Securities and Exchange Act: Amendments to the SEA took effect on 1 July 2015.

[2015/09/16]

On 1 July 2015, amendments to the Securities and Exchange Act (SEA) were promulgated by the President and came into force. The amended articles include Articles 20-1, 43-1, 155 and 156. The main points are as follows:

1. The liability of a company’s president and chief executive officer in the case of misrepresentation or non-disclosure in financial reports is reduced from strict liability to an assumption of negligence liability:
The SEA provides that if financial reports and financial and operational documents filed or publicly disclosed by a company as required by law contain misrepresentations or fail to disclose material information, the issuer, its responsible officers, and those of its employees who have placed their signatures or seals on such documents, are liable for damages in respect of losses consequently suffered by bona fide purchasers, sellers or holders of negotiable securities issued by the company. In such cases, the old Act imposed strict liability (non-fault liability) on the issuer, its president and its CEO. But in order to avoid the risk that excessively harsh liability may discourage talented individuals from accepting leading executive positions, under the amended Act the liability of the issuer’s president and CEO is reduced to a prima facie presumption of negligence liability. In other words, if a president or CEO is able to present evidence showing that they exercised reasonable care, and had legitimate cause to reasonably believe that the content of such reports and documents did not contain misrepresentations or misleading nondisclosures, they will not liable for damages; and if such misrepresentation or nondisclosure was due to their negligence, each shall be liable for damages in proportion to their degree of responsibility.
2. Under new provisions, real estate investment trust securities (REITS) may be purchased by public tender offer:
Under the amended Act, REITS may be acquired by public tender offer; and when a purchaser intends to acquire more than a certain percentage of the beneficial securities of a real estate investment trust, this must be done by public tender offer, unless certain conditions are satisfied.
3. Acts of stock price manipulation must be likely to affect market prices or market order:
Under a new provision of the amended Act, where a person continuously purchases securities at a high price or continuously sells them at a low price with the intention to artificially inflate or deflate the trading price of a security, such actions must involve “the likelihood that market prices or market order will be affected” to fall within the definition of behavior prohibited under the SEA.
4. Following the Ting Hsin International Group adulterated and tainted cooking oils scandals, in order to more strongly encourage enterprises to fulfill their social responsibilities and to limit losses to investors, if a stock-exchange-listed company is involved in a major public nuisance incident or major food or drug safety incident, the Financial Supervisory Commission may order the suspension of trading in all or part of the company’s securities, or may restrict the numbers of its securities that may be traded by securities brokers and dealers.