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Newsletter No: 031

January 1, 2007

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I. News and Events 　　(Chinese)

1.   Issue measures of futures trading at overseas futures exchanges by futures commission merchants

On 13 November 2006, the FSC allowed futures commission merchants (FCMs) engaging in re-consigned foreign futures business to apply for executing futures trades and settlement at overseas futures exchanges through either a controlling company, which holds more than 50% voting rights of the FCM, or a subordinate company whose more than 50% voting rights held by the aforesaid controlling company, as well as, a subordinate company whose more than 50% voting rights held by the aforesaid FCM and qualified as clearing member of the overseas futures exchanges executing futures trades and settlement. The aforesaid holding more than 50% voting rights includes direct and indirect holdings.

 

2.   Strengthen supervisions on Securities Investment Trust Enterprises and adopt uniform management with offshore funds sub-distributors

On 24 November 2006, the FSC amended selected provisions of the Regulations Governing Securities Investment Trust Enterprises (SITEs), in order to strengthen supervision on SITEs. Besides, the amendments coordinate with liberalizing other enterprises to sell domestic securities investment trust funds and bring SITEs under uniform management with offshore funds sub-distributors. The key amendments are as the following:

(1)  New provisions require SITEs to implement Know Your Customers guidelines and require customers to submit relevant certificated documentation. Besides, SITEs and their funds sub-distributors shall comply with provisions of anti-money laundering and short-term trading control when handling subscriptions or redemptions of funds.

(2)  New provisions require that SITEs shall report any advertising, public information meetings, or promotional activities undertaken either by themselves or by their funds sub-distributors to Securities Investment Trust and Consulting Association (SITCA). If a funds sub-distributor conducts any prohibited behaviors or violates reporting requirements of preceding activities, the SITE and its funds sub-distributor will bear legal liability under relevant laws and regulations.

 

3.  Strengthen internal control and auditing systems of Securities Investment Trust Enterprises (SITEs) and Securities Investment Consulting Enterprises (SICEs) conducting discretionary investment business

On 28 November 2006, the FSC issued the amended Regulations Governing the Establishment of Internal Control Systems by Securities Investment Trust Enterprises and by Securities Investment Consulting Enterprises Conducting Discretionary Investment Business. The amendments aim to strengthen the internal control and auditing systems of SITEs and SICEs conducting discretionary investment business. In addition to strengthening internal control systems and enhancing the independence and effectiveness of implementation of internal auditing systems, the amendments added provisions that allow the competent authority to require the establishment of legal compliance units depending on the enterprise's business scope and nature of business, to increase the soundness of internal control and auditing systems of aforesaid enterprises.

 

4.   Adjusted measures in 2007 at securities and futures markets for extra working days due to flexible supplemental holidays for the Chinese New Year, Tomb-Sweeping Day, the Dragon Boat Festival, and the Mid-Autumn Festival

In response to the flexible supplemental holidays for the Chinese New Year, Tomb-Sweeping Day, the Dragon Boat Festival, and the Mid-Autumn Festival, employees are required to work on March 3, April 14, June 23, and September 29, respectively (all are Saturdays), the Financial Supervisory Commission decided that there will be extra 4 trading days at the GreTai Securities Market and the centralized securities and futures markets on the above given dates (please refer the details to the 2007 schedule of trading days and holidays at the centralized securities market in Taiwan).

 

5.   Information on the prosecution of major securities law violations and related judgments is provided with English and Chinese versions at the website of the Securities and Futures Bureau of the Financial Supervisory Commission, Executive Yuan: http://www.sfb.gov.tw/intro_index.asp .

 

II. Market Wrap-up

As of the end of November, 689 companies were listed on the Taiwan Stock Exchange, an increase of 1 against the previous month. The total capital issued was NT$ 5,531.25 billion, an increase of NT$6.78 billion over the preceding month, and the market capitalization was NT$18,722.60 billion, an increase of NT$1,377.61 billion over the preceding month.

As of the end of November, 532 companies were listed on the GreTai Securities Market, an increase of 1 against the previous month. The total capital issued was NT$ 730.82 billion, an increase of NT$7.96 billion against the preceding month, and the market capitalization was NT$1,778.345 billion, an increase of NT$160.60 billion against the previous month.  

