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MANAGEMENT OF DISCRE-TIONARY ACCOUNTS RULES ANNOUNCED
CHUANG, YUNG-CHI SANDY
On 9 October 2000 the Securities and Futures Commission (SFC) announced the Rules Gov-erning the Management of Discretionary Ac-count by Securities Investment Consulting En-terprise and Securities Investment Trust Enter-prise (Rules). The Rules comprise 28 articles. The main points are as follows:
The Rules impose certain qualifications for engaging in managing the discretionary ac-counts business. Securities Investment Con-sulting Enterprises (SICE) or Securities In-vestment Trust Enterprises (SITE) meeting the relevant qualifications may apply to the SFC for approval to engage in such business, and should further apply for change of its license to engage in such business within three months from the date of approval.
When applying for change of such a license, an SICE or SITE shall deposit an operation bond in an amount which varies according to the amount of its paid-in capital. The bond shall not be deposited in different financial institutions, and SFC's approval is required before changing the financial institution at which the bond is deposited.
An SICE or SITE wishing to engage in man-aging the discretionary accounts business shall draw up operation rules for such business, which must be approved by its board of di-rectors.
The scope of investments for managing the discretionary accounts business shall be lim-ited to the following, and shall not include securities credit transactions:
1.Securities listed on an ROC securities ex-change. 2.Securities traded on an ROC over-the- counter securities exchange. 3.Underwritten securities approved by the SFC. 4.Government and corporate bonds. 5.Other securities approved by the SFC.
The following proportional limits are imposed on investments of managed funds:
1.The total amount invested on behalf of any one client in securities issued by any one company shall not exceed 20% of that cli-ent's net managed portfolio value.
2.The maximum ownership in the shares of any one company for all its clients shall not exceed 10% of the issued shares of that company.
3.Investments in corporate bonds shall not exceed 10% of a client's net managed port-folio value.
