The Supreme Court rendered the 104-Tai-Shang-3877 Criminal Decision of December 17, 2015 (hereinafter, the “Decision”), which contained the following facts. WK Associates Ltd. (hereinafter, “WK”) actually operated and controlled by Wen-Chang Ko was a juristic shareholder of Taiwan Green Point Enterprises. Co., Ltd. (hereinafter, “Green Point”), and Jabil Circuit, Inc. desired to invest in Green Point. After signing a non-binding letter of intent on September 12, 2006, Jabil Circuit, Inc. conducted due diligence at Green Point. Green Point’s board of directors approved the execution of the merger agreement with Jabil Taiwan on November 22, 2006 and posted such material information in the Market Observation Post System on the same day. However, Wen-Chang Ko, Cheng-Ching Ho and Jung-Chih Wang (i.e., the Appellants) jointly leveraged the above material information, out of their communication of criminal intent and in violation of the provisions concerning insider trading under the Securities and Exchange Law as insiders of a company, and Wen-Chang Ko purchased Green Point’s shares via WK and other affiliated companies after the above merger information became clear (September 12, 2006) and before it was publicly disclosed (November 22, 2006) and sold out all of the shares during the tender offer period and generated illegal proceeds in the amount of NT$472,847,065. In the original decision, the three Appellants were found to have jointly committed the offense of insider trading under Article 171, Paragraph 1, Subparagraph 1 and Paragraph 2 of the Securities and Exchange Law. Dissatisfied, the Appellant filed this appeal.
In the appeal reasons, it was asserted, with respect to whether the execution of the non-binding letter of intent causes material information clear and specific, as follows: The non-binding letter of intent, which was executed on September 12, 2006 merely for Green Point to agree to the due diligence conducted by Jabil Circuit, Inc. for the merger matters between the parties (hereinafter, the “Merger Deal”), was not legally binding. Although matters relating to the Merger Deal were stipulated, still the parties did not reach a consensus and would not commence with specific negotiation of important matters of the Merger Deal until Jabil Circuit, Inc. was satisfied with the outcome of the due diligence and were still facing several uncertainties that could put an end to the Merger Deal (such as directors not agreeing to the considerations). Therefore, it was obvious that since the Merger Deal would not surely become a reality within a specific timeframe, this certainly did not meet the criteria of “clarity” and “specificity” of material information with respect to insider trading under the Securities and Exchange Law. The Appellant also cited multiple Supreme Court decisions, asserting that judicial practices and scholarly opinions both hold that since merger risks cannot be accurately assessed before due diligence is completed, the “clarity” and “specificity” criteria are hardly satisfied.
According to the Decision, material information often requires a series of processing procedures or evolution of time before it is required by law to be disclosed or becomes suitable for public disclosure, and then that the specifics covered or event indicated by such information becomes reality. The development and evolution of such material information varies by individual cases. When the essence of material information, according to objective observations, has revealed that a certain event will definitely take place over a certain period of time or when there are facts sufficiently supporting the finding that such event has taken place, if an insider has in fact become aware of such information, it cannot be argued that such information is not yet definite or such event has not taken place or such information is not actually known simply because the company or insider subjectively is not willing to realize the event. Otherwise, an insider may deliberately delay required statutory procedures or buy or sell stocks in advance based on such information. This will not only undermine the circulation of information but also impede fair competition in the stock market in violation of the legislative objective of equal access to information. Usually, a merger agreement requires several stages, including initial negotiations, conclusion of agreement, signing of the agreement and a resolution adopted during a board meeting, before the agreement is established. In the course of initial negotiations between the parties, since this is a stage involving an exchange of opinions, if no consensus is reached, it can hardly be concluded that the preliminary framework of a merger has been created. If both parties have reached an agreement on major points, this means that the parties have reached a consensus about the merger, and the subsequent signing of the agreement and the resolution of a board meeting are merely part of the steps to complete the merger. To wit, although such material information requires a series of processing procedures and evolution of time for the specifics covered or event indicated by such information to become reality before the material information reaches a stage where such information should be publicly disclosed pursuant to law or becomes appropriate for public disclosure, it should be deemed that the determination criteria for the “establishment” or “clarity or specificity,” of material information are met already. If multiple points in time exist with respect to the determination criteria for the above-mentioned “establishment” or “clarity or specificity,” the earliest point in time for the establishment of such information should serve as the basis pursuant to relevant requirements.
According to the following facts determined by the original decision, the provisions of the non-binding letter of intent first proposed by Jabil Circuit, Inc. on September 11, 2006 were generally identical with the specifics of the resolution adopted during Green Point’s board meeting on September 6, and the President signed the non-binding letter of intent on behalf of Green Point on September 12 of the same year and sent the same back to Jabil Circuit, Inc. According to the original decision, specifics of this Merger Deal such as the backgrounds, progression, implementation and the contents of the non-binding letter of intent (including the price range for the acquisition of Green Point’s shares and the willingness of the parties to conduct the merger) were carefully examined before it was concluded that the parties had reached a consensus about the merger price and framework of the Merger Deal. Therefore, the finding that the determination criteria for the establishment or clarity or specificity of material information were met was not baseless. Moreover, the importance of the so-called “initial letter of content” or “non-binding letter of content” does not lie in the name as used but rather on the specific contents of the documents signed for individual merger deals, not to mention that the binding legal effect of the signed documents or the lack of it is not an absolute determination criterion. Therefore, even if it is determined that factors supporting the establishment of material information are lacking in case of a “letter of intent” or a “non-binding letter of intent” signed for another merger deal, the non-binding letter of intent signed for this Merger Deal could not be found to be subject to the same circumstances on such basis. In addition, since the determination criteria for the specific timing of material information and the connections between due diligence and the specific timing of material information are not completely consistent in the facts contained in various court decisions, such legal precedents cannot be relied on as the basis of a decision. Therefore, it cannot be concluded that the original decision was unlawful for erroneous application of laws on such basis. Based on the foregoing reasons, it was held that since the original decision was not erroneous, the Appellants’ appeal was rejected.