A Study on Insider Trading with Tender Offers

• Main Authors: CHING-YING CHANG, 張晶瑩
• Other Authors: none
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/03225844847273745250

碩士 === 中原大學 === 財經法律研究所 === 96 === “Tender offer” is a corporate finance term denoting a type of takeover bid. The tender offer is a public, open offer (usually announced in a newspaper advertisement) by an acquirer to all stockholders of a publicly traded corporation to tender their stock for sale at a specified price during a specified time, subject to the tendering of a minimum and maximum number of shares. Tender offers are made directly to shareholders and are commonly used to takeover a target company when that company's board of directors does not approve the acquisition. In these years, in Taiwan, tender offers have become one of the most popular business activities. Thus, the significant question is to what extent does the insider trading prohibition apply where the defendant traded on the basis of information derived from sources other than the issuer. In the United States, SEC Rule 14e-3 under Exchange Act Section 14(e) is limited to insider trading in connection with a tender offer. Unlike both the disclose or abstain rule and the misappropriation theory under Rule 10b-5, Rule 14e-3 liability is not premised on breach of a fiduciary duty. There is no need for a showing that the trading party or tipper was subject to any duty of confidentiality, and no need to show that a tipper personally benefited from the tip. In EU’s Directive 2003/6/EC, it states that “An integrated and efficient financial market requires market integrity. The smooth functioning of securities markets and public confidence in markets are prerequisites for economic growth and wealth. Market abuse harms the integrity of financial markets and public confidence in securities and derivatives.” As a result, considering the integrity of the market and public confidence in securities, we should reconsider the law and regulation of insider trading with tender offers. The analysis herein touched briefly on the US insider trading law and the EU’s Directive. It is to be hoped that Taiwan will take advantage of the instances, while avoiding the worst of their foibles.