In November, the trading value of shares on the Taiwan Stock Exchange was NT$2,353.69 billion, an increase of NT$681.92 billion over the previous month, while the trading volume was 82.09 billion shares, an increase of 26.93 billion shares compared with the previous month.

As of the end of November, the accumulated net inward remittance of foreign investors was US$127.85 billion, an increase of US$4.26 billion over October. There are currently 138 securities firms, 22 futures commission merchants, 43 securities investment trust enterprises and 175 securities investment consulting enterprises.

 

III. Measures related to futures trading, please refer to the website of Taiwan Future Exchange (http://www.taifex.com.tw/chinese/home.htm)

 

IV. Q&A

1.  Investment quotas for foreign investors

Under the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Investors, foreign investors are divided into two categories: foreign institutional investors (FINIs) and foreign individual investors (FIDIs). While FIDIs are subject to a US$5 million investment quota, FINIs are free of an upper limit on investment. However, in a few specific industries foreign investors are still subject to investment ceilings under relevant acts or regulations.

2. Investment scope for offshore foreign investors

The scope of investment in Taiwan securities markets open to offshore foreign investors is as follows:

1. Stocks, bond conversion entitlement certificates, and Taiwan Depositary Receipts issue privately placed by listed, over-the-counter (“OTC”), or emerging-stock companies.

2.Securities investment trust fund beneficiary certificates placed publicly or privately.

3.Government bonds, financial bonds, ordinary corporate bonds, convertible corporate bonds, and corporate bonds with warrants.

4.Beneficial securities placed publicly or privately by trustee institutions, or asset-backed securities placed publicly or privately by special-purpose companies.

5. Call warrants and Put warrants.

6. Other securities approved by the competent authority for the securities industry, such as underwritten call/put warrants in IPO prior to initial listing, real estate investment trust beneficial securities and real estate asset trust beneficial securities placed publicly or privately, listed/GTSM beneficiary certificates, open-ended beneficiary certificates, foreign-currency-denominated fund issued by SITEs, underwritten stocks in IPOs prior to initial GTSM listing and underwritten GTSM stocks in rights offerings, beneficiary certificates prior to initial listing, NT dollar bonds issued in Taiwan by international financial organizations, and preferred shares issued by listed/GTSM companies and private securities trust funds placed by SITEs.

Additionally, Funds that have been duly and timely remitted into Taiwan for the purchase of domestic securities and that have not yet been invested may be used as follows (with the total value of such use not to exceed 30 percent of the amount remitted in, except in the case of outright bond trading):

1. Investment in government bonds, time deposits, and money market instruments;   trading of NTD interest-rate derivatives on over-the-counter.

2. Investments in NT dollar time deposits shall be limited to duration of three months, with a one-time extension of three months allowed at expiration.

3. Investments in money market instruments, limited to bills within 90 days of expiration.

3.  Requirements over the outward remittance of investment principal, capital gains and the other investment gains by foreign investors.

1. After receiving permission to invest in Taiwan, foreign investors may apply to remit investment capital and investment earnings out of the ROC. However, outward remittances of capital gains and stock dividends may be made from realized earnings only.

2. Applications for foreign exchange remittance for investment capital and earnings shall be handled in accordance with the Act for the Regulation of Foreign Exchange (under the purview of the Central Bank).

3.When a foreign investor intends to repatriate investment earnings, the investor's agent or representative shall submit documents evidencing the filing of a tax return and payment of taxes by an agent/representative approved by the tax authorities and carry out exchange settlement in accordance with the Act for the Regulation of Foreign Exchange; however, during a period when assessment of ROC income tax on capital gains from securities transactions is suspended, the agent or representative may submit a tax clearance certificate from the tax authorities and carry out exchange settlement in accordance with the Act for the Regulation of Foreign Exchange.

