Important Measure December 2021
2022-02-23
1. Amendment to Articles 2, 5 and 6 of the Regulations Governing Content and Compliance Requirements for Shareholders' Meeting Agenda Handbooks of Public Companies
To strengthen the operation of shareholders' meetings of TWSE/TPEx-listed companies as set forth in the "Corporate Governance 3.0 - Sustainable Development Roadmap", and to timely inform investors of proposals to be put forward at regular shareholders' meetings of TWSE/TPEx-listed companies for them to have sufficient time to gain understanding of the proposals, as well as to encourage shareholders to participate in these meetings to exercise their rights, the Financial Supervisory Commission (FSC) amended Articles 2, 5 and 6 of the Regulations Governing Content and Compliance Requirements for Shareholders' Meeting Agenda Handbooks of Public Companies, to move forward the reporting date for TWSE/TPEx-listed companies to disclose information on regular shareholders' meeting agenda handbooks. The FSC issued the amendment on 16 December 2021.
2. Partial Amendment to the Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises
In order to attract the funds of domestic and foreign institutions to entrust domestic enterprises to offer discretionary investment services, to expand the scale of assets managed by domestic enterprises, as well as to strengthen the management of Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises (SITCs and SICEs) and trust enterprises and their personnel that concurrently operate discretionary investment business, the FSC issued an amendment on 8 December 2021 to the Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises. Key amendments are as follows:
I. Considering that domestic and foreign institutions meeting requirements for high net worth corporate investor as stipulated by item 1 to 4 of subparagraph 2 in paragraph 3 of Article 3 of the Regulations Governing Offshore Structured Products should be capable of dealing with matters related to discretionary investment, the FSC amended that a institutions meeting the above-mentioned criteria which have applied in writing to SITCs and SICEs as high net worth corporate investor, and it furthermore has designated a custodian for the discretionary investment assets, is also discretionary investment business customers as defined in paragraph 7 of Article 62 of the Securities Investment Trust and Consulting Act. The SITCs, SICEs and the customer may agree between themselves on the custody of the discretionary investment assets, and are exempted from application of the provisions of paragraph 1 regarding the customer shall place the discretionary investment assets in the custody of a discretionary investment custodian or transfer them to the custodian by trust.
II. For SITCs and SICEs, trust enterprises and their directors, supervisors, managerial officers, associated persons and employees providing or concurrently providing discretionary investment services using discretionary investment assets or trust property to trade in securities or related products, the amendment states that they shall not engage in buying or selling for its own benefit or the benefits of others. Securities-related products are also added to the investment targets regulated in current prohibited activities of enterprises and their personnel.
3. Partial Amendment to the Regulations Governing Securities Investment Trust Funds
In order to increase the operational flexibility of securities investment trust funds, to enhance the competitiveness of securities investment trust enterprises (SITEs) and to strengthen the development of asset management industry, the FSC issued an amendment on 28 December 2021 to the Regulations Governing Securities Investment Trust Funds. Key amendments are as follows:
I. In order to facilitate funds to participate in the investment of underwriting stocks, to enhance the allocation flexibility of the fund’s portfolio, and to increase its opportunity of obtaining profit, the FSC relaxed the upper limit of the ratio of each fund and total funds under the management of SITEs not exceeding 3% and 10% of the total underwriting stocks, respectively.
II. Considering the consistency of the fund's investment in domestic and foreign bonds, the FSC relaxed that the funds may invest in domestic subordinated bonds that have not reached a certain rating or have not been rated, however, the current restrictions on the ratio of investment in non-investment grade bonds for funds shall still be complied with.
III. In recent years, many financial institutions in various countries have issued contingent convertible bonds and total loss absorbing capacity bonds. To improve the competitiveness of bond funds, the FSC amended the regulation and allow the bond funds to invest in such targets.
4. Partial Amendment to the Regulations Governing Responsible Persons and Associated Persons of Securities Investment Trust Enterprises
In order to strengthen the risk management mechanisms and the management of personnel transactions of securities investment trust enterprises (SITEs), and to expand the channels for the employment of sales personnel of investment trust funds, the FSC issued an amendment on 30 December 2021 to the Regulations Governing Responsible Persons and Associated Persons of Securities Investment Trust Enterprises. Key amendments are as follows:
I. Considering that risk management personnel have become an important part of the corporate governance of SITEs, the business type of risk management is added to associated persons of SITEs. The amendment also requires that SITEs shall have adequate and competent risk management personnel, and specifies the qualifications these personnel shall possess and that they shall be full-time personnel. SITEs shall comply with these regulations by 31 December 2022.
II. SITEs are professional institutional investors who raise investment trust funds from the investing public or execute the investment of discretionary investment assets delivered by customers, and are highly related to the rights of investors. In consideration of this and to avoid conflicts of interest as well as to implement professional operating principles, the amendment stipulates that SITEs’ personnel may not act as another person's agent engaging in investment in securities or trading in securities-related products.
