The company I work for is listed on the Taipei Exchange. I was wondering whether it is legal in Taiwan to buy shares in the company.
Do I have to declare my investments to the Taiwan version of the SEC like I would need to do in the US?
Obviously concerned about accusations of insider trading. Although there is none of that going on. I just think that the company is managed very well and has a good future.
Legal? It should be encouraged! And it is very cool to hear you are bullish about the company just because it’s a plain good company.
I used to work in Investor Relations at another company also listed on the Taipei Exchange (formerly known as the GreTai Exchange). We had ESOP-like Plans (Employee Stock Ownership Plans) so that staff could participate in the company’s rise in valuation after its IPO. The commercial bank of all of our salary bank accounts offered special loans so that employees could participate - depending on your grade or level, you were entitled to buy certain numbers of shares at a specified price. This not only happened when the companied IPO’ed but at 2 other times before I left after 5 years. This is a major part of compensation – I have even heard it said that it is why some will tolerate ridiculously low monthly salaries on the hope/expectation to really cash-in when the stock rises on the GreTai.
I do not think you need to declare your investments with the Securities and Futures Bureau (SFB) or the Financial Supervisory Commission (FSC). I didn’t. But you will need to open a brokerage account, and – like commercial banks – they probably report to the Tax Bureau for your convenience.
As in other countries, your company management is highly motivated to discourage any insider trading. So, you can expect to receive internal messages – probably from the Finance Department – informing executives and staff when there are “black out” trading dates when you are not allowed to trade. These usually will be scheduled to begin a few days before up to some time after a major announcement is planned. I remember participating our ESOP Employee Stock Option Plan and buying some shares allocated to me, and then learning that I could not sell the stock exercise the options for 8 months (this is not a good example of Black Out dates). I watched the company price rise over this period to precipitous heights - and my colleagues and I had mixed feelings about it because while we were thrilled to see the rise in value, we were concerned as well because knew the rise was completely speculation driven since the company had not made any significant announcements throught that time. Interestingly, when I was allowed to trade after 8 months, many of us naturally cashed out – and the optics of seeing so many managers “take profit” and sell part or all of their stakes.
So, you will need to make sure you do not miss those announcements (e.g., if your Chinese reading is not great, you need a go-to person to help you when you receive something from whoever in your organization is responsible for this; start with the CFO and her/his team). Well, you can expect these announcements if your company does have an ESOP-like plan, since management will do its part to avoid trouble.
If you are holding company stock and are not participating in an ESOP (i.e., not holding stock as part of your compensation package), then you will likely need to follow what’s going on via MOPS - the Market Observation Post System - where listed companies must post “material information.” Here is a link to the page on MOPS that shows material information that companies posted for the day - this covers the Taipei Exchange, the Taiwan Stock Exchange, and probably the new stock markets being planned here.
https://emops.twse.com.tw/server-java/t58query
Whenever we posted announcements on MOPS, I could expect the lone bank analyst who formally covered us in English to reach me for further comment (usually, I didn’t have any or any authority to say anything beyond what we posted). Meanwhile, the financial media would reach out to my colleague in PR and flood her with questions (I was grateful that only handled global analysts and portfolio managers)
This TWSE website in English is probably helpful in giving you an idea of what is expected of you as an individual investor – so it should generally apply for shareholders of stocks on the Taipei Exchange as well
https://www.twse.com.tw/en/page/investor/edu/index.html
This comparison of the TWSE and the TPex might be interesting, too
https://www.tpex.org.tw/web/service/sotck_info/comparison/market_comparison.php?l=en-us
Thanks for all the great info.
May I ask if you know the Chinese for this plan?
I will ask tomorrow if my company has anything like this.
If you were a director or senior management of the company you would have to declare if you were buying or selling, especially if it was before a big news announcement that affected the share price. Otherwise…No.
I also bought shares in the Gretai listed company I worked for, in fact employees are often pushed to do so ! Indeed that is a major motivation in working for these companies as they have potential to list on the Taiex and also their shares can pump at certain times (usually very volatile though )
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I lifted this from an old email I got from the company back then. It’s actually a Stock Option Plan.
I didn’t think we had an ESOP. In our case, since we were IPO-ing and we were a small company when I joined them, everyone got options.
A few exceptions like if he works in some financial roles. I signed a few clients from banks when I was doing that, but it doesn’t sound like that is the case.
This is where I relate my story of buying the shares.(getting a loan to do so) , then selling them when I quit the company and paying back the loan at a small loss. Two years later I saw a report in the paper on the private stock market star performer…Guess which company it was. They had gone up 10x (they then plummeted later on …That’s the game).
Ouch!
In my case, I was one of the lucky ones, who was able to cash out of most of holdings while the stock was on its rapid rise. Most of my co-workers (a lot of people at that point), hung on a couple months longer, only to see the price peak and then rapidly drop (as many of us feared would happen). Many were even still barred from exercising their allocations, and were stuck when the price fell to the Option Strike level, making them worthless.
To add to the misery, a year later at tax time, the stock price was well below the strike, so there was no way they could be exercised. But the tax laws valued the Stock Options at the price on the day they were issued - when the stock price itself was beginning it’s crazy rise. So, not only did they have worthless options, they were on-the-hook for taxes based on a valuation that was higher than what the company was worth, plus they had loans to participate that they still had to pay off.
I recall we had to put in funds to secure our allocation, and many of my junior colleagues took out loans arranged by our company bankers. So, I may be confused about how exactly our Stock Option plan worked
You have to pay taxes in Taiwan on stocks you own even if you haven’t sold them? All my holdings are in the UK so have never been through this process before here. Or did they have to pay taxes on them because they were gifted them from the company?
My tax example refers specifically to the Stock Options that the company offered its employees. This unfortunate scenario that we faced was/is also a quirk of biotech companies in Taiwan (which were red hot at the time we IPO’s in 2012 and uplisted in 2014). At the time of the misery I mentioned, the Taiwan Tax Bureau valued options at the Strike Price because that is the “acquisition price”. This isn’t fair to the Option Holder if the Market Price of the stock dips below the Strike Price - the Option Holder will not exercise it at that point. And while they will continue to have the opportunity to exercise in the future (up to a certain point), the following year, the Tax Office needs to value the “holdings”, even if the holdings do not actually exist yet.
In the US, employees at biotech companies can defer the taxation so that the tax is calculated at the time the stocks are sold, not when the options are exercised.
I think the following excerpt applies here:
Stock Options. Biotech companies with no foreseeable prospects of profitability may choose to use Incentive Stock Options (ISOs), enabling employees to defer taxation at the time of exercise and receive capital gains treatment on the entire gain when the stock is sold. The company tax deduction that would be realized with a Nonqualified Stock Option (NSO) maybe of no concern for these firms.
Discounted stock options can combine insulation from short-term stock price volatility with a deferred compensation opportunity. A source of institutional investor criticism, earnings charges and lost deductibility for grants to top executives, discounted options may meet the needs of an emerging biotech company with affiliated investors, a focus on revenue overshort-term profit and no taxable income.
https://corporate.findlaw.com/law-library/stock-based-compensation-in-the-biotech-industry.html
I sold most of my holdings when the black out dates ended for that round of options. I still had some left, and the following year, I was stuck with taxes calculated on the Strike Price for the remainder of what I had that was much higher than the current market price.
Deferring taxes on stock options in this way simply wasn’t a regulation in Taiwan. I hope this has changed since
I don’t see why not? I mean many companies offer stock options as a part of the compensation package… or offers stock buys at a slight discount.