4.  Exercising shareholder's rights for offshore foreign investors

1. The voting rights of a foreign institutional investor outside of Taiwan ("offshore foreign institutional investor") holding shares in a public company in Taiwan may be exercised as follows:

(1)Exercise electronically or by means of a written form in accordance with Article 177-1 of the Company Act;

(2)Exercise through appointment of a company conforming to Article 3, paragraph 2 of the Regulations Governing Handling of Stock Affairs by Public Companies;

(3)Exercise through appointment of a domestic agent or representative to exercise voting rights at the shareholder meeting;

(4)Exercise through an appointment by the domestic agent or representative, as authorized by the offshore foreign institutional investor, of a party other than the domestic agent or representative to exercise voting rights at the shareholder meeting;

2. An offshore foreign institutional investor that appoints a company as indicated in point 2 of the preceding paragraph or a person as indicated in points 3 and 4 therein to exercise voting rights at a shareholder meeting shall in each case clearly indicate in the letter of appointment its instructions regarding the exercise of voting rights on each proposal.

3.An offshore foreign institutional investor may not give a proxy form issued by the public company to a proxy solicitor or proxy agent. 

5. Restrictions on investment of money market instruments for offshore foreign investors

The government's opening of Taiwan’s securities market to offshore foreign investors is primarily oriented toward drawing investment into securities on the centralized exchange market. Investing in money market instruments is purely for short-term cash management needs. The cap of 30 percent should be sufficient for this purpose. Therefore, currently there are no plans to raise the ceiling.

6.Prefunding Issues in Taiwan

1. Domestic financial institutions in Taiwan since 4 May 2004 have been allowed to provide intraday credit to foreign investors to assist foreign investors who, due to time differences, are unable to make timely remittance of funds to complete settlement.

2. Some Taiwan securities firms instituted their own requirement on foreign investors to provide settlement funds in advance (i.e., prefunding) when they place an order, causing inconvenience to foreign investors. A late settlement system has therefore been adopted for foreign investors to postpone settlement until 6 p.m. of the third business day after the date of the trade under certain circumstances, such as a discrepancy between holidays in different time zones, interruptions in telecommunications or natural disaster.  The deadline for securities firms to report default by foreign investors shall be expended to the third business day after the date of the trade.

3. The TSEC has amended Article 76 of the Operating Rules of the Taiwan Stock Exchange Corporation on August 1, 2005, repealing the provision that an investor may not open an account and engage in trading for a period of three years after a conclusive finding of settlement default.

4. The FSC allowed Overseas Chinese and Foreign Nationals to borrow funds for settlement engaging in trading listed and GTSM securities from securities firms, securities finance enterprises and financial institutions on June 2, September 13 and November 15, 2006, respectively.

7. Disclosure of the investment positions of foreign investors

The FSC does not disclose investment information of individual foreign investors, but foreign investors are nevertheless obligated to comply with reporting requirements.

8. Locking period of stocks

The trading of stocks held by foreign investors is not subject to a "locking period".

9. Off-exchange transactions

1.Article 150 of the Securities and Exchange Act provides that trading of listed securities shall be conducted on a centralized securities trading market operated by a stock exchange. However, paragraph 4 of the same Article empowers the Competent Authority to make provisions for permitting off-exchange transactions in exceptional situations. For example, a foreign investor who has received approval from the Investment Commission of the Ministry of Economic Affairs under the Act Governing Investment by Foreign Nationals to transfer assets to another foreign investor may do so through off-exchange trading. Many foreign investors have invested in Taiwan stocks through such off-exchange channels over the years.

2. Under current law, securities listed on the GreTai Securities Market (GTSM) can be traded off-market. But, in those cases of securities for which the relevant authorities have duly set a foreign investment ceiling in accordance with law, foreign investors (who must have obtained approval or registration in accordance with the Regulations Governing Securities Investment by Overseas Chinese and Foreign Investors) are required to trade such securities through the GTSM trading system. However, only a very few OTC stocks are subject to this requirement. Most GTSM stocks can also be traded by foreign investors via price negotiation at the business places of securities firms.

3.After each market close, the TSEC also provides auction and tender offer systems in which securities prices are negotiable to satisfy various investors’ demands. 

