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Order of the Financial Supervisory Commission
Issue date: 27 December 2024
Issue no.: Financial-Supervisory-Securities-SITC-1130386473
- Pursuant to Article 3, paragraph 3, subparagraph 3 of the Securities Investment Trust and Consulting Act, approval is granted that securities investment trust enterprises (SITEs) may operate the following business:
- A SITE may accept engagement to manage a private equity fund, and shall comply with the following provisions:
- A SITE conducting the business of managing a private equity fund under engagement shall set up a dedicated department and allocate sufficient and qualified personnel.
- With respect to the business mentioned above, a SITE shall adopt and scrupulously implement comprehensive internal control systems and risk control and management mechanisms regarding operating principles, operational procedures, division of authorities and responsibilities, anti-money laundering and counter-terrorism financing, handling of business disputes, personnel education and training and management matters, segregation from existing business, prevention of conflicts of interest, and other relevant matters.
- A SITE engaged to manage a private equity fund shall not engage in trading of securities or securities-related products between that fund and any of the securities investment trust funds, discretionary investment accounts, or self-owned funds accounts under its management. This restriction shall not apply, however, to cross trades that unintentionally result from orders placed and transacted through a centralized exchange market or in over-the-counter trading.
- If any investment target enterprise of a private equity fund that the SITE is engaged to manage has any interest relationship with the SITE, the client's written consent shall be obtained, or special stipulations set out in the management engagement contract, in advance. The term "interest relationship" shall be subject mutatis mutandis to the definition set out in Article 14-1 of the Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises.
- A SITE may accept a mandate by the relevant institution of a private equity fund, with respect to a private equity fund in which a subsidiary of the site serves as a general partner or a private equity fund that the SITE is engaged to manage under the preceding subparagraph, to introduce professional institutional investors and high-asset customers to participate in investment and provide related services, and the following requirements shall be met:
- The term "professional institutional investor" means a professional institutional investor conforming to Article 4 of the Financial Consumer Protection Act.
- The term "high-asset customer" means a juristic person or natural person who meets all of the conditions listed below and has applied in writing to the SITE to be a high-asset customer:
- The customer provides proof of financial capacity showing a net worth of investable assets and/or value of insurance products equivalent to NT$100 million or above; or has investable assets with the SITE with a net worth equivalent to NT$30 million or above and provides a statement of financial capacity declaring holdings of investable assets with a net worth and/or insurance products with a value equivalent to NT$100 million or above.
- The SITE confirms that the natural person, or the person(s) authorized by the juristic person to conduct trades, possesses adequate professional knowledge and trading experience with respect to financial products and confirms that the natural person or juristic person has adequate risk-bearing capacity.
- The customer agrees to sign on as a high-asset customer after fully understanding that the SITE may be exempted from liability for providing financial products or services to high-asset customers, and to natural persons or juristic persons under applicable laws and regulations relating to professional investors.
- The term "investable assets" above means financial assets including cash deposits, domestic or foreign securities or short-term bills (including bonds or short-term bills purchased through repo or reverse repo transactions), structured products, and gold passbooks. The term "net worth" means the amount of the customer's investment principal after deducting the amount of collateralized financing or pledged loans. If a financial asset has an open market price or reference price, the net worth shall be calculated as the amount of its value measured at its market price or reference price after deducting the amount of collateralized financing or pledged loans. The term "value of insurance products" means the policy value of investment-linked insurance or non-forfeiture value of non-investment-linked personal insurance.
- A natural person or juristic person that already has professional investor status and meets the conditions of item b.I and is confirmed by the SITE as having adequate risk-bearing capacity may apply in writing to the SITE to be a high-asset customer.
- With respect to the conditions required to be met by a high-asset customer, the SITE firm shall fulfill its due diligence responsibilities and obtain reasonable and credible supporting evidence from the customer and conduct review and approval in accordance with the know-your-customer procedures and customer acceptance criteria established by the SITE.
