In order to prevent directors, supervisors, managers or shareholders holding more than 10% of the company's issued shares in the company from using inside information and not focusing on company operation, prevent investors from losing interest in securities markets, seriously affecting the fairness and function of securities markets. Major countries around the world such as the United States, Great Britain and Japan legally prohibit insider trading. In order to make up for shortfalls in regulations prohibiting insider trading, attain the goals of prohibiting insider trading and establish a disgorgement plan so profits from persons engaging in short-swing trades is returned to the company.
At least once every year, the company conducts education courses on the management of the prevention of insider trading and relevant laws and regulations for incumbent directors, supervisors, managers and employees. Education courses for newly appointed directors and managers after taking office, and the HR department will conduct these same courses on new employees during pre-employment training.
Legal courses including the prevention of insider trading and the protection of trade secrets were conducted on June 15, 2020 and July 13, 2020 for incumbent directors, managers, and employees. Course briefings were uploaded onto the internal staff education and training system to be used as reference for those who were absent during those days.
Short-swing trading by insiders: When insiders of a stock issuing company profit from engaging in short-swing trades of publically listed stock or other securities of an equity nature, the company shall request that the insider return or disgorge the profits to the company (Securities 6 III Permit 157).
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The securities that insiders may engage in short-swing trades ( Sec. 6 III permit 157 and enforcement rule 11I) shall include common stock, preferred stock, convertible bonds, corporate bonds with warrant, stock option certificates, warrants, certificate of payment of shares, certificate of entitlement to subscribe to new shares, certificate of entitlement to new shares, certificate of entitlement to shares from convertible bonds and other securities of an equity nature.
Behavioral patterns for short-swing trades： A short-swing trade is the purchase or sale of the publicly listed shares or other securities of an equity nature held by company insiders in a six month period before or after of any purchase and sale transaction. If a profit spread exists, a disgorgement claim can be made on the insider to make the insider return the profits to the company. Short-swing trades do not necessarily constitute insider trading (Securities 157-1). If the insider uses undisclosed inside information to engage in a short-swing trade, the the insider trading and disgorgement rules shall both apply.
Persons who may make disgorgement claims against insiders： When an insider profits from engaging a short- swing trade, the director or supervisor representative shall claim disgorgement against the insider to return the profit back to the company. In the event that the director or supervisor does not claim disgorgement, shareholders may request a director or supervisor make the clam within thirty days. If the claim is not made by the director or supervisor within 30 days, the requesting shareholder may claim disgorgement against the company insider. The company shall be liable for damages suffered from the failure of a director or supervisor to represent the company in claiming disgorgement.
Disgorgement claim against insider term：Disgorgement claims against insiders are valid for a two-year period from the date that the profit was earned by insiders. Claims made not be made after a period of two years.
Insiders of stock issuing company, natural persons appointed to exercise the duties of a government agency or corporate shareholder or persons with a professional or controlling relationship that use their position or standing to obtain undisclosed information or information that will have a major impact of stock prices and uses this inside information to purchase or sell stock or other securities of an equity nature on the stock exchange or OTC market. In other words, the use of insider information in transactions is called insider trading (Securities 157-1).
Persons who may not engage in insider trading:
- Insiders：Directors, supervisors, managers or shareholders holding more than 10% of the company's issued shares. When calculating the shareholdings of insiders of a publicly listed company, the shareholdings of the insider’s spouse, minor children and the names of utilized persons(Securities Enforcement Rules 2) are included in the calculation. Insiders who have lost this status for a period of less than six months are still subject to this standard to guard against abuse.
- Natural persons appointed to exercise the duties of a government agency or corporate shareholder that are elected as directors or supervisors of a publicly issued company as stated in Article 27-1 of the Company Act.
- Persons with a professional or controlling relationship that have access to inside information: For example, securities brokers, investment consultants, securities analysts, reporters, persons employed to conduct business for the issuing company, lawyers, accountants and police investigator and judicial personnel who receive inside information through prosecution of security law cases.
- Persons in items (1), (2) and (3) that have lost their status for a period less than six months.
- Persons who receive information from the people listed in items (1), (2), (3) and (4).
Information that has a major effect on the stock price of a company： Information involving company finances, business or market supply / demand of securities, tender offers that have a major effect of the company’s stock price or information that has a major effect of investment decisions of legitimate investors including the nine types of situations in the Securities Enforcement Rules 7, the major information range and the disclosure method guidelines defined in Articles 2 and 3 from the Articles 157-1 to 4 of the Securities and Exchange Act established by the Financial Supervisory Committee In addition, according to item 2I of the TSEC Publicly Listed Company Major Information Confirmation and Disclosure Procedure, if there is any major event that may influence shareholder rights or the price of securities, it should in principle be announced before the market opens on the business day after the event occurs.
Definition of disclosure： Refers to information that is disclosed through the Market Observation Post System, websites that report basic market conditions, non-local sections of daily nationwide newspapers or national television news. Therefore, information disclosed through reporting agencies that has passed through a 18- hour cooling off period is considered to be disclosed information (major information range in the Article 157-1 to 4 of the Securities Exchange Act, Article 5 of Disclosure Method Guidelines, Securities 157-1I).
Responsibility for engaging in insider trading： Insider trading is judged based on whether or not persons fail in their recusal or disclosure duties not on whether or not the insider trading is profitable. Unless there is a just reason to believe the information has already been announced, persons are liable for civil damages and compensation under Securities 157-1 II III when engaging in opposing transaction without knowledge in good faith and criminally liable under Securities 171. In addition, since internal tradition in securities markets can easily involve money laundering, our country’s money laundering laws have already made insider tradition a serious offence that is punishable through the Money Laundering Control Act.
Term for requesting compensation from persons who engage in insider trading：Damage and compensation claims defined in Securities 157-1 II III must be made within two years of the time that the claimant become aware of the reason for the compensation or within five years of the private placement , issue or transaction. Claims may not be made after this time (Securities 21).