Newsletter
Amendments to Certain Articles of the Regulations Governing Securities Firms Announced by the Financial Supervisory Commission
The Financial Supervisory Commission (FSC) amended certain Articles of the Regulations Governing Securities Firms ("Amendments") for purposes of enhancing the competitiveness of local securities firms, taking into account the impact on the overall business development of securities firms being issued an administrative disposition, reducing dependence on credit rating reports, increasing securities firms' flexibility in operating their dealership businesses and permitting buy-then-sell same day trading. Main points of the Amendments:
I. Securities firms are to be permitted to set up dedicated departments (for example, stock affairs agent department, bond department or wealth management department) by the nature of each securities business they operate.
II. Currently when a securities firm applies to the FSC for approval of cash capital increase, corporate bond issuance or investment in foreign enterprises, it shall not have been given any administrative punishment during a specific period. Under the Amendments, said restriction is to be waived if the condition that resulted in the administrative punishment has been improved and such improvement has been recognized by the FSC. Further, with respect to the conditions that a securities firm underwrites securities on a firm commitment basis, the current Article provides that the securities firm shall not be subject to the punishment of suspension of business. Under the Amendments, the punishment of suspension of business is to be restricted to conditions resulted from the underwriting business and the restriction is to be waived if the condition that resulted in the suspension of business has been improved and such improvement has been recognized by the FSC after the suspension period ends.
III. For regulatory consistency in supervising cash capital increase and debenture or corporate bond issuance by financial institutions, the Amendments delete the Article which stipulates that a listed securities firm may not make another filing (application) for cash capital increase or corporate bond issuance within the same fiscal year in which it receives a letter of approval or effectiveness from the FSC for cash capital increase or corporate bond issuance.
IV. To respond to international trend of lowering dependence on credit rating reports, the Amendments delete the provisions related to credit rating reports and replace those credit rating reports requirements with financial and business qualifications required of securities firms.
V. When the issuer applies to the FSC for approval of straight corporate bonds issuance, the current Article provides that when the bonds obtain a credit rating of a specified grade or higher, the lead underwriter is exempt from the restrictions set forth in Paragraph 1 of Article 26. Under the Amendments, the exemption will be limited to only apply to bonds subscribed by professional investor institutions.
VI. In order to enhance securities firms' business efficiency and international competitiveness in trading foreign securities for their own accounts or engaging in foreign derivative financial product transactions, the Amendments ease the rules and securities firms may trade foreign securities for their own accounts or engage in foreign derivative financial product transactions not only for hedging purpose.
VII. The Amendments ease the rules to permit the derivative financial product trading business operated by a securities firm to be linked to securities issued overseas by domestic enterprises or certificates of beneficial interest issued overseas by domestic securities investment trust enterprises and marketable securities on a mainland area securities market.
VIII.The Amendments revise the provisions related to the investment procedures adopted by a securities firm trading securities for its own account. Under the Amendments, such investment procedures shall be stipulated in the internal control system and the relevant operating procedures and the required contents shall be included in the internal control system.
IX. To complete the securities trading mechanism and provide investors with hedging method, the Amendments permit buy-then-sell same day trading by investors.