Frances Hsieh
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To enhance cross-business operations in the financial industry and pool resources among financial institutions, Article 43 of the Financial Holding Act stipulates that subsidiaries of a financial holding company may conduct cross-selling activities among themselves to take advantage of their synergy. To maintain consumer protection and information security while achieving the aforesaid goal, Paragraph 3 of Article 43 of the Financial Holding Act authorizes the regulator to issue rules on cross-selling activities. Hence the Financial Supervisory Commission (FSC), with reference to cross-selling related current administrative regulations and self-disciplinary practices adopted by The Bankers Association of The Republic of China, issued the Regulations Governing Cross-selling Among Subsidiaries within Financial Holding Company ("Regulations") on October 21, 2009. Main points of the Regulations are as follows:
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Types of Cross-selling Activities
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A subsidiary of a financial holding company is required to obtain prior approval from the FSC to conduct business of other subsidiaries of the same financial holding company within its business premises. Though under the Regulations it is not required to obtain prior approval from the FSC to conduct other types of cross-selling activities, it is still required, under the Regulations, to set up appropriate internal control mechanism and risk management mechanism, and to follow other applicable laws and regulations.
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Strengthen Consumer Protection while Cross-selling
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A subsidiary of a financial holding company shall conspicuously display the name of another company whose services the subsidiary may provide to clients at its business premises in cross-selling activities.
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Sales persons shall make customers aware of the separation between own-label products of the subsidiary and other companies' products, clearly informed of the nature of the financial products and the attribution of responsibilities between the subsidiary and other companies should there be any disputes.
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Regulate the Use of Client Information By Financial Holding Company
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Unless otherwise stipulated by laws or regulations or with express consent from the client by executing an agreement or in writing, the information that can be interchangeably used shall not include transactions details and other relevant information other than the client's basic information.
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Subsidiaries of the same financial holding company shall execute non-disclosure confidentiality agreement and restrict the re-use of information.
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The product agreement shall make explicit disclosure to the client that he/she may at any time by the most convenient way, such as telephone notification, notify the company to refrain from sharing his/her information for cross-selling activities. Upon receipt of such client notification by the subsidiary, the financial holding company and its subsidiaries shall immediately cease interchangeable use of the client's information.
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Regulate the Scope of Cross-selling by Financial Holding Company
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Subsidiaries of a financial holding company are required to set up risk management mechanism for cross-selling, interchangeable use of client information, shared personnel and facilities for the promotion of another company's products, or related preparation or post-transaction work other than execution or performance of the transaction agreements and shall include these items in the internal control and internal audit items.
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