Important Measure August 2017
2017-09-27
1. Allowed Securities Investment Consulting Firms Providing Clients with Robo-Advisory Services to Use Automated Systems to Rebalance Clients’ Portfolios
To facilitate securities investment consulting firms’ development of robo-advisory services for asset management, on August 10th, 2017, the Financial Supervisory Commission (FSC) permitted securities investment consulting firms using algorithms on robo-advisory services to use computer systems to engage in automated rebalancing on a client’s behalf that the firm and client shall have in the contract agreed upon. Such rebalancing shall be executed only in the circumstance that the individual underlying asset or the total portfolio achieves prescribed profit target or stop loss, or deviates from the stipulated investment ratio, provided that it maintains the original investment targets and ratios specified in the client agreement.
2. Permitted Securities Investment Trust Enterprises to Establish PE Funds through Subsidiary, to manage PE Funds under Mandate and to Introduce Investors Participating in the PE Funds
To expand the business scope of Taiwan’s securities investment trust enterprises (SITEs), increase the scale of their asset under management (AUM), steer domestic institutional investors’ capital into real industries, and aid in the development of domestic real economy, on August 3rd, 2017, the FSC issued an order permitting SITEs to submit applications to engage in the following Private Equity (PE) Fund-related businesses:
(1) Domestic and overseas subsidiaries may serve as general partners of PE Funds to establish and operate PE Funds with investors.
(2) SITEs may manage PE Funds under mandate and should establish a specialized department dedicated to the management activities. Because PE Funds can become involved with the business management of investment targets, SITEs may assign employees from this specialized department to positions at PE Funds under the SITE’s management or at enterprises that are invested by such PE Funds.
(3) SITEs may introduce qualified institutional investors meeting the definition in Article 4 of the “Financial Consumer Protection Act” to invest in the PE Funds under the SITE’s management.
3. Permitted FCMs Operating Foreign Futures Trading Businesses to Commission Domestic FCMs Holding Foreign Futures Exchange Memberships to Carry out Trades on Foreign Exchanges
In response to the needs of FCMs operating businesses accepting orders to trade foreign futures, on July 27th, 2017, the FSC issued Order No. Financial- Supervisory-Securities-Futures-1060023566. This order permits approved domestic FCMs to accept commissions from other FCMs to engage in foreign futures trading, provided that the approved FCM holds a foreign futures exchange membership and has obtained proof that a clearing member of a futures clearing organization provides the FCM with clearing and settlement services.
4. Amended “Regulations Governing Offshore Securities Branches,” Strengthening Such Branches’ Procedures for Customer Due Diligence
To strengthen the Customer Due Diligence(CDD) measures of offshore securities units (OSU) and in response to Taiwan’s acceptance of the Asia/Pacific Group on Money Laundering (APG) evaluation in 2018, on August 18th, 2017, the FSC amended the “Regulations Governing Offshore Securities Branches” with reference to the recommendations of Financial Action Task Force (FATF) on preventing money laundering, the Hong Kong and Singaporean securities industries’ CDD requirements, and the “Rules Governing Offshore Banking Branches.” The key amendments were as follows:
(1) Simplified procedures for OSU submission of audited financial statements and financial information.
(2) Strengthened OSU CDD measures:
OSUs must handle CDD measures in accordance with Taiwan’s anti-money-laundering related regulations and the Taiwan Securities Association “Guidelines Governing Anti-Money Laundering and Countering Terrorism Financing of Securities Firms”, which must be also incorporated into internal controls and audit items. In addition, the amendments specified documents and information the OSU CDD measures must obtain or verify.
(3) OSUs may rely upon offshore institutions or professionals to perform CDD measures:
In consideration of the distinctive nature and client base of OSU businesses, and that OSUs therefore have a need for third-party assistance when carrying out CDD, the amendments made explicit that OSUs may rely upon offshore institutions (offshore subsidiaries, branches, or invested financial institutions) or professionals (lawyers or accountants) in their CDD measures.
(4) OSUs handling new account openings shall not encourage or otherwise assist onshore clients to open accounts under a non-resident identity, and OSUs should establish relevant internal control mechanisms.
(5) Because these amendments involve adjustments of internal procedures and system settings, part of the amendments will not take effect until January 1st, 2018.
5. In Conjunction with Taiwan’s 2018 Adoption of IFRS, the FSC Announced Amendments to the “Regulations Governing the Preparation of Financial Reports by Securities Firms,” and to “the Format of the Financial Reports of Securities Firms”
In conjunction with Taiwan and the international community’s adoption of IFRS 9 “Financial Instruments” and IFRS 15 “Revenue from Contracts with Customers” in 2018, and a review of extant rules that sought to increase the transparency of financial reports and maintain appropriate oversight, on September 14th, 2017, the FSC announced amendments to the “Regulations Governing the Preparation of Financial Reports by Securities Firms.” Key changes include amendments to relevant accounting items on the balance sheet and income statement, and the provisions that required information related to financial instruments and contracts with customers to be disclosed in the notes to the financial reports. In conjunction with the amendments to the preparation standards, on September 14th, 2017, the FSC also issued a new order to amend the relevant supplementary schedules and statements of major accounting items. The amended articles and the new order will take effect from fiscal year 2018.
