Beyond Uncertainty: Lower Courts’ Defiance in Insider Trading Cases in Taiwan

Abstract

Taiwan promulgated its insider trading law in 1988. Prosecutions against insider traders were rare until the late 1990s. As enforcement actions increase, high-profile cases often shock the public and unsettle the business community about how to implement trading without incurring any legal risks. On the other hand, only a small number of prosecuted defendants are finally convicted. Judgments by the second-instance high courts are often reversed and remanded by the Supreme Court. That the conviction rate and the non-reversal rate are low means that prosecutors and judges from different levels of the judicial hierarchy are often unable to agree on the alleged violations and the interpretation of the law. Hence, legal uncertainty is unreasonably high. In this paper, conventional wisdom is challenged regarding the causes of difficulties enforcing insider trading laws in Taiwan, arguing that evaluating the defiance of the lower courts can elucidate these enforcement problems. It is suggested that lower courts’ obedience to precedents be partly premised on the condition that higher courts are more skillful interpreters of the law and can offer superior solutions to legal questions. From this angle, hierarchical legitimacy has become an increasing challenge since specialized panels were established in lower courts, but not in the Supreme Court. This paper does not favor a specialist court system. Instead, it suggests that, to improve communication between the Supreme Court and the lower courts, academics can play a much more important role than they do now.