The Regulation of Derivatives under the Short-Swing Rules

• Main Authors: Wen, Taipin, 溫帶斌
• Other Authors: Lin, Kuobin
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/41160444977008933146

碩士 === 國立臺北大學 === 法律學系法律專業組 === 100 === The purpose of article 157 of the Securities Exchange Law was to prevent the unfair use of inside information by any director, supervisor, managerial officer, or shareholder holding more than ten percent of the shares of the company. These insiders must disgorge to the corporation the profits made from any purchase and sale, or sale and purchase, of equity securities(stock, option, and other derivatives) issued by the company in a six-month period, no matter these insiders were wilful or faultful to do so. Most courts were adapt the “lowest-in, highest-out” algorithm to calculate the recoverable profits. It is a general method for calculating short-swing profits from 1943, but some argues that the algorithm cannot be well used in today’s complex financial transact environment. As we know, stocks were not the only invest instrument today, there were also other financial instruments like options, warrants, futures and so on, be traded in the market, these derivatives were more complex in product structure and transaction than stocks, so the old method to calculate short-swing profits might be not the accurately calculating method. Besides, more and more derivatives were shown in a different way with traditional stock and its derivative products. These totally new kind of derivatives might be have a uncertain exercise price, might be not easy to know wether it is put/call side or not, with these characters, existing short-swing profiting rules could not functionally operate in deal with these new kind of derivative transactions. This article will illustrate how the existing short-swing rules operating first, then present a more accurate way for short-swing profit calculation to recover the maximum possible profit. Finally, this article will conclude and summarize the findings about how to strengthen existing short-swing rules to make the rules the more efficient and powerful rules to prevent the unfair use of inside informations by insider.