To facilitate securities investment consulting firms’ development of robo-advisory services for asset management, on August 10th, 2017, the Financial Supervisory Commission (FSC) permitted securities investment consulting firms using algorithms on robo-advisory services to use computer systems to engage in automated rebalancing on a client’s behalf that the firm and client shall have in the contract agreed upon. Such rebalancing shall be executed only in the circumstance that the individual underlying asset or the total portfolio achieves prescribed profit target or stop loss, or deviates from the stipulated investment ratio, provided that it maintains the original investment targets and ratios specified in the client agreement.
2. Permitted Securities Investment Trust Enterprises to Establish PE Funds through Subsidiary, to manage PE Funds under Mandate and to Introduce Investors Participating in the PE Funds
To expand the business scope of Taiwan’s securities investment trust enterprises (SITEs), increase the scale of their asset under management (AUM), steer domestic institutional investors’ capital into real industries, and aid in the development of domestic real economy, on August 3rd, 2017, the FSC issued an order permitting SITEs to submit applications to engage in the following Private Equity (PE) Fund-related businesses:
(1) Domestic and overseas subsidiaries may serve as general partners of PE Funds to establish and operate PE Funds with investors.
(2) SITEs may manage PE Funds under mandate and should establish a specialized department dedicated to the management activities. Because PE Funds can become involved with the business management of investment targets, SITEs may assign employees from this specialized department to positions at PE Funds under the SITE’s management or at enterprises that are invested by such PE Funds.
(3) SITEs may introduce qualified institutional investors meeting the definition in Article 4 of the “Financial Consumer Protection Act” to invest in the PE Funds under the SITE’s management.
3. Permitted FCMs Operating Foreign Futures Trading Businesses to Commission Domestic FCMs Holding Foreign Futures Exchange Memberships to Carry out Trades on Foreign Exchanges
In response to the needs of FCMs operating businesses accepting orders to trade foreign futures, on July 27th, 2017, the FSC issued Order No. Financial- Supervisory-Securities-Futures-1060023566. This order permits approved domestic FCMs to accept commissions from other FCMs to engage in foreign futures trading, provided that the approved FCM holds a foreign futures exchange membership and has obtained proof that a clearing member of a futures clearing organization provides the FCM with clearing and settlement services.
4. Amended “Regulations Governing Offshore Securities Branches,” Strengthening Such Branches’ Procedures for Customer Due Diligence
To strengthen the Customer Due Diligence(CDD) measures of offshore securities units (OSU) and in response to Taiwan’s acceptance of the Asia/Pacific Group on Money Laundering (APG) evaluation in 2018, on August 18th, 2017, the FSC amended the “Regulations Governing Offshore Securities Branches” with reference to the recommendations of Financial Action Task Force (FATF) on preventing money laundering, the Hong Kong and Singaporean securities industries’ CDD requirements, and the “Rules Governing Offshore Banking Branches.” The key amendments were as follows:
(1) Simplified procedures for OSU submission of audited financial statements and financial information.
(2) Strengthened OSU CDD measures:
OSUs must handle CDD measures in accordance with Taiwan’s anti-money-laundering related regulations and the Taiwan Securities Association “Guidelines Governing Anti-Money Laundering and Countering Terrorism Financing of Securities Firms”, which must be also incorporated into internal controls and audit items. In addition, the amendments specified documents and information the OSU CDD measures must obtain or verify.
(3) OSUs may rely upon offshore institutions or professionals to perform CDD measures:
In consideration of the distinctive nature and client base of OSU businesses, and that OSUs therefore have a need for third-party assistance when carrying out CDD, the amendments made explicit that OSUs may rely upon offshore institutions (offshore subsidiaries, branches, or invested financial institutions) or professionals (lawyers or accountants) in their CDD measures.
(4) OSUs handling new account openings shall not encourage or otherwise assist onshore clients to open accounts under a non-resident identity, and OSUs should establish relevant internal control mechanisms.
(5) Because these amendments involve adjustments of internal procedures and system settings, part of the amendments will not take effect until January 1st, 2018.
5. In Conjunction with Taiwan’s 2018 Adoption of IFRS, the FSC Announced Amendments to the “Regulations Governing the Preparation of Financial Reports by Securities Firms,” and to “the Format of the Financial Reports of Securities Firms”
In conjunction with Taiwan and the international community’s adoption of IFRS 9 “Financial Instruments” and IFRS 15 “Revenue from Contracts with Customers” in 2018, and a review of extant rules that sought to increase the transparency of financial reports and maintain appropriate oversight, on September 14th, 2017, the FSC announced amendments to the “Regulations Governing the Preparation of Financial Reports by Securities Firms.” Key changes include amendments to relevant accounting items on the balance sheet and income statement, and the provisions that required information related to financial instruments and contracts with customers to be disclosed in the notes to the financial reports. In conjunction with the amendments to the preparation standards, on September 14th, 2017, the FSC also issued a new order to amend the relevant supplementary schedules and statements of major accounting items. The amended articles and the new order will take effect from fiscal year 2018.
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Update：
2017-09-27