Banking Act | Is it illegal to share investment information with family and friends?

違反銀行法 刑事訴訟

Following the previous article, Articles 29, 29-1, and 125 of the Banking Act specify the crime of illegal fundraising, with a criminal penalty of 3 to 10 years. If the amount exceeds 100 million, the penalty can be increased to over 10 years. But is it considered a violation of the Banking Act to "share investment information with family and friends"?


Banking Law Regulations

Banking Law Regulations

Unless otherwise specified by law, non-banks shall not engage in the acceptance of deposits, the entrusted management of trust funds, public property, or carry out domestic and foreign exchange business.

Banking Law Article 29-1 (Quasi-Acceptance of Deposits)

Borrowing, accepting investments, making someone a shareholder, or under other pretexts, from a majority or an unspecified number of people, and agreeing or paying a dividend, interest, or other compensation disproportionately high compared to the principal shall be regarded as accepting deposits.

Banking Law Article 125 (Illegal Fundraising Crime)

Violators of the provisions of Article 29, Paragraph 1, shall be sentenced to a fixed-term imprisonment of not less than three years but not more than ten years and may, in addition, be fined from ten million New Taiwan Dollars to two hundred million. If the crime results in financial gains or benefits of over one hundred million New Taiwan Dollars, the sentence shall be not less than seven years, with a possible additional fine of twenty-five million to five hundred million New Taiwan Dollars.

In particular, Article 29-1 of the Banking Act states: "Anyone who, under the guise of loans, accepting investments, joining as shareholders, or other pretexts, receives money or raises funds from the public or an unspecified number of people, and promises or pays dividends, interest, or other compensation disproportionately high compared to the principal amount, shall be treated as accepting deposits."

A key aspect of this law is the phrase "receives money or raises funds from the public or an unspecified number of people." Recent Supreme Court and High Court rulings have clarified that sharing information privately with a select group of family and friends does not constitute "public solicitation" and therefore does not fall under the crime of illegal fundraising intended to prevent underground companies from accepting investments from hundreds of people. 

Pertinent Supreme Court and High Court decisions:

Supreme Court Decision No. 4788/2020

The defendant only accepted money from acquaintances he knew and specified, such as Xu Man Ni and Huang Miao Ling, before July 11, 2012. Starting July 12, 2012, through Xu Man Ni’s introductions, he raised funds from a small circle of friends and neighbors like Li Shi Xuan and others, which did not involve soliciting funds from the public or an unspecified number of people, and thus did not meet the conditions of operating an illegal banking business.

Supreme Court Decision No. 5521/2020

"Initially, the defendant only received money from six acquaintances he knew, such as Zhong Hong Xin. Whether the money received from these six people during this period constituted soliciting deposits from 'the public or an unspecified number of people,' as stipulated by Articles 5-1 and 29-1 of the Banking Act, was not adequately addressed in the original judgment."

Supreme Court Decision No. 3715/2020

"According to the original judgment, the defendants solicited investments or loans from about nine people over nearly a year, which included two married couples. The actual number of solicited individuals was effectively only seven (groups), which does not align with the legislative intent behind the amendments to Article 29-1 of the Banking Act in 1989, aimed at combating 'underground investment companies' that solicit funds from hundreds or thousands of people."

High Court Decision No. 46/2020

"If the actor merely informs and persuades a small number of close friends or specific trusted individuals to lend or invest, without continuously expanding the circle of borrowers or investors to the public, such actions should be seen as personal financial investments among a specific few. Even if the terms promised to investors involve guarantees or disproportionately high returns compared to the principal, the impact on public financial stability is minimal, and based on the principle of restraint in criminal law, such behavior should not fall within the scope intended for punishment under the illegal operation of deposit-taking businesses."

These rulings indicate that private inquiries among individuals with established trust or personal relationships do not constitute the crime of illegal fundraising under the Banking Act. However, if a court determines that the solicitation was made to the public or an unspecified group, it could be considered a violation. The specific nature of each case—whether it involves public solicitation or private inquiries—depends on the detailed circumstances.

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Reference:Banking Law

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