Insider trading investigation of Taiwanese vaccine manufacturer reveals broader issues

An insider trading investigation into a Taiwanese Covid-19 vaccine manufacturer has raised broader concerns about the country’s financial regulation and has entangled the administration of President Tsai Ing-wen.

Taipei City’s Shilin District Prosecutor’s Office told the Financial Times that it is investigating Medigen Vaccine Biologics Corporation after the company’s stock price rose more than 20% in the days before the positive results of its vaccine phase 2 clinical trial were announced in June. The prosecutor declined to provide further details about the investigation.

In a televised speech last month, Tsai Ing-wen rejected accusations from political opponents that her government blocked the import of vaccines to boost Medigen’s stock price.

The investigation opened up another front through which Tsai Ing-wen’s political opponents could attack the president because she tried to withstand external pressure from China

Only 8.2% of Taiwan’s population received the first injection, and the government has agreed to purchase 5 million vaccines from Medigen to address the shortage in Taipei partly blamed on China Prevent it from buying foreign-made doses.

“We have conducted an internal investigation and there is no evidence that the government or its employees speculate [on] Stocks,” Tsai Ing-wen said in his speech. Taiwan’s Ministry of Finance later stated that before the sudden rise, none of the government’s eight state-owned banks had purchased Medigen shares.

Cai called on the public to beware of fake news about the vaccination campaign. Spread on Taiwanese media Due to the domestic outbreak in early May, the country entered a state of soft lockdown.

But the investigation revealed the prevalence of Taiwan’s stock market manipulation, where financial regulators often lack the necessary legal powers to crack down. “The Medigen case is highly political,” said Wang Wenye, a professor of capital market law at National Taiwan University. “But the practice of insider trading is rampant in Taiwan.”

Wang mentioned a high-profile case involving Ke Wenchang, the former chairman of HP Taiwan. After buying the shares of a Taiwanese company, Gao was sentenced to nine years in prison in 2015. He knew that the Taiwanese company would be acquired by a larger American group.

Lin Shuyu, an analyst at CITIC CLSA, added that “everyone in the financial industry knows that insider trading and stock manipulation are a problem.” She said that for small listed companies, it is common for employees, financial intermediaries and journalists to buy stocks through the brokerage accounts of relatives and friends before releasing positive financial results.

“The public does not have much confidence in the government’s ability to control this industry,” Lin added.

The lawyer believes that part of the problem also stems from the fact that the Taiwan Financial Supervision and Administration Commission has no jurisdiction over insider trading cases.

Instead, these cases fell into the hands of local prosecutors, “they lack the financial background to successfully prosecute,” Wang said.

Wu Huanting, an attorney for Nolan Barton and Olmos in California, pointed out that the conviction rate for insider trading is less than 40%.

Officials argue that Taiwan’s approach only requires a higher burden of proof.

“There are some problems with insider trading in Taiwan, but I don’t think it is particularly serious compared to other countries,” said Cindy Chang, chairman of the Government Securities and Futures Investor Protection Center.

Some have emphasized the contrast between Taiwan’s financial industry and its cutting-edge technology companies, which dominate. semiconductor.

“Taiwan’s financial market still has a long way to go,” said Wang, a law professor. “They are lagging behind the high-tech industry-it has to do with lack of discipline.”

Medigen did not respond to a request for comment.

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