III. To facilitate SITEs and fund distributors in expanding the channels for the employment of sales personnel as well as developing their business, it is relaxed that personnel who have passed examinations for associated persons of investment-linked insurance products and regulations of investment trust and consulting may conduct fund distribution business.
5. The FSC Encourages Audit Firms to Prepare and Publish Transparency Reports to Enhance Audit Quality and Transparency in Taiwan
On 30 December 2021, the FSC released “Principles for Preparation of Transparency Reports by Audit Firms” as the basis for audit firms to prepare future transparency reports, hoping that the enhancement of transparency of audit firms would raise overall audit quality. The content of the transparency report shall include the overview, legal and governance structure, risk management and audit quality indicators of audit firms. The FSC takes a two-stage approach to implement this policy - in stage one, Big Four audit firms will make public their first copies of transparency reports by 2023; in stage two, the FSC will review from 2023 the result of the implementation for the Big Four audit firms to look into the possibility of extending application to non-Big Four audit firms.
From 2023, public companies can refer to the transparency report published voluntarily by audit firms to assess the governance and audit quality of the audit firms so as to appoint suitable audit firms or CPAs.
6. The FSC amends the Regulations Governing Establishment of Internal Control Systems by Public Companies and requires companies meeting certain conditions to appoint a person to concurrently serve as its chief information security officer, and to establish chief information security officer, information security unit, and its officers and personnel
In order to strengthen the information security management mechanisms of public companies, the FSC on 28 December 2021 amended the Regulations Governing Establishment of Internal Control Systems by Public Companies with relevant clarifications, requiring TWSE/TPEx-listed companies meeting certain conditions to appoint a person to concurrently serve as its chief information security officer, and to establish a dedicated information security unit with officers and personnel. For TWSE/TPEx-listed companies reaching NT$10 billion in paid-in capital or are constituent stocks of TWSE Taiwan 50 Index by the end of previous year, or whose primary business engage in providing E-commerce platform service for others products and services, shall appoint a person to serve as its chief information security officer, and establish a dedicated information security unit with officers and personnel by the end of 2022. For all other TWSE/TPEx-listed companies whose income before tax that has not shown consecutive losses in the most recent three years and their net asset value per share is not lower than par value in the most recent year's financial report, dedicated information security personnel and information security officers shall be established by the end of 2023, in order to gradually enhance their information security protection capabilities.
To strengthen the operation of shareholders' meetings of TWSE/TPEx-listed companies as set forth in the "Corporate Governance 3.0 - Sustainable Development Roadmap", and to timely inform investors of proposals to be put forward at regular shareholders' meetings of TWSE/TPEx-listed companies for them to have sufficient time to gain understanding of the proposals, as well as to encourage shareholders to participate in these meetings to exercise their rights, the Financial Supervisory Commission (FSC) amended Articles 2, 5 and 6 of the Regulations Governing Content and Compliance Requirements for Shareholders' Meeting Agenda Handbooks of Public Companies, to move forward the reporting date for TWSE/TPEx-listed companies to disclose information on regular shareholders' meeting agenda handbooks. The FSC issued the amendment on 16 December 2021.
2. Partial Amendment to the Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises
In order to attract the funds of domestic and foreign institutions to entrust domestic enterprises to offer discretionary investment services, to expand the scale of assets managed by domestic enterprises, as well as to strengthen the management of Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises (SITCs and SICEs) and trust enterprises and their personnel that concurrently operate discretionary investment business, the FSC issued an amendment on 8 December 2021 to the Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises. Key amendments are as follows:
I. Considering that domestic and foreign institutions meeting requirements for high net worth corporate investor as stipulated by item 1 to 4 of subparagraph 2 in paragraph 3 of Article 3 of the Regulations Governing Offshore Structured Products should be capable of dealing with matters related to discretionary investment, the FSC amended that a institutions meeting the above-mentioned criteria which have applied in writing to SITCs and SICEs as high net worth corporate investor, and it furthermore has designated a custodian for the discretionary investment assets, is also discretionary investment business customers as defined in paragraph 7 of Article 62 of the Securities Investment Trust and Consulting Act. The SITCs, SICEs and the customer may agree between themselves on the custody of the discretionary investment assets, and are exempted from application of the provisions of paragraph 1 regarding the customer shall place the discretionary investment assets in the custody of a discretionary investment custodian or transfer them to the custodian by trust.
II. For SITCs and SICEs, trust enterprises and their directors, supervisors, managerial officers, associated persons and employees providing or concurrently providing discretionary investment services using discretionary investment assets or trust property to trade in securities or related products, the amendment states that they shall not engage in buying or selling for its own benefit or the benefits of others. Securities-related products are also added to the investment targets regulated in current prohibited activities of enterprises and their personnel.
