The FSC announced the upcoming amendments to the “Regulations Governing Securities Firms Accepting Orders to Trade Foreign Securities” and “Directions for the Conduct of Wealth Management Business by Securities Firms” as well as three exiting rulings (hereinafter called "the Amendment"). The Amendment and the introduction of related supervisory measures are expected for securities firms to address the high asset customers’ demands for wealth management services so as to enhance international competitiveness.  Key points of the Amendment are as follows:

 

1.Securities Firm Qualifying Requirements: In filing an application with the FSC for the permit to conduct the high asset customer business, the securities firm must fulfill the following qualifying requirements: A regulatory capital adequacy ratio of not lower than 200% for each of the preceding 6 months; Its CPA audited and attested financial report for the most recent period shows net worth not less than NT$10 billion; and it has not be subject to significant sanction by the FSC. To actively attract investment and recruit talents, the net worth criteria may be lowered to NT$7 billion once the securities firm promises to increase substantive investments, and number of employees in Taiwan in three years. 

2.Application Procedures: The securities firm shall obtain approval from the FSC to engage in the high asset customer business via three business divisions, including sub-brokerage, wealth management and proprietary trading divisions, or make guarantees to overseas subsidiary for its issuance of offshore structured products. The securities firm shall submit their applications respectively to the Taiwan Securities Association (sub-brokerage division), the Taiwan Stock Exchange (wealth management division and make guarantees) or the Taipei Exchange (proprietary division) for their transmittal to the FSC.

3.Senior Division Head Accountability Scheme (The Scheme): The FSC will introduce the Scheme. The senior division head of the business will be interviewed when the securities firm applies for permission to engage in the business operations. The senior division head will be required to explain his/her vision and commitment for the business in terms of the “corporate culture and code of conduct”, “business management strategy and R&D capability”, “business procedures and manpower management”, and “fair treatment of customers”. The FSC aims to create a system of accountability for the business execution. 

4.The financial services and products offered to high asset customers: A high asset customer shall meet the criteria that he/she has a proof of financial capacity of at least NT$100 million, together with sufficient professional knowledge, trading experience in financial products. The Amendment allows that the securities firm renders wide ranging financial services and products to high asset customers as follows: 

(1)The exemption from the TFSR product review procedures for offshore structured products: When the securities firm provides offshore structured product to high asset customers, the Taiwan Financial Services Roundtable (TFSR) product review procedures can be exempted if the offshore structured product belongs to the same issuer and falls in equivalent product structure or risk classification. 

(2)The qualified ETN-issuer securities firm’s offshore subsidiary or the domestic bank’s offshore banking unit is allowed to issue offshore structured products: The securities firm and the domestic bank shall make guarantees to their offshore entities for their issuance of offshore structured products and offered to high asset customers via three business divisions, including sub-brokerage, wealth management and proprietary trading divisions.

(3)Foreign bond trading without a credit rating limitation: The foreign bond, the securities firm offering to high asset customers via three business divisions, including sub-brokerage, wealth management and proprietary trading divisions, is exempted from the credit rating limitation of BB or higher.  

(4)DBUs may trade offshore structured bonds with high asset customers through its securities trading business line. 

5.Strengthened supervisory measures to safeguard high asset customer interests: In consideration of the complexity in offshore structured products, the FSC imposes strengthened supervisory measures to ensure customer interests. To enhance information disclosure, the securities firm is obliged to offer product information in Chinese, handle customer disputes and make timely notification to customers for significant investment interest related matters.  In addition, the securities firm is also obliged to establish product suitability and product censorship and monitoring regime. 

 

The FSC urges the securities firms to place great emphasis on fair treatment of customers practice and risk control. Securities firms are also encouraged to boost product innovation and nurture asset management talents. In the future, the FSC will actively work to enhance the competitiveness of Taiwan’s financial industry with aims to introduce appropriate amendments to supervisory regulations following the international trend, support financial institutions with their business expansion and promote product diversification to satisfy multiple investment needs. 

 

Contact：Section Chief Doris Lo, Securities Firms Division 

Direct Line：02-2774-7286

Please direct all correspondence and inquiries to:FSCmail