Important Measure September 2022
2022-12-09
1. FSC Amends Articles 21, 38, and 69 of the “Regulations Governing Securities Firms” and Articles 21 and 40 of the “Regulations Governing the Preparation of Financial Reports by Securities Firms” and issues a related interpretive order (2022/9/1)
To promote the timely disclosure of financial information by securities firms, and to allow for more flexible use of the funds in securities firms’ customer ledgers, the FSC on 1 September 2022 amended the above-cited articles of the “Regulations Governing Securities Firms” and the “Regulations Governing the Preparation of Financial Reports by Securities Firms”. Key points of the amendments are as follows:
(1) Amendments to the “Regulations Governing Securities Firms”:
A. The annual financial report filing deadline for some securities firms has been adjusted: To promote timely financial disclosures by securities firms and for the sake of consistency in the regulatory supervision of financial services firms, the amendment provides that, beginning from fiscal year 2022, the deadline for reporting the annual financial reports by public securities firms and securities firms under a financial holding company is shortened from the original 3 months after the close of each fiscal year to no later than 75 days.
B. More flexible use of the funds in securities firms’ customer ledgers: To enliven the use of funds in the customer ledgers under securities firms’ settlement accounts and increase returns on such funds, the amendment expands the permitted uses of funds in customer ledgers beyond the original limited purpose of making required payments on behalf of customers. The amended provisions allow a securities firm, with the customer’s consent, may use such funds to invest in safe and high-liquidity financial products, or may deposit such funds at separate banks.
C. In coordination with the amendment to Article 38 of the Regulations, the FSC issued an interpretive order on 5 September 2022 that permits securities firms to use funds in customer ledgers to purchase domestic government bonds and treasury bills, or if the funds in a customer ledger account in the form of a time deposit exceed NT$1 billion, that portion in excess of NT$1 billion may be transferred to a time deposit account at another bank. The order also specifies limits on the amounts of customer ledger funds that may be used in these ways, and sets out requirements for liquidity control, information reporting, internal control mechanisms, and other supporting measures.
(2) Amendments to the “Regulations Governing the Preparation of Financial Reports by Securities Firms”: All public securities firms are required to prepare annual reports to shareholders in compliance with the “Regulations Governing Information to be Published in Annual Reports of Public Companies.” Some content of these annual reports overlaps with the disclosure requirements set out in Articles 28 to 31 of the “Regulations Governing the Preparation of Financial Reports by Securities Firms” (the “Regulations”) regarding matters including compensation for directors and supervisors, labor-management relations, employee salary information, cyber security management, and financial analyses for the most recent 5 years, etc. To avoid possible confusion from redundant content in the annual report and the financial report, and to bring the requirements governing securities firms into line with those applying to other public companies, the amendment provides that a securities firm that discloses in its annual report to shareholders the content specified in Articles 28 to 31 of the Regulations is exempted from the disclosures required by Articles 28 through 32 in its annual parent company only (or individual) financial report.
2. FSC Partially Amends the Regulations Governing the Offering and Issuance of Securities by Foreign Issuers (2022/9/5)
To strengthen its review and control of securities offerings by companies with a primary listing on the TWSE or TPEx, ensure equitable regulatory treatment of offerings by domestic and foreign securities issuers, and ease restrictions on the currencies in which foreign emerging stock board companies issue straight corporate bonds, the FSC amended the above-cited Regulations on 5 September 2022. Key points of the amendment include the following:
(1) Strengthened regulation of the capital raising activities of TWSE and TPEx primary listed companies:
A. A new 20 business day waiting period is introduced for effective registration of certain types of offerings, and additional grounds for rejection are introduced: With respect to filings by TWSE and TPEx primary listed companies for securities offerings that have a relatively wide-ranging impact on investors, such as for a domestic issue of corporate bonds with equity characteristics or an issue of new shares for cash capital increase, if any irregularity is seen in the company’s finances or business, the review period will be extended to 20 business days. This brings the requirement for foreign issuers into line with the provisions of the Regulations Governing the Offering and Issuance of Securities by Securities Issuers. The amendment also introduces new grounds on which the FSC may reject filings for such cases. Additionally, with reference to the provisions of the Company Act, the amended Regulations require an issuer that has incurred after-tax losses for 2 consecutive years to submit a sound business plan.
