The Disgorgement of Short Swing Profits－A Legal Analysis

• Main Authors: LIN, MING-HSIN, 林明信
• Other Authors: LAI, YING-JHAO
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/84001700485661241699

碩士 === 國立臺北大學 === 法律學系一般生組 === 97 === The disgorgement of short swing profits, which applies to virtually all directors, officers, and 10% beneficial owners of publicly traded companies, prohibits these particular insiders from getting profits by purchase and sale that take place within any six-month period. In an attempt to ensure that insiders do not hide a profitable unfair trade among a series of unprofitable trades, insiders must return the short-swing profits that courts have adopted the “lowest-in highest-out rule” to calculate even if the insiders sustained an overall trading loss during the relevant six-month period to the company. In this way, insiders were relatively inactive in the market during six-month period, and would focus their attention on their fiduciary duty and on long-term corporate health, rather than on short-term trading profits. Critics assert that it is totally ineffective in combatting insider trading because insiders can easily escape the short-swing rule by selling six months and a day after purchase, on the contrary, the provision usually only results in trapping unwary “minnows”, those who do not receive the legal advice to wait exactly six months. Even though the debate over short-swing rule has generated more heat than light, on the other hand, supporters assert that anything but the broadest application of the statute will impede the war against insider trading, it remains a useful tool for preventing speculative abuses by insiders. I agree that the disgorgement of short swing profits remains a useful tool for preventing insider trading, and the restriction could be recognized as the social liability of insider’s property. Equally important, however, there are many questions need to be solved to enhance the quality of our law. Hence, I analyze our law set and combine the opinions from both academic and practical field, and provide some suggestions at the end of this study.