10. What are recently key adjustments to the Block Trading System?

In the past, block trading was traded after trading-hours with the closing price. To liven up the market and cater to investors’ needs, a new block trading system was launched on April 4, 2005, designed with reference to block trading systems employed overseas. The new system expands the applicable scope of block trading (the minimum order quantity is now 500,000 shares or NT$15 million per single stock buy or sell trade, or 5 stocks and NT$15 million per basket buy or sell trade), increases price flexibility, and allows block trading during trading hours. The securities firm pre-collects the securities and funds, reports them to the stock exchange by computer, and trades are then settled by same-day real-time gross settlement, raising the efficiency of trading.

11. Foreign ownership restrictions

Taiwan lifted limits on total/individual foreign shareholding in public companies from 30 December 2000. Applicable acts and regulations may in a few instances limit the percentage of equity holdings by foreign nationals in companies in certain industries (such as postal industry, telecommunications, and shipment) to meet policy needs related to national interests in the economic, social, or cultural spheres. Most developed countries have similar policies, and the practice in Taiwan is in line with developed-market standards.

12. Odd-lot trading

In the past, offshore foreign investors were permitted to sell stocks in odd lots, but not to buy them. To meet the varied trading and investment demands of foreign investors, the FSC announced on 22 July 2005 that offshore foreign investors are also permitted to buy odd lots.

13. Permission for asset transfers between offshore foreign investors with different ID numbers but where the final beneficiary is the same person

1.A foreign investor may open multiple depositary accounts in Taiwan, as long as each account bears the same investor registration number. Assets may be transferred freely between such accounts, without the need for a buy-sell process.

2.The FSC further announced that transferring of assets accounts involved belonging to the same final beneficiary legal entity and there is no violation of off-exchange trading rules. Moreover, the FSC has eased rules relating to signing documents by a great number of final beneficiaries.

14. Evaluation of the MSCI revision of the Limited Investability Factor

Morgan Stanley Capital International (MSCI) raised the Limited Investability Factor (LIF) applied to the MSCI Taiwan Index to 1 from the former 0.75 effective after market close on 31 May. This adjustment has raised the international standing of Taiwan's securities market and pushed Taiwan into the top spot in the MSCI Emerging Markets (EM) Index, and has helped to boost investor interest in Taiwan stocks, attract a stronger influx of foreign capital, and enliven and expand Taiwan's securities markets.

15. Reformation for FTSE

1.  In its list of country classifications announced in September 2004, the FTSE Group upgraded Taiwan and South Korea from its Provisional Watch List for Developed Markets to its Watch List for Developed Markets. In response, the FSC formed a special working group in November 2004 to study and launch further market reforms in Taiwan, and held overseas roadshows actively.

2. To support an upgrade of Taiwan's securities market to Developed Market status, the FSC has launched a series of improvements aimed at further deregulating and internationalizing the market. For example: introducing a settlement grace period mechanism for foreign investors, easing requirements for foreign investor participation in the securities borrowing and lending system, streamlining the foreign investor registration system, simplifying asset transfers between foreign investors with different ID numbers, relaxing off-exchange trading systems, as well as completely opening foreign investors to engage in futures transactions for hedging and non-hedging purposes, allowing to trade through individual accounts or omnibus accounts, allowing to borrow money from securities firms and securities financing enterprises and allowing to borrow money in NT dollar from banks.

 

Note: If you expect to receive this newsletter, or have your name deleted from the sending list, or have your email information changed, please send to newsletter@sfb.gov.tw.If you hope to know more about the Taiwan's securities and futures markets, please surf the websites of Securities and Futures Bureau, Taiwan Stock Exchange, Taiwan Futures Exchange, GreTai Securities Market, Taiwan Securities Central Depository.

Disclaimer: The SFB did its utmost to ensure that the information in newsletter is complete and true. All materials on this newsletter are for general information only. They are not legal or other professional advice and shall not be relied on as such. The SFB and its employees do not warrant the accuracy and completeness of the materials and disclaim all liabilities for eventual loss or damage. Links to external websites are provided purely for convenience. The SFB has no control over the websites and does not assume any responsibility for their contents. Inclusion in this website of any document from a third party or the provision of links does not constitute endorsement of the contents.