B. Strengthened controls during the post-offering period: The amendment extends the period for which the issuer is required to engage an underwriter’s assistance from 2 fiscal years to 3 fiscal years. For cases in which the implementation of an offering differs materially from the plan, the amendment requires that the matter be submitted to the board of directors and a shareholders meeting to amend the plan. In addition, for a foreign issuer that has a major subsidiary located in mainland China, the capital that the issuer raises in Taiwan must be deposited with a Taiwanese bank or an overseas subsidiary or branch thereof, and utilized in accordance with the plan.
(2) Eased restrictions on the allowable types of straight corporate bonds and amended requirements regarding prospectuses: The amended Regulations allow foreign emerging stock board companies to issue straight corporate bonds in foreign currencies, and set out separate prospectus disclosure requirements for straight corporate bonds depending on whether they are sold to professional investors or retail investors.
(3) Other amendments:
A. With respect to both publicly offered and privately placed straight corporate bonds, the Regulations place restrictions on the uses of the proceeds, foreign exchange settlement, and reporting matters.
B. To improve administrative efficiency and achieve supervisory consistency, the amended Regulations, under the authority of Article 16 of the Administrative Procedure Act, expressly empower the FSC to engage the TWSE or the TPEx to suspend the public issuance of the stock of a foreign issuer.
3. FSC Amends the Directions for Public Companies Conducting Private Placements of Securities (2022/9/7)
The FSC amended Points 3 and 5 of the Directions for Public Companies Conducting Private Placements of Securities. The amendments expressly require an issuer conducting a private placement of corporate bonds to obtain an approval letter from the Central Bank in advance. They also require the issuer to submit regular filings to the Central Bank of any changes in the outstanding balance of privately placed bonds, and set out other relevant matters that issuers must handle with the Central Bank to support the Central Bank’s foreign exchange management needs.
4. FSC Issues Order Amending the Incentive Policy for Onshore Fund (2022/9/23)
To encourage securities investment trust enterprises (SITEs) to enhance stewardship, integrate environmental, social, and governance (ESG) factors into investment processes and risks, and actively take engagement action, so as to improve the environment for sustainable development in Taiwan, the FSC on 23 September 2022 amended the Incentive Policy for Onshore Funds to expressly add to the matters that may be recognized by the FSC as “other substantial contributions” the following: “A SITE has good performance in signing and implanting the Stewardship Principles , or integrates ESG considerations into internal control mechanisms such as investment processes and risk management and actively takes engagement action and other stewardship action, so as to promote the sustainable development of invested enterprises.”
To promote the timely disclosure of financial information by securities firms, and to allow for more flexible use of the funds in securities firms’ customer ledgers, the FSC on 1 September 2022 amended the above-cited articles of the “Regulations Governing Securities Firms” and the “Regulations Governing the Preparation of Financial Reports by Securities Firms”. Key points of the amendments are as follows:
(1) Amendments to the “Regulations Governing Securities Firms”:
A. The annual financial report filing deadline for some securities firms has been adjusted: To promote timely financial disclosures by securities firms and for the sake of consistency in the regulatory supervision of financial services firms, the amendment provides that, beginning from fiscal year 2022, the deadline for reporting the annual financial reports by public securities firms and securities firms under a financial holding company is shortened from the original 3 months after the close of each fiscal year to no later than 75 days.
B. More flexible use of the funds in securities firms’ customer ledgers: To enliven the use of funds in the customer ledgers under securities firms’ settlement accounts and increase returns on such funds, the amendment expands the permitted uses of funds in customer ledgers beyond the original limited purpose of making required payments on behalf of customers. The amended provisions allow a securities firm, with the customer’s consent, may use such funds to invest in safe and high-liquidity financial products, or may deposit such funds at separate banks.
C. In coordination with the amendment to Article 38 of the Regulations, the FSC issued an interpretive order on 5 September 2022 that permits securities firms to use funds in customer ledgers to purchase domestic government bonds and treasury bills, or if the funds in a customer ledger account in the form of a time deposit exceed NT$1 billion, that portion in excess of NT$1 billion may be transferred to a time deposit account at another bank. The order also specifies limits on the amounts of customer ledger funds that may be used in these ways, and sets out requirements for liquidity control, information reporting, internal control mechanisms, and other supporting measures.
