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Disclosure of Significant Event

Short-Swing Profit Rule

Under the short-swing profit provisions of the FSCMA and the subordinate regulations (the “short-swing profit rule”), corporate insiders must return any profit they realize from the purchase and sale or the sale and purchase of certain classes of equity securitiesㅡreferred to as specific securities in the FSCMAㅡwithin a six-month period. The disgorgement of short-swing profit is effective irrespective of whether or not any insider information was used to realize the profit.

The short-swing profit rule is intended to prevent corporate insiders from trading specific securities on the basis of material, nonpublic information. Such insider trading is illegal, and the short-swing profit rule imposes civil and criminal penalties on the violators in order to ensure no unauthorized disclosure or privileged inside information is used for personal gains.

Insiders who are subject to short-swing profit disclosure include:

  • (a) Directors, officers, and others covered under article 401-2(1) of the Commercial Act;
  • (b) Employees handling or given access to privileged nonpublic company information, including employees administering the company's regulatory filings as provided under article 161(1) of the FSCMA; and
  • (c) Major shareholders (shareholders with equity ownership of ten percent or more in the company) or shareholders that effectively control the company.

Exemptions from the Disgorgement of Short-Swing Profit

Each of the following transactions is exempted from the disgorgement of short-swing profit:

  • (a) The purchase or a sale is made in compliance of rules and regulations;
  • (b) The purchase or a sale is made in accordance with the government's permission, authorization, or approval, or its written guidance or recommendation;
  • (c) The purchase and sale, or a sale and purchase is made for the purpose of price stability or market making;
  • (d) Shares are acquired or disposed of as a result of or following the underwriting of certain classes of newly issued, privately placed, or already issued shares;
  • (e) Shares are acquired with the exercise of a stock option;
  • (f) Shares are acquired by exercising already-owned equity securities, an instrument representing preemptive rights to new shares, convertible bonds, or bonds with warrant;
  • (g) Securities are acquired as a result of the termination of a deposit contract for securities depositary receipts;
  • (h) Securities are acquired with the conversion of exchangeable bonds;
  • (i) Shares are acquired as a result of subscription to certain classes of newly or already issued securities;
  • (j) A member of an employee stock ownership plan (ESOP) acquires shares through the ESOP (applicable only to shares acquired and placed at an ESOP manager);
  • (k) Shares are disposed of with the exercise of the appraisal rights;
  • (l) Shares or other securities are disposed of with the acceptance of a tender offer; and
  • (m) The share purchase or sale is determined to pose no risk of the use of material nonpublic information by the Securities and Futures Commission.