph 1 of this Article.
The right of claim specified in paragraph 1 of this Article shall be extinguished if not exercised within two years after the date on which the profit is realized.
The provisions of paragraph 3 of Article 22-2 hereof shall apply mutatis mutandis to paragraph 1 of this Article.
This Article shall apply mutatis mutandis to other securities with the nature of equity shares issued by a company.
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Article 157-1
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(Regulation of Insider Trading)
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 following persons shall not purchase or sell, in the person's own name or in the name of another, shares of the company that are listed on an exchange or an over-the-counter market, or any other equity-type security of the company:
- a director, supervisor, and/or managerial officer of the company, and/or a natural person designated to exercise powers as representative pursuant to Article 27, paragraph 1 of the Company Act.
- shareholders holding more than ten percent of the shares of the company.
- any person who has learned the information by reason of occupational or controlling relationship.
- a person who, though no longer among those listed in [one of ] the preceding three subparagraphs, has only lost such status within the last six months.
- any person who has learned the information from any of the persons named in the preceding four subparagraphs.
Upon actually knowing of any information that will have a material impact on the ability of the issuing company to pay principal or interest, after the information is precise, and prior to the public disclosure of such information or within 18 hours after its public disclosure, the persons listed in the preceding paragraph shall not sell, in the person's own name or in the name of another, the non-equity-type corporate bonds of such company that are listed on an exchange or an over-the-counter market:
Persons in violation of the provisions of paragraph 1 or the preceding paragraph shall be held liable, to trading counterparts who on the day of the violation undertook the opposite-side trade with bona fide intent, for damages in the amount of the difference between the buy or sell price and the average closing price for ten business days after the date of public disclosure; the court may also, upon the request of the counterpart trading in good faith, treble the damages payable by the said violators should the violation be of a severe nature. The court may reduce the damages where the violation is minor.
The persons referred to in subparagraph 5 of paragraph 1 shall be held jointly and severally liable with the persons referred to in subparagraphs 1 through 4 of paragraph 1 who provided the information for the damages referred to in the preceding paragraph. However, where the persons referred to in subparagraphs 1 through 4 of paragraph 1 who provided the information had reasonable cause to believe the information had already been publicly disclosed, they shall not be liable for damages.
The phrase "information that will have a material impact on the price of the securities" in paragraph 1 shall mean information relating to the finances or businesses of the company, or the supply and demand of such securities on the market, or tender offer of such securities, the specific content of which will have a material impact on the price of the securities, or will have a material impact on the investment decision of a reasonably prudent investor. Regulations governing the scope of the information, the means of its disclosure and related matters shall be prescribed by the Competent Authority.
Regulations governing the scope of information that will have a material impact on the ability of the issuing company to pay principal or interest as described in paragraph 2, the means of its disclosure, and related matters shall be prescribed by the Competent Authority.
The provisions of paragraph 3 of Article 22-2 shall apply mutatis mutandis to subparagraphs 1 and 2 of paragraph 1 of this Article; the same shall apply with respect to those who have lost the identity [set out in those provisions] for a period of less than a full six months. The provisions of paragraph 4 of Article 20 shall apply mutatis mutandis to the trading counterpart referred to in paragraph 2 of this Article.
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Article 171
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(Penal Provisions)
A person who has committed any of the following offenses shall be punished with imprisonment for not less than three years and not more than ten years, and in addition thereto, a fine of not less than NT$10 million and not more than NT$200 million may be imposed:
- A person who has violated the provisions of paragraph 1 or paragraph 2 of Article 20, paragraph 1 or paragraph 2 of Article 155, or paragraph 1 or 2 of Article 157-1.
- A director, supervisor, managerial officer or employee of an issuer under this Act who, directly or indirectly, causes the company to conduct transactions to its disadvantage and not in the normal course of operation, thus causing substantial damage to the company.
- A director, supervisor, or managerial officer of an issuer under this Act who, with intent to procure a benefit for himself/herself or for a third person, acts contrary to his/her duties or misappropriates company assets, thus causing damage of NT$5 million or more to the company.
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.
A person who commits an offense under paragraph 1, subparagraph 3, causing damage of less than NT$5 million to the company, shall be punished under Articles 336 and 342 of the Criminal Code.
A person who commits an offense under the preceding 3 paragraphs and subsequently voluntarily surrenders himself/herself, if he/she voluntarily hands over the proceeds of the crime in full, shall have his/her punishment reduced or remitted. Where another principal offender or an accomplice is captured as a result, the punishment shall be remitted.
A person who commits an offense under paragraphs 1 to 3 and confesses during the prosecutorial investigation, if he/she voluntarily hands over the proceeds of the crime in full, shall have his/her punishment reduced. Where another principal offender or an accomplice is captured as a result, the punishment shall be reduced by one-half.