3. Partial Amendment to the Regulations Governing Securities Investment Trust Funds
In order to increase the operational flexibility of securities investment trust funds, to enhance the competitiveness of securities investment trust enterprises (SITEs) and to strengthen the development of asset management industry, the FSC issued an amendment on 28 December 2021 to the Regulations Governing Securities Investment Trust Funds. Key amendments are as follows:
I. In order to facilitate funds to participate in the investment of underwriting stocks, to enhance the allocation flexibility of the fund’s portfolio, and to increase its opportunity of obtaining profit, the FSC relaxed the upper limit of the ratio of each fund and total funds under the management of SITEs not exceeding 3% and 10% of the total underwriting stocks, respectively.
II. Considering the consistency of the fund's investment in domestic and foreign bonds, the FSC relaxed that the funds may invest in domestic subordinated bonds that have not reached a certain rating or have not been rated, however, the current restrictions on the ratio of investment in non-investment grade bonds for funds shall still be complied with.
III. In recent years, many financial institutions in various countries have issued contingent convertible bonds and total loss absorbing capacity bonds. To improve the competitiveness of bond funds, the FSC amended the regulation and allow the bond funds to invest in such targets.
4. Partial Amendment to the Regulations Governing Responsible Persons and Associated Persons of Securities Investment Trust Enterprises
In order to strengthen the risk management mechanisms and the management of personnel transactions of securities investment trust enterprises (SITEs), and to expand the channels for the employment of sales personnel of investment trust funds, the FSC issued an amendment on 30 December 2021 to the Regulations Governing Responsible Persons and Associated Persons of Securities Investment Trust Enterprises. Key amendments are as follows:
I. Considering that risk management personnel have become an important part of the corporate governance of SITEs, the business type of risk management is added to associated persons of SITEs. The amendment also requires that SITEs shall have adequate and competent risk management personnel, and specifies the qualifications these personnel shall possess and that they shall be full-time personnel. SITEs shall comply with these regulations by 31 December 2022.
II. SITEs are professional institutional investors who raise investment trust funds from the investing public or execute the investment of discretionary investment assets delivered by customers, and are highly related to the rights of investors. In consideration of this and to avoid conflicts of interest as well as to implement professional operating principles, the amendment stipulates that SITEs’ personnel may not act as another person's agent engaging in investment in securities or trading in securities-related products.
III. To facilitate SITEs and fund distributors in expanding the channels for the employment of sales personnel as well as developing their business, it is relaxed that personnel who have passed examinations for associated persons of investment-linked insurance products and regulations of investment trust and consulting may conduct fund distribution business.
5. The FSC Encourages Audit Firms to Prepare and Publish Transparency Reports to Enhance Audit Quality and Transparency in Taiwan
On 30 December 2021, the FSC released “Principles for Preparation of Transparency Reports by Audit Firms” as the basis for audit firms to prepare future transparency reports, hoping that the enhancement of transparency of audit firms would raise overall audit quality. The content of the transparency report shall include the overview, legal and governance structure, risk management and audit quality indicators of audit firms. The FSC takes a two-stage approach to implement this policy - in stage one, Big Four audit firms will make public their first copies of transparency reports by 2023; in stage two, the FSC will review from 2023 the result of the implementation for the Big Four audit firms to look into the possibility of extending application to non-Big Four audit firms.
From 2023, public companies can refer to the transparency report published voluntarily by audit firms to assess the governance and audit quality of the audit firms so as to appoint suitable audit firms or CPAs.
6. The FSC amends the Regulations Governing Establishment of Internal Control Systems by Public Companies and requires companies meeting certain conditions to appoint a person to concurrently serve as its chief information security officer, and to establish chief information security officer, information security unit, and its officers and personnel
In order to strengthen the information security management mechanisms of public companies, the FSC on 28 December 2021 amended the Regulations Governing Establishment of Internal Control Systems by Public Companies with relevant clarifications, requiring TWSE/TPEx-listed companies meeting certain conditions to appoint a person to concurrently serve as its chief information security officer, and to establish a dedicated information security unit with officers and personnel. For TWSE/TPEx-listed companies reaching NT$10 billion in paid-in capital or are constituent stocks of TWSE Taiwan 50 Index by the end of previous year, or whose primary business engage in providing E-commerce platform service for others products and services, shall appoint a person to serve as its chief information security officer, and establish a dedicated information security unit with officers and personnel by the end of 2022. For all other TWSE/TPEx-listed companies whose income before tax that has not shown consecutive losses in the most recent three years and their net asset value per share is not lower than par value in the most recent year's financial report, dedicated information security personnel and information security officers shall be established by the end of 2023, in order to gradually enhance their information security protection capabilities.
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Update：
2022-02-24