An insider trading probe into a Taiwanese maker of Covid-19 vaccines has raised wider concerns over financial oversight in the country and entangled the administration of President Tsai-ing Wen.

The Taipei-based prosecuting office for Shilin District told the Financial Times that it is investigating Medigen Vaccine Biologics Corporation after the company’s shares leapt more than 20 per cent in the days before it announced positive results for its vaccine’s phase 2 clinical trials in June. The prosecutor declined to provide further details on the investigation.

Last month, Tsai gave a televised address in which she rejected accusations from political opponents that her government had blocked imports of vaccines to boost Medigen’s stock price.

The probe opens up another front through which Tsai’s political rivals can attack the president as she attempts to fend off external pressure from China.

Only 8.2 per cent of Taiwan’s population has received their first jab, and the government has agreed to purchase 5m vaccines from Medigen in a bid to resolve a shortage that Taipei has partially blamed on China blocking its purchases of foreign-made doses. 

“We have done an internal investigation, and there is no evidence of the government or its employees speculating [on] the stock,” Tsai said during her address. Taiwan’s finance ministry later said none of the government’s eight state-backed banks had bought Medigen stock before the sudden jump.

Tsai has urged citizens to be wary of fake news on the vaccination campaign, which has proliferated in Taiwanese media as the country entered into a soft lockdown due to a domestic outbreak in early May. 

But the probe has cast a light on the prevalence of stock manipulation in Taiwan, where financial regulators often lack the legal authority necessary to crack down. “The Medigen case is highly political,” said Wang Wen-Yeu, a professor of capital markets law at National Taiwan University. “But the practice of insider trading is rampant in Taiwan.”

Wang pointed to a high-profile case involving Ko Wen-chang, a former chair of Hewlett-Packard Taiwan. Ko was sentenced in 2015 to nine years in prison after purchasing stock in a Taiwanese company that he knew would be acquired by a larger US group.

Lin Shu-Yu, an analyst at brokerage CLSA, added that “everyone in the financial industry knows that insider trading and stock manipulation is a problem”. She said for small listed companies it is common for employees, financial intermediaries and journalists to buy stocks with brokerage accounts of extended family and friends prior to the release of positive financial results.

“The public doesn’t have much confidence in the government’s ability to control this sector,” Lin added.

Part of the problem also stems from the fact that Taiwan’s Financial Supervisory Commission does not have jurisdiction over insider trading cases, lawyers argue.

Instead, the cases fall to local prosecutors “who lack the financial background to prosecute successfully”, said Wang. 

Wu Huan-Ting, an attorney at California-based Nolan Barton and Olmos points out that the conviction rate for insider trading is less than 40 per cent.

Officials argue that Taiwan’s approach simply requires a higher burden of proof.

“There are some problems with insider trading in Taiwan, but I do not think it is especially severe compared to other countries,” said Cindy Chang, chair of the government’s Securities and Futures Investors Protection Centre. 

Some highlight the contrast between Taiwan’s finance industry and its cutting-edge tech companies, which dominate in semiconductors.

“Taiwan’s financial markets have a long way to go,” said Wang, the law professor. “They are lagging behind the high-tech sector — it has to do with a lack of discipline.”

Medigen did not respond to a request for comment.