Where the value of property or property interests gained by a person through commission of an offense under paragraph 1 or 2 exceeds the maximum amount of the criminal fine, the fine may be increased within the scope of the value of the property or property interests gained; if the stability of the securities market is harmed, the punishment shall be increased by one-half.
If the proceeds of a crime committed under paragraphs 1 to 3 belong to the offender, or were obtained by a natural person, juristic person, or unincorporated body other than the offender under a circumstance set out in Article 38-1, paragraph 2 of the Criminal Code, the proceeds shall be confiscated, unless they shall be returned to a victim, third person, or person who is entitled to claim for damages.
A person who violates Article 20, paragraph 1 or 2, Article 155, paragraph 1 or 2, or Article 157-1, paragraph 1 or 2, as applied mutatis mutandis under Article 165-1 or 165-2, shall be punished under the provisions of paragraph 1, subparagraph 1, and of paragraph 2 to the preceding paragraph.
The provisions of paragraph 1, subparagraphs 2 and 3, and paragraphs 2 to 7 shall apply to the directors, supervisors, managerial officers, or employees of a foreign company.
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Article 174
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(Penal Provisions)
A person who commits any of the following offenses shall be punished with imprisonment for not less than one year and not more than seven years and in addition thereto a fine of not more than NT$20 million may be imposed:
- the making of false statements on the application materials required under Article 30, Article 44, paragraphs 1 to 3, or Article 93, or Article 30 as applied mutatis mutandis under Article 165-1 or 165-2, of this Act.
- the making and dissemination to the public of false information with regard to the market value of securities, or with regard to the material aspects of the approved public offering.
- the violation of paragraph 1 of Article 32 by an issuer, its responsible persons or employees, and the provision of paragraph 2 of the same Article does not apply.
- the making of false statements on the account books, forms/statements, documents, or other reference or report materials produced by any issuer or public tender offeror or related party thereof, securities firm or its principals, securities dealers association, stock exchange, or any other enterprises referred to in Article 18 pursuant to an order of the Competent Authority to produce such materials.
- the making of false statements on the account books, forms/statements, vouchers, financial reports or any other business documents by any issuer, public tender offeror, securities firm, securities dealers association, stock exchange, or any other enterprises referred to in Article 18, as required to be produced in compliance with acts or regulations, or orders prescribed by the Competent Authority pursuant thereto.
- the making of false statements in the content of a financial report under the preceding subparagraph by a managerial officer or accounting officer who signs or seals the financial report; provided, the punishment may be reduced or remitted if the person has submitted a corrective opinion and provided evidence in a report to the Competent Authority before the Competent Authority or a judicial agency has commenced an investigation [ex officio or] upon a complaint filed by another person.
- the making of any investment advice relating to an issuer or specific securities transactions which was based on false information and disseminating the said advice on any newspapers and magazines, written materials, broadcasts, films or by other means.
- the loaning of company funds to another person, using company assets to provide security or a guarantee for another person, or endorsing of a negotiable instrument by a director, managerial officer, or employee of an issuer in violation of an act or regulation, or the articles of incorporation, or beyond the scope authorized by the board of directors, causing substantial damage to the company.
- counterfeiting, altering, destroying, concealing, or obscuring working papers or relevant records or documents with intent to impede inspection by the Competent Authority or investigation by a judicial agency.
A person who commits any of the following offenses shall be punished with imprisonment for not more than five years, or a fine of not more than NT$15 million may be imposed [in lieu thereof] or in addition thereto:
- issuance of a false or untrue opinion by a lawyer regarding any contract, report, or document of the company or foreign company related to securities offering, issuance, or trading.
- failure by a certified public account to faithfully fulfill his or her audit duties and issue a report or opinion with respect to any material falsehood or error in a financial report, document, or information reported or published by a company or foreign company; or failure by a certified public accountant to expressly state a material falsehood or error in a company or foreign company financial report due to failure to audit in accordance with applicable laws and regulations and generally accepted audit principles.
- violation of Article 22, paragraphs 1 to 3.
Where the commission of an offense under the preceding paragraph materially affects the rights or interests of shareholders or harms the stability of the securities market, the punishment may be increased by one-half.
Where a personnel member or employee of an issuer commits an offense in subparagraph 6 of paragraph 1, and the offense is minor, the punishment may be reduced.
The Competent Authority shall render a disposition suspending attestation work by a certified public accountant who violates subparagraph 2 of paragraph 2.
If a foreign company is the issuer, any violation of paragraph 1, subparagraphs 1 to 9 by the foreign company or a director, managerial officer, employee, or accounting officer of the foreign company shall be punished under paragraphs 1 and 4.
A person who violates Article 22 as applied mutatis mutandis under Article 165-1 or 165-2 shall be punished under paragraphs 2 and 3.
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