Propriety of Ponzi Scheme's Regulations in Taiwan

• Main Authors: Lee-Ting Sun, 孫立婷
• Other Authors: Yung-Cheng Chuang
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/62286787701200527175

碩士 === 東吳大學 === 法律學系 === 102 === In recently decades, many unregistered investment companies entice large sums of investor by offering abnormally high rates of return. Though the operators claim the returns from investment portfolios, the funds are never really invested but working as Ponzi Scheme. The operators pay returns to initial investors from new capital paid by new investors rather than from investment profit. Once the stream of new investments slow down, the scheme collapses which causes investors serious damage. In order to prevent Ponzi Scheme, the authority takes the investment as deposit and regulates it by Banking Law §29-1 while other countries, such as U.S., regulate it by Security Law. However, when we look into the nature of Ponzi Scheme, selling limited partnership units, notes, or members of a group is not taking deposit. Protecting investors is not the legislative purpose of Banking Law either. Because the statute conflicts with financial regulation theory, there are many unnecessary issues need to be solved in court decision. This paper scrutinizes the features of Ponzi Scheme, operated by unregistered investment companies, and finds out that it fit the definition of an investment contract under U.S. Supreme Court’s Howey case. As the schemes constitute investment contract and fall within securities under the Securities and Exchange Law, the operators may be indicted for the commission of selling unregistered securities or securities fraud. In this way, Ponzi Scheme should be regulated properly and investors would be completely protected.