Copyright Notice: Copyright protected materials on this newsletter shall not be used for commercial purposes. The SFB permits accurate reproduction of the materials for non-commercial use. When third party copyright is involved, permission for reproduction must be obtained direct from the appropriate copyright owner.

 

行政院金管會證期局第三十一期新聞信

壹、 重要公告

一、發布期貨商經營國外期貨交易業務於國外交易所進行期貨交易之方式

本會於95年11月13日開放經營國外期貨交易複委託業務之期貨商，得申請本會核准由其所屬持有表決權逾50％之控制公司，或該控制公司持有表決權逾50％之從屬公司，或該經營國外期貨交易複委託業務之期貨商持有表決權逾50％從屬公司，且具有國外交易所結算會員資格者，於國外交易所執行期貨交易及結算交割；所稱持有表決權逾50％，包括直接及間接持有。

 

二、加強投信事業之監理並與境外基金銷售機構為一致性管理

本會於95年11月24日修正證券投資信託事業管理規則部分條文，主要為加強對投信事業之監理，並配合開放他業從事國內證券投資信託基金之銷售，並與境外基金銷售機構為一致性管理，本次修訂重點如下：

(一) 增訂投信事業應充分瞭解客戶並要求其提供相關證明文件，並規範投信事業及其基金銷售機構受理基金申購及買回，應遵行洗錢防制規定及執行基金短線交易防制相關規範。

(二) 增訂證券投資信託事業或其基金銷售機構為基金之廣告、公開說明會及促銷活動，統一由投信事業向同業公會申報；以及基金銷售機構從事基金之廣告、公開說明會及其他促銷活動如涉及不得為之行為及違反應申報規定，將視投信事業及基金銷售機構責任之歸屬，由投信事業或基金銷售機構依相關法令負其責任。

 

三、強化證券投資信託事業及接受全權委託業務之證券投資顧問事業內部控制及內部稽核制度

本會於95年11月28日修正發布「證券投資信託事業及經營接受客戶全權委託投資業務之證券投資顧問事業內部控制制度處理準則」，強化證券投資信託事業及經營接受客戶全權委託投資業務之證券投資顧問事業內部控制及內部稽核制度；除強化內部控制制度及提昇內部稽核執行效果及獨立性外，並增列主管機關得視事業規模及業務性質，命令設置法令遵循單位，以健全證券投資信託事業及經營接受客戶全權委託投資業務之證券投資顧問事業內部控制制度及內部稽核制度。

 

四、為配合政府行政機關96年度春節、民族掃墓節、端午節及中秋節彈性放假後之補行上班，證券及期貨市場採取之調整措施

為配合政府行政機關於96年度春節、民族掃墓節、端午節及中秋節彈性放假後，分別於96年3月3日、4月14日、6月23日及9月29日（均為星期六）補行上班1日，行政院金融監督管理委員會決定，證券集中交易市場、證券櫃檯買賣市場及期貨集中交易市場於上開4日均補行交易1日，並依規定辦理結算交割事宜。（詳參中華民國96年有價證券集中交易市場開（休）市日期表）

 

 

五、重大證券犯罪起訴及判決情形中英文資訊請參考證券期貨局網站http://www.sfb.gov.tw/intro_index.asp。

 

 

貳、 重要指標

截至2006年11月底止
上市公司計有689家，較上月增加1家；資本額新台幣5,531.25十億元，較上月增加新台幣6.78十億元；上市市值新台18,722.60十億元，較上月增加新台幣1,377.61十億元。

上櫃公司計有532家，較上月增加1家，資本額新台幣730.82十億元，較上月增加新台幣7.96十億元；上櫃市值新台幣1,778.34十億元，較上月增加新台幣160.60十億元。

集中市場股票總成交值新台幣2,353.69十億元，較上月增加新台幣681.92十億元；成交量82.09十億股，較上月增加26.93十億股。外資總累積匯入淨額127.85十億美元，較上月增加4.26十億美元。

證券商計138家，期貨商計22家，投資信託公司計43家，投資顧問公司計175家。

 

參、 交易人從事期貨交易相關措施請參考臺灣期貨交易所網站-http://www.taifex.com.tw/chinese/home.htm。