(2) Amendments to the “Regulations Governing the Preparation of Financial Reports by Securities Firms”: All public securities firms are required to prepare annual reports to shareholders in compliance with the “Regulations Governing Information to be Published in Annual Reports of Public Companies.” Some content of these annual reports overlaps with the disclosure requirements set out in Articles 28 to 31 of the “Regulations Governing the Preparation of Financial Reports by Securities Firms” (the “Regulations”) regarding matters including compensation for directors and supervisors, labor-management relations, employee salary information, cyber security management, and financial analyses for the most recent 5 years, etc. To avoid possible confusion from redundant content in the annual report and the financial report, and to bring the requirements governing securities firms into line with those applying to other public companies, the amendment provides that a securities firm that discloses in its annual report to shareholders the content specified in Articles 28 to 31 of the Regulations is exempted from the disclosures required by Articles 28 through 32 in its annual parent company only (or individual) financial report.
2. FSC Partially Amends the Regulations Governing the Offering and Issuance of Securities by Foreign Issuers (2022/9/5)
To strengthen its review and control of securities offerings by companies with a primary listing on the TWSE or TPEx, ensure equitable regulatory treatment of offerings by domestic and foreign securities issuers, and ease restrictions on the currencies in which foreign emerging stock board companies issue straight corporate bonds, the FSC amended the above-cited Regulations on 5 September 2022. Key points of the amendment include the following:
(1) Strengthened regulation of the capital raising activities of TWSE and TPEx primary listed companies:
A. A new 20 business day waiting period is introduced for effective registration of certain types of offerings, and additional grounds for rejection are introduced: With respect to filings by TWSE and TPEx primary listed companies for securities offerings that have a relatively wide-ranging impact on investors, such as for a domestic issue of corporate bonds with equity characteristics or an issue of new shares for cash capital increase, if any irregularity is seen in the company’s finances or business, the review period will be extended to 20 business days. This brings the requirement for foreign issuers into line with the provisions of the Regulations Governing the Offering and Issuance of Securities by Securities Issuers. The amendment also introduces new grounds on which the FSC may reject filings for such cases. Additionally, with reference to the provisions of the Company Act, the amended Regulations require an issuer that has incurred after-tax losses for 2 consecutive years to submit a sound business plan.
B. Strengthened controls during the post-offering period: The amendment extends the period for which the issuer is required to engage an underwriter’s assistance from 2 fiscal years to 3 fiscal years. For cases in which the implementation of an offering differs materially from the plan, the amendment requires that the matter be submitted to the board of directors and a shareholders meeting to amend the plan. In addition, for a foreign issuer that has a major subsidiary located in mainland China, the capital that the issuer raises in Taiwan must be deposited with a Taiwanese bank or an overseas subsidiary or branch thereof, and utilized in accordance with the plan.
(2) Eased restrictions on the allowable types of straight corporate bonds and amended requirements regarding prospectuses: The amended Regulations allow foreign emerging stock board companies to issue straight corporate bonds in foreign currencies, and set out separate prospectus disclosure requirements for straight corporate bonds depending on whether they are sold to professional investors or retail investors.
(3) Other amendments:
A. With respect to both publicly offered and privately placed straight corporate bonds, the Regulations place restrictions on the uses of the proceeds, foreign exchange settlement, and reporting matters.
B. To improve administrative efficiency and achieve supervisory consistency, the amended Regulations, under the authority of Article 16 of the Administrative Procedure Act, expressly empower the FSC to engage the TWSE or the TPEx to suspend the public issuance of the stock of a foreign issuer.
3. FSC Amends the Directions for Public Companies Conducting Private Placements of Securities (2022/9/7)
The FSC amended Points 3 and 5 of the Directions for Public Companies Conducting Private Placements of Securities. The amendments expressly require an issuer conducting a private placement of corporate bonds to obtain an approval letter from the Central Bank in advance. They also require the issuer to submit regular filings to the Central Bank of any changes in the outstanding balance of privately placed bonds, and set out other relevant matters that issuers must handle with the Central Bank to support the Central Bank’s foreign exchange management needs.
4. FSC Issues Order Amending the Incentive Policy for Onshore Fund (2022/9/23)
To encourage securities investment trust enterprises (SITEs) to enhance stewardship, integrate environmental, social, and governance (ESG) factors into investment processes and risks, and actively take engagement action, so as to improve the environment for sustainable development in Taiwan, the FSC on 23 September 2022 amended the Incentive Policy for Onshore Funds to expressly add to the matters that may be recognized by the FSC as “other substantial contributions” the following: “A SITE has good performance in signing and implanting the Stewardship Principles , or integrates ESG considerations into internal control mechanisms such as investment processes and risk management and actively takes engagement action and other stewardship action, so as to promote the sustainable development of invested enterprises.”
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Update：
2022-12-12