| Summary: | 博士 === 東吳大學 === 法律學系 === 106 === The effective enforcement of the securities regulation depends on the joint efforts of the investors, securities regulator and the prosecutors. It appears that the legal mechanism for the enforcement of the securities regulation in Taiwan focuses more on civil remedies and criminal prosecution for recent years. With respect to the criminal prosecution, the Securities and Exchange Act has been revised twice since 1988 to elevate the criminal liabilities of the securities fraud. However, according to several empirical studies, the prosecution rate, conviction rate and final criminal liabilities for the securities fraud are comparatively low. In addition, it takes years for the prosecutor to bring the criminal case to the final judgment. As a result, there is room to discuss whether the securities fraud should be subject to criminal liabilities alone, or whether the securities regulator may concurrently take administrative actions, such as imposing administrative fines, to punish the wrongdoers.
Regarding the civil liabilities, the Securities Investors Protection Act and the Securities Investor Protection Center created thereunder were in place from 2002 to take class action on behalf of investors. In addition, the Securities Investors Protection Center may take provisional attachment and provisional enforcement without posting bonds. It appears that the Securities Investor Protection Center plays the role like the Enforcement Division of the US Securities and Exchange Commission to actively advocate investors. Moreover, Article 10-1 was added to the Securities Investor Protection Act authorizing the Securities Investor Protection Center to file derivative suit as well as take action to remove the directors and supervisors of the company. However, the Securities Investors Protection Center does not have the law enforcement power. The investigation of the Securities Investors Protection Center into the cases largely depends on the data and information from the Financial Supervisory Commission and the prosecutors. As such, the timing of taking class action is normally delayed. In addition, there are limited cases where the Securities Investors Protection Center successfully took provisional attachment on the assets of the defendant. It is not surprising that after years of lawsuits, the defendant may not have assets available for compensating the investors' claims. Furthermore, the Securities Investors Protection Center prevailed in just a few cases of removing the directors and supervisors of the company. Compared to the US Securities and Exchange Commission, the Securities Investors Protection Center has no authority to initiate a lawsuit to impose civil penalties or claim the disgorgement of unlawful benefits.
The securities regulator has the law enforcement power and expertise to bear the responsibility for enforcing laws against the securities frauds and taking enforcement action at the first moment. The enforcement tools, including injunction, disgorgement, civil penalty, fair fund, debarment and asset freeze, are usually used by the US Securities and Exchange Commission as the sanction mechanism to customize the remedies for the securities frauds. Considering that the manpower and resources of the securities regulator in Taiwan are limited, we propose taking a step by step approach to reinforce the enforcement power of the Taiwanese securities regulator. In the short term, we may consider introducing those enforcement tools that we have similar counterparts in our legal system, including imposing the administrative penalties and debarment orders. In the mid term, we may consider introducing the enforcement tools, including the disgorgement of unlawful benefits and the asset freeze order. In the long term, we may carefully assess whether the introduction of injunction is helpful to complete the enforcement arsenal of the securities regulator. In addition, certain enforcement tools of the securities regulator are complementary to those of the Securities Investors Protection Center and the prosecutors. By establishing certain coordination protocol and taking into consideration the factors such as the materiality and urgency of the case and the remedies suitable for the case, the securities regulator may work hand in hand with the Securities Investors Protection Center and the prosecutors to take appropriate enforcement action in each individual case.
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