Securities Firms Allowed to Engage in Benefits Trust Business
2021-07-01
At present, securities firms may engage in wealth management business in the form of trust, and concurrently operate money trust and securities trust businesses which are limited to self-benefit trusts. That is, the beneficiary of the trust contract and trustor shall be the same person. In order to enhance the competitiveness of securities firms in the wealth management business, the FSC has recently further allowed securities firms to engage in the securities third party trust business. That is, the beneficiary of the trust contract is different from the trustor.
The securities business is the core business of securities firms, and the FSC has allowed securities firms to engage in the wealth management business in the form of trust since 2009. In addition to money trusts, securities firms may also operate the securities trust business in the form of self-benefit trust to assist clients in making diversified use of their securities, including the securities lending business. The opening up of the securities third party trust business this time is to assign the principal for self-benefit and the interest for the benefit of others; that is, the holder of securities (the trustor) and the securities firm which concurrently operates the trust business (the trustee) jointly sign a trust deed to transfer the securities (such as stocks) to the trustee, who will manage, apply or dispose of the securities (such as securities custody, dividend or interest collection, subscription to new shares, exercise of voting rights, etc.) for the benefit of the beneficiary or for a specific purpose in accordance with the terms of the trust deed, and agree to distribute the trust benefits (such as dividends) to a third party (the beneficiary), to assist clients in planning wealth transfer and property transfer to meet clients' trust needs.
The qualifications of securities firms and application procedures for engagement in this business are as follows:
I. Qualifications: The securities firm shall meet the requirements of point 6 of the "Directions for the Conduct of Wealth Management Business by Securities Firms", including:
(I) The regulatory capital adequacy ratio of the securities firm shall exceed 150% during the half-year period preceding the date of application.
(II) The securities firm’s financial condition shall meet any of the following:
1. The CPA-audited and attested financial report for the most recent period states net worth of not less than NT$10 billion.
2. The CPA-audited and attested financial report for the most recent period states total assets of not less than NT$20 billion, net worth of not less than NT$6 billion and not less than paid-in capital, and a profit in each of the past three years.
3. For a controlling company that directly or indirectly holds 100% of the shares of a securities firm, or a financial holding company that has a controlling interest in the securities firm, it meets one of the preceding conditions and issues an unconditional and irrevocable guarantee for the liabilities of the securities firm.
(III) The firm has been observing relevant laws and regulations.
II. Application procedures: According to item 21 of the Q&A of the Directions for the Conduct of Wealth Management Business by Securities Firms, if a securities firm has not obtained approval for the securities trust business from the FSC, it shall first submit the specified documents to the Taiwan Stock Exchange Corporation (TWSE) for examination and onward submission to the FSC for approval; if the securities firm has already obtained approval for the securities self-benefit trust business, it shall directly submit the specified documents to the FSC for approval.
The opening up of securities third party trust business to securities firms can give full play to securities firms’ expertise in the securities business, give wealth management clients more choices in asset allocation and financial planning, and create a win-win environment for securities firms and investors.
The securities business is the core business of securities firms, and the FSC has allowed securities firms to engage in the wealth management business in the form of trust since 2009. In addition to money trusts, securities firms may also operate the securities trust business in the form of self-benefit trust to assist clients in making diversified use of their securities, including the securities lending business. The opening up of the securities third party trust business this time is to assign the principal for self-benefit and the interest for the benefit of others; that is, the holder of securities (the trustor) and the securities firm which concurrently operates the trust business (the trustee) jointly sign a trust deed to transfer the securities (such as stocks) to the trustee, who will manage, apply or dispose of the securities (such as securities custody, dividend or interest collection, subscription to new shares, exercise of voting rights, etc.) for the benefit of the beneficiary or for a specific purpose in accordance with the terms of the trust deed, and agree to distribute the trust benefits (such as dividends) to a third party (the beneficiary), to assist clients in planning wealth transfer and property transfer to meet clients' trust needs.
The qualifications of securities firms and application procedures for engagement in this business are as follows:
I. Qualifications: The securities firm shall meet the requirements of point 6 of the "Directions for the Conduct of Wealth Management Business by Securities Firms", including:
(I) The regulatory capital adequacy ratio of the securities firm shall exceed 150% during the half-year period preceding the date of application.
(II) The securities firm’s financial condition shall meet any of the following:
1. The CPA-audited and attested financial report for the most recent period states net worth of not less than NT$10 billion.
2. The CPA-audited and attested financial report for the most recent period states total assets of not less than NT$20 billion, net worth of not less than NT$6 billion and not less than paid-in capital, and a profit in each of the past three years.
3. For a controlling company that directly or indirectly holds 100% of the shares of a securities firm, or a financial holding company that has a controlling interest in the securities firm, it meets one of the preceding conditions and issues an unconditional and irrevocable guarantee for the liabilities of the securities firm.
(III) The firm has been observing relevant laws and regulations.
II. Application procedures: According to item 21 of the Q&A of the Directions for the Conduct of Wealth Management Business by Securities Firms, if a securities firm has not obtained approval for the securities trust business from the FSC, it shall first submit the specified documents to the Taiwan Stock Exchange Corporation (TWSE) for examination and onward submission to the FSC for approval; if the securities firm has already obtained approval for the securities self-benefit trust business, it shall directly submit the specified documents to the FSC for approval.
The opening up of securities third party trust business to securities firms can give full play to securities firms’ expertise in the securities business, give wealth management clients more choices in asset allocation and financial planning, and create a win-win environment for securities firms and investors.
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Update：
2021-08-30