The Liability of Information Delivery in Stock Market─Focus on the News Report of Financial Media and Research of the Professional Securities

Abstract This study is aimed to investigate the liability of the information providers in the stock market, and to conclude a solution to avoid the market chaos. This study focuses on the news released from financial media and investment reports offered from stock exchange, and compares the legal practice and cases on the insider trading and market manipulation, especially in the U.S and U.K with Taiwan. In this study, we divide the information that influences the stock market into “hard information” and “soft information”. The former is the precise, not-amended data, and mainly were the official finance reports; while the latter is the prospective predictions, analysis suggestions, and, most of them, the finance projections. We try to analyze the legal principle of financial projections, in order to estimate the media release and analysis reports, and set up a liability and its restriction to the financial projections. Through the research on the process of news-generating, we find it very likely to have a deviation from the truth, which may be caused by subjective or false consciousness from the editors. On the other hand, the institutional investment reports are more likely to be less biased, as they develop forecasts on the basis of solid information. However, they are only disclosed to the members or certain investors. We could easily find that the institutional investment reports are passed on to the investment market from the media. Therefore, Puffery Doctrine, Bespeak Caution Doctrine, and safe harbor provision are developed in U.S. to eliminate the liability to the professional corporations who generate the investment reports. Information is essential for the operation of stock market. Both of professional institutional investment reports and immense number of financial news have an impact on investors’ decision. Currently, there is lack of regulation of false or misleading press release. If the press release is correct, on the contrary, the journalists or analysts, instructing an order, will be involved in the matters of insider- trading. Thus, if the trading is prohibited, it will minimize the chance of illegal insider trading, but it will result in a negative effect on the freedom of information access and market trading. This study propose that information efficiency and symmetry will stimulate economic growth by promoting the stock market and attracting international corporations to list their stock in Taiwan. On the other hand, misleading and false information should be prohibited. If false or not-able-to-be-proof information is revealed in either investment reports or press release, Securities and Exchange Act shall regulate it immediately; or otherwise, a press conference should be called in order to end the false or asymmetric information and avoid chilling effect.