Definition and Scope of the Insiders
The scope of the company Insiders defined under the SEA includes the public company's directors, supervisors, managers, and shareholders holding more than 10% of the total issued shares. The related persons of the Insiders include: (i) the Insider's spouse, minor children, and third parties whose names were used to hold the shares for the Insiders ("Nominees"); (ii) the representatives of the juristic person directors (supervisors), their spouses, minor children, and Nominees; and (iii) the directors, supervisors and managers of the subsidiary being 100% held by a financial holding company, and their spouses, minor children, and Nominees. All the persons mentioned above are also Insiders of the company. As to the subjects regulated by the insider trading, except for the persons mentioned above, it also include any person who has learned the information by reason of occupational or controlling relationship and the tippees who receive information from the Insiders.
Note：To clearly define the scope of the manager, the former Securities and Futures Commission ("SFC") issued a ruling on March 27, 2003 (Ref. No.: Tai-Tsai-Zheng-(3)-Zi-0920001301) that the managers regulated by Articles 22-2, 25, 28-2, 157 and 157-1 of the SEA refer to：
- General Manager or the person with equivalent level
- Deputy General Manager or the person with equivalent level
- Vice President or the person with equivalent level
- Head of the Finance Department
- Head of the Accounting Department
- any other persons who are authorized to manage the affairs and sign for the company
Ex-ante Filing of Share Transferring
According to Article 22-2 of the SEA, the transfer of shares by the Insiders (including their spouses, minor children and Nominees) shall be effected in accordance with any of the following methods:
- To transfer to non-specific person following approval from or an effective registration with the competent authority
- To transfer, at least three days following filing with the competent authority, on a centralized exchange market or an over-the-counter market, shares that have satisfied the holding period requirement and within the daily transfer allowance ratio prescribed by the competent authority. However, this requirement shall not apply to transfers totaling less than 10,000 shares per trading day
- To transfer, within three days following filing with the competent authority, to specific persons meeting the qualifications prescribed by the competent authority
Ex-post Filing of Shareholdings Movement
- According to Paragraph 2 of Article 25 of the SEA, the Insiders (including their spouses, minor children and Nominees) of a public company shall file, by the fifth day of each month, a report with the company of the changes in the number of shares they held during the preceding month. The company shall compile and file such report of changes with the competent authority by the fifteenth day of each month. The competent authority may order the company to make a public announcement of such information should it deem the measure necessary.
- According to Paragraph 4 of Article 25 of the SEA, where the Insider of a public company pledge the shares, the pledgor shall make immediate notification to the company; the company shall inform the competent authority of such pledges within five days of their formation, and publicly announce such pledge.
Restriction on Short-term Trading
According to Paragraph 3 of Article 62 and Paragraph 1 of Article 157 of the SEA, if the Insider of the TWSE/TPEx -listed and emerging market companies, sells its company stocks or other securities with equity nature within six months after its acquisition, or repurchase the securities within six months after its sale, the company shall claim for the disgorgement of any profit realized from the sale and purchase. If the board of directors or the supervisors of the company fail to exercise the right of claim for disgorgement 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. The right of claim above shall be extinguished if not exercised within two years after the date on which the profit is realized.
Restriction on Insider Trading
According to Article 157-1 of the SEA, upon actual knowledge 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 securities with equity nature of the company:
- A director, supervisor and manager of the company, and/or a natural person designated to exercise powers as representative pursuant to Paragraph 1 of Article 27of the Company Act.
- Shareholders holding more than 10% 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.
Some Common Violations with respect to the Filing Duty of Insiders
Violation of Article 22-2 of the SEA (prior filing)
- Insiders transfer the shares within the holding period 6 months.
- Insiders transfer the shares in an amount exceeding the daily maximum amount.
- Insiders have filed for share transfer but miscalculate the transferring period and transfer within three days (for instance, if the filing date is July 1, the shares cannot be transferred until July 4 but the Insider sells the shares from a period from July 1 to July 3).
- Insiders neglect or are not familiar with the relevant regulations of the SEA and fail to make the filing before transferring the shares.
- Insiders' shares are subject to liquidation of pledge by the financial institution or compulsory enforcement of the court but the Insiders fail to make the filing.
Violation of Article 25 of the SEA (post filing)
- Though the Insiders have make the filing with the company (or its stock agent), the company (or its stock agent) fails to aggregate the information filed by the Insiders and make the filing.
- Insider's purchase and sale are in the same amount in the current month, but fails to make the filing or file with an amount after netting between purchase and sale. (For instance, if a director of company A acquires 1,000,000 shares and transfers 500,000 shares, he/she shall file a report of 1,000,000 shares acquired and 500,000 shares transferred, rather than of 500,000 shares acquired after netting.)
- Insiders have made the filing with the company (or its stock agent), but the filing amount is more (or less) than the actual amount acquired or transferred)
- Insiders neglect or are not familiar with the relevant regulations of the SEA and fail to make the filing or make an additional filing.
- Insiders fail to make both prior filing and post filing for the share transfer.
- Insiders' shares are subject to margin call of the financial institution or compulsory enforcement of the court but the Insiders fail to make the filing.
- Insiders mistakenly add the amount of shareholding change until the filing date in the current month to the shareholding change of the preceding month when it make the filing for the shareholding change of the preceding month by the fifth day of each month.