Legal Insights

The defendant in this case was involved in the manipulation of a company’s stock price. The court found that, in addition to providing financing capacity and securities accounts under nominee names that he could control for use by others in stock trading, the defendant also placed orders at the direction of others to drive up the company’s share price, thereby participating in the core conduct of the unlawful stock manipulation scheme. After the case reached the third instance, the defendant argued that he had already admitted during the investigation that he knew a co-defendant. He therefore contended that this should constitute a form of “confession” and that his sentence should be reduced pursuant to Article 171, Paragraph 5 of the Securities and Exchange Act.

However, after reviewing his statements during the investigation, the courts found that when questioned about the essential aspects of the securities offense, the defendant sometimes responded that he “did not remember” or had “forgotten,” and at other times exercised his right to remain silent. He had not affirmatively admitted the essential facts of the offense. The Supreme Court therefore concluded that the defendant did not satisfy the requirement of a “confession during the investigation.”

II. Issue

This article focuses on one of the key issues addressed in the judgment: how much must a defendant admit in order to constitute a “confession during the investigation” under Article 171, Paragraph 5 of the Securities and Exchange Act?

If a defendant admits certain objective facts but does not admit that he possessed the subjective criminal intent required for the offense, can he nevertheless claim to have confessed and thereby seek a reduction of his sentence?

III. The Securities and Exchange Act and the Supreme Court’s Reasoning

Before examining the Supreme Court’s reasoning, it is necessary to understand the sentence-reduction mechanism under Article 171 of the Securities and Exchange Act. Article 171 prescribes the penalties for serious securities offenses. For example, violations involving stock price manipulation under Article 155 or insider trading under Article 157-1 may be punishable by imprisonment for not less than three years but not more than ten years, together with a possible fine of NT$10 million to NT$200 million (Article 171, Paragraph 1). Where the property or financial benefit obtained through the offense amounts to NT$100 million or more, the defendant may face imprisonment for not less than seven years and a possible fine of NT$25 million to NT$500 million (Article 171, Paragraph 2).

At the same time, to conserve judicial resources, facilitate the prompt clarification of the facts, and encourage defendants to confess and demonstrate remorse, Article 171, Paragraph 5 provides:

“A person who commits an offense under Paragraphs 1 to 3 and confesses during the investigation shall have his or her punishment reduced if he or she voluntarily surrenders all proceeds of the crime; where such confession leads to the discovery of another principal offender or accomplice, the punishment shall be reduced by up to one-half.”

The provision therefore gives a defendant an opportunity to obtain a meaningful reduction in sentence through confession.

The difficulty, however, lies in determining what constitutes a “confession.” Does a defendant confess merely by admitting that he knows another co-defendant? Is it sufficient to admit that he provided the relevant account? What if he admits that he carried out certain stock transactions but denies that he intended to manipulate the stock price?

In this judgment, the Supreme Court provided a relatively clear standard. It first explained that a confession requires an affirmative admission of “all or the essential parts” of the defendant’s own criminal conduct. More importantly, the Court stated that the “essential parts” must include facts satisfying both the subjective and objective elements of the offense. Accordingly, admitting only certain objective facts does not necessarily amount to a confession.

More specifically, even where a defendant admits that he objectively engaged in certain conduct, he may still deny possessing the subjective criminal intent required for the offense. If he minimizes his conduct or conceals the truth in an attempt to obtain conviction for a lesser offense or even an acquittal, such statements are inconsistent with the purpose of the confession-based sentence reduction mechanism, which is intended to encourage confession and remorse and to bring criminal proceedings to an earlier resolution.

Accordingly, although the defendant in this case admitted that he knew other persons involved in the case, he did not affirmatively admit the essential facts relating to the securities offense itself. He therefore did not qualify for sentence reduction under Article 171, Paragraph 5 of the Securities and Exchange Act.

IV. Analysis

The most significant aspect of this judgment is the Supreme Court’s clear position that a confession under the Securities and Exchange Act cannot consist solely of admitting objective facts. The defendant’s subjective criminal intent is also an important component of the confession.

For example, a defendant may admit that he provided the securities account, that he personally placed the stock orders, or even that he carried out transactions at another person’s direction. These are still merely objective facts. If, after admitting those facts, the defendant continues to assert, “I did not know they were manipulating the stock,” “I was merely helping them place orders,” or “I did not know this would drive up the stock price,” he may still be denying the subjective criminal intent required for the offense. Under the standard adopted by the Supreme Court in this judgment, such statements may not constitute a “confession” within the meaning of Article 171, Paragraph 5, and the defendant may therefore be unable to obtain the corresponding sentence reduction.

This makes defense strategy during the investigation of securities crimes considerably more difficult. A defendant unquestionably has the right to remain silent during an investigation and also has the right to dispute that he possessed the requisite criminal intent. If there is a genuine issue concerning subjective intent, joint principal liability, or another element of the offense, the defendant should not hastily admit criminal liability merely for the purpose of seeking a reduced sentence.

On the other hand, where the evidence is already relatively clear and the defendant wishes to rely on the confession-based sentence reduction under the Securities and Exchange Act, admitting only certain objective facts while consistently giving ambiguous answers concerning subjective criminal intent may ultimately result in the defendant neither succeeding in obtaining an acquittal nor qualifying for the sentence reduction available for a confession during the investigation.

V. Attorney’s Recommendations

How to confess, when to confess, and precisely how much to admit have always been difficult questions during the investigative stage of a criminal case. Under the standard adopted by the Supreme Court in this judgment, a “confession” under Article 171, Paragraph 5 of the Securities and Exchange Act requires more than merely admitting several objective facts. A defendant seeking the benefit of sentence reduction must, in principle, affirmatively admit the essential parts of the offense, including facts relating to both its subjective and objective elements.

This does not mean, however, that every defendant should immediately plead guilty. Once a defendant has admitted criminal liability, attempting later to retract that position and claim innocence may not be a sound defense strategy. Whether to maintain an innocence defense or, where the evidence is relatively unfavorable, make a complete confession and seek a reduced sentence is therefore one of the most important strategic decisions in criminal defense.

A defendant who attempts to preserve an innocence defense while simultaneously seeking the benefit of sentence reduction based on confession, and therefore gives ambiguous or evasive answers concerning subjective criminal intent, may, under the Supreme Court’s reasoning in this case, ultimately lose the benefit of both approaches.

Accordingly, in serious criminal cases involving the Securities and Exchange Act, a defendant should remain in close consultation with defense counsel throughout the investigation. The existing evidence, the elements of the potential offenses, and the legal consequences of making a confession should all be carefully evaluated before determining the most appropriate defense strategy, rather than waiting until after indictment to reconsider whether statements made during the investigation were sufficient to constitute a legal “confession.”