The Definition and the Realm of Securities on Securities and Exchange Act
Date Issued
2015
Date
2015
Author(s)
Yen, Hung-Bin
Abstract
Regulation of the realm of securities lies on the article 6 of the Taiwan’s Securities and Exchange Act. However, reviewing this article, it is obvious that the realm of securities is extremely small. Factually, this small realm of securities cannot react to the modern financial society, leads to many vacancies of the regulation and lacks enough protections for the investors in the capital market. Therefore, this thesis tends to start from the present regulation on realm of securities and examine the extent and disadvantages of the regulation. Second, by analyzing the foreign regulations, the thesis tends to observe how foreign countries definite their securities and hence reflect over the regulations of Taiwan to create a reasonable definition and realm of securities on Securities and Exchange Act. According to the article 6 of Taiwan’s Securities and Exchange act, it uses the way of “respectively listing” to definite the realm of securities and lists government bonds, corporate stocks, corporate bonds, stock warrant certificate, certificate of entitlement to new shares, certificate of payment or document of title to any of the securities referred to in the preceding paragraph and non-physical securities as securities. Although the paragraph 1 of the article 6 has given the “approval power” to the ""Competent Authority"", the realm is still small and only adds seven more kinds of securities. Under the circumstance of this small range of securities, some controversial securities, such as bank debentures, structured note, investment contract, commercial paper, are still in dispute, whether they are contained in the range of the regulation. In addition, despite the fact that the article gives Competent Authority the approval power, our Competent Authority seems not to conduct this power actively. Even when it approves the securities, it often makes the decision without any explanation. As a result, it is necessary to think over how the act should draw out the line and how the judgment standards of securities should be made. As the observation of foreign regulations, this thesis chose the Japanese act and the German act. Talking of the Japanese act, Japanese Financial Instruments and Exchange Act was enacted in 2006. One of the aims of this act is to enlarge the realm of securities and hence to construct a whole protection of investors. According to the paragraph 1 and 2 of the article 2, the act adapts “respectively listing”, “approval of the authority” and “general requirement” as the methods of securities regulation. It contains more than 20 securities in the law. In terms of the abstract concept and judgment standards of securities, the act reveals 4 elements─ “investment”, “circulation”, “public interest” and “necessity of investor protection.” It is commonly believed that “investment” is more emphasized than “circulation” when judging securities. Regarding German act, Germany uses the paragraph 1 of the article 2 on German Securities and Exchange Act to definite the realm of securities. Although the act lists “shares”, “investments similar to shares” and “bonds” as securities, it is still regarded as a “general requirement.” Once the security conforms to the description of the paragraph 1 of the article 2, regardless of its kind, it can still be considered the security on this act. Concerning the abstract concept of securities, the act reveals “ability to be changed” and “circulation” as the judgment standards. Obviously, the German emphasized how securities influence and react to the capital market. After reviewing the Japanese act and the German act, this thesis thinks it is necessary to build up the judging standards of securities just as the foreign acts do. While constructing the standards of our own, it is better to include these characters of securities─ “investment”, “circulation”, “ability to be changed”, “pubic” and “necessity of investor protection.” In the “issue market”, only the character of “investment”, “pubic” and “necessity of investor protection” should be valued. However, in the “trading market”, all of the above-mentioned characters should be used as the judging standards. In this way, the realm of securities can be widely enlarged but at the same time makes the appeal of regulations separated properly. Besides, it is also important to reform the present act as soon as possible. This thesis suggests that the act in the future take “respectively listing”, “approval of the authority” and “general requirement” at the same time. On the one hand, it can specifically definite the range of securities. On the other hand, it can make this range more feasible to respond to the newly-coming securities. Moreover, this thesis also suggests that securities and other financial instruments integrate into a single regulation in order to construct the more strong and consistent protection for the investors.
Subjects
Securities on Securities and Exchange Act
Investment
Circulation
Public
Structured note
Investment contract
Commercial paper
Type
thesis
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