Head of Taiwan Investor Protection Center: "A total of 293 class-action lawsuits underway... South Korea only 12 cases"[War Against Stock Manipulation]

④-⑶ Interview with Lin Junhong, Director of Taiwan Securities and Futures Investor Protection Center
Compensated 1.8 million individual investors with 7.6 billion TWD over 20 years
Litigation expenses covered by protection fund

"Since the establishment of the center, as of the end of last year, we have assisted over 185,000 investors and conducted a total of 293 securities-related class action lawsuits."

Lin Junhong, Director of the Taiwan Securities and Futures Investor Protection Center (SFIPC). (Provided by SFIPC)

Lin Junhong, Director of the Taiwan Securities and Futures Investors Protection Center (SFIPC), emphasized SFIPC's achievements in a written interview with Asia Economy on the 25th. Considering that only 12 lawsuits were filed in Korea over 20 years since the enactment of the Securities Class Action Act, the role of SFIPC in Taiwan's capital market can be inferred.

SFIPC was established in January 2003 with the enforcement of the Securities Investor and Futures Trader Protection Act, aiming to "protect shareholders." SFIPC files class action lawsuits on behalf of 20 or more general shareholders against directors if a specific company violates the Company Act or securities regulations. When victims arise from unfair trades such as stock price manipulation, SFIPC gathers investors to act as an arbitrator, demands collective compensation, and also files civil lawsuits. This is the first time SFIPC has conducted an interview with a domestic media outlet, Asia Economy.

Director Lin Junhong stated, "As a non-profit organization, SFIPC proactively leads class actions, representative lawsuits, and dismissal lawsuits to protect investors and support those who have suffered losses in receiving compensation," adding, "It also plays a role in enhancing investors' trust in the market." This is why Lin described SFIPC as "not only a vital driving force in fulfilling civil liabilities in the capital market but also a key practitioner of shareholder activism and an indispensable part of maintaining market order."

Since its establishment, SFIPC has helped 180,000 investors over 20 years receive compensation totaling 7.6 billion New Taiwan Dollars (approximately 318.9 billion KRW). Director Lin explained, "We filed a total of 293 lawsuits, of which 77 resulted in full or partial court victories, confirming compensation amounts of about 29.8 billion New Taiwan Dollars (approximately 1.25 trillion KRW). Through settlements and enforcement procedures, we secured over 7.6 billion New Taiwan Dollars in compensation on behalf of investors."

These achievements were possible due to a specialized litigation team. Lin said, "Currently, SFIPC employs 19 lawyers (including clerks), most of whom are specialized litigation attorneys in securities law and company law," adding, "Experienced lawyers serve as clerks, leading the litigation team and handling cases."

Lin further explained, "When securities crimes occur, prosecutors provide indictments and other materials to SFIPC, and the competent authorities supply related criminal judgments and documents," elaborating, "After receiving indictments or judgments, SFIPC supports securities and futures victims in filing civil damage claims through class actions."

He viewed securities class actions as an essential system because they protect victims' rights and effectively support loss compensation. Lin stated, "Individual investors who suffer losses in the capital market often have weak awareness of their rights or lack knowledge of compensation methods, and their capacity to present evidence, navigate litigation procedures, and bear costs is limited, resulting in low willingness to seek compensation," adding, "If illegal acts occur, claimants filing separate lawsuits to claim damages also burden the courts."

As Lin mentioned, initiating securities class actions is challenging. Gathering members to participate and covering the costs until the trial concludes are significant hurdles. This is a primary reason why securities class actions have not been active in Korea.

To reduce these burdens, SFIPC conducts class actions free of charge for cases involving harm to many investors. Lin emphasized, "We prevent investors from giving up related relief procedures due to lack of information, limited capacity, difficulty in proving claims, and excessive litigation costs."

SFIPC covers the costs of filing lawsuits or arbitration from a protection fund. Lin said, "The amounts donated to the protection fund by the Taiwan Stock Exchange, Futures Exchange, and Securities Central Depository amount to about 1 billion New Taiwan Dollars (approximately 42 billion KRW)," adding, "Securities firms, futures firms, and stock exchanges contribute a fixed monthly amount to the protection fund, which had a balance of about 8.9 billion New Taiwan Dollars (approximately 373.5 billion KRW) as of the end of last year."

Institutional measures that partially exempt litigation costs have also contributed to the establishment of the class action system. He said, "According to the Investor Protection Act, SFIPC exempts litigation costs exceeding 30 million New Taiwan Dollars (approximately 1.258 billion KRW) for lawsuits with target amounts or values above that threshold," evaluating, "This regulation reduces expenses during litigation and helps operate the class action system by lowering litigation costs."

Additionally, SFIPC plays a role in monitoring and preventing illegal acts by filing lawsuits or dismissal suits against executives, directors, and auditors who commit unlawful acts.

Director Lin stated, "As of the end of last year (cumulative), the investor protection center has conducted 83 shareholder representative lawsuits, with compensation amounts from illegal actors themselves and settlements with companies totaling about 1.8 billion New Taiwan Dollars (approximately 75.5 billion KRW)," adding, "By the end of last year, 97 dismissal lawsuits (cumulative) had been filed."

Finally, he said, "If an institution like SFIPC were established in Korea, it would help promote the protection of investors' rights and interests."

Editor's NoteIt has been nearly one year (April 24, 2023) since the 'Ra Deok-yeon Gate,' the largest stock price manipulation crime to date (with total illicit gains of 730.5 billion KRW), occurred, yet the victims' nightmare has not ended. There are no effective victim relief measures in the Korean capital market. Litigation is the only answer, but due to cost burdens and difficulties in proving damages, victims cannot even attempt it. The amendment to the Capital Market Act, which supplemented the limitations of criminal punishment and introduced effective monetary sanctions following the 'Ra Deok-yeon Gate,' is significant. However, to eradicate the continuously increasing securities crimes in various forms, it is necessary to establish a system capable of efficiently detecting and investigating these crimes and to implement additional institutional improvements for swift and strict sanctions. The Asia Economy Securities Capital Market Department Special Coverage Team examines advanced systems in overseas capital markets and reviews the challenges and directions for our market to suppress securities crimes. Furthermore, as intelligent and organized criminal acts occur, we seek effective measures to provide relief to investors.

We plan to intensively report from various perspectives on all kinds of unfair trades such as insider trading, fraudulent transactions, market manipulation, and reporting violations. We will strive to establish comprehensive countermeasures to eradicate capital market crimes. Please send tips to lsa@asiae.co.kr. We will investigate thoroughly and report.

▲Team Leader Seon-ae Lee, Manager △Min-young Kim, Yoon-joo Hwang, Min-young Cha, Dae-hyun Kim, Reporters

This content was produced with the assistance of AI translation services.