- One having the status of high-asset customer under item b or d shall be deemed to be a natural person or juristic person with professional investor status as provided under relevant laws or regulations governing the business of the financial products or services provided by the SITE.
- The SITE shall carry out follow-up review at least once every 2 years in accordance with the adopted follow-up review procedures to ensure that the customer continues to meet the eligibility conditions for high-asset customers. The SITE shall regularly evaluate the net worth of investable assets the customer has with the SITE. If it finds that the customer's net worth of investable assets does not reach the standards of financial capacity required for high-asset customers, it shall obtain the customer's written confirmation on whether the customer wishes it to continue to provide additional financial products or services applicable for high-asset customers.
- A high-asset customer may apply in writing to the SITE to terminate the customer's status as a high-asset customer.
- When a SITE conducts the business under this subparagraph, the total number of high-asset customers introduced for investment for each private equity fund shall not exceed 99 persons, and the business shall not involve New Taiwan Dollar foreign exchange settlement.
- With respect to the business under this subparagraph, a SITE shall adopt and scrupulously implement comprehensive internal control systems and risk control and management mechanisms regarding Know Your Product (KYP), Know Your Customer (KYC), anti-money laundering and counter-terrorism financing, dispute handling, segregation from existing business, prevention of conflicts of interest, and other relevant matters.
- A SITE's introduction of professional institutional investors and high-asset customers to participate in investment in private equity funds and provision of related services, shall not involve any act of general advertising or public solicitation.
- A SITE applying to conduct the business under the preceding point shall meet the following conditions:
- Have net worth per share not less than par value as stated in the CPA audited and attested financial report for the most recent period.
- Have not been subject within the past half year to any disposition under Article 103, subparagraph 1 of the Act, Article 66, subparagraph 1 of the Securities and Exchange Act, or Article 100, subparagraph 1 of the Futures Trading Act.
- Have not been subject within the past 2 years to any disposition under Article 103, subparagraphs 2 to 5 of the Act, Article 66, subparagraphs 2 to 4 of the Securities and Exchange Act, or Article 100, subparagraphs 2 to 4 of the Futures Trading Act.
- In the case of a SITE that does not meet a provision of the preceding two subparagraphs, the provisions of those subparagraphs shall not apply if the circumstances of the violation have been specifically corrected and the correction has been recognized by the FSC.
- A SITE shall submit the following documents in an application to the FSC for approval to conduct the business under Point 1:
- Documentation that it meets the qualifying conditions under the preceding point.
- The minutes of the relevant board of directors meeting.
- Business plan: shall specify the operational items and content of the services to be provided.
- The internal control systems for engaging in the relevant business.
- Other documents as required by the FSC.
- The personnel of the dedicated department under Point 1, subparagraph A, item b shall comply with the following provisions:
- Before the personnel begin performing their duties, they shall be registered with the Securities Investment Trust and Consulting Association of the R.O.C. (SITCA) by the employing SITE, and none may engage in business unless they have been registered. Anyone under any circumstance set out in Article 68 of the Act shall not be registered; if already registered, the registration shall be voided.
- A SITE shall register any change in the personnel of the dedicated department with the SITCA within 5 business days from the day following the change. Before completing registration of the change, the SITE shall remain liable for the acts of such personnel.
- They shall not handle business beyond the scope of the dedicated department, nor shall their functions be performed by any person who is not a registered personnel member of the dedicated department.
- If a SITE assigns a personnel member of the dedicated department to take up concurrent duties in a private equity fund it manages or in a related institution such as an investment target enterprise of the fund, it shall carry out registration and filing with the SITCA; if the concurrent assignment ceases, it shall carry out cancellation with the SITCA within 5 business days from the day following the date of occurrence of the fact.
- A SITE conducting the business under Point 1, subparagraph B shall comply with the following provisions:
- It shall sign a mandate contract with the relevant institution of the private equity fund regarding the matters for which the SITE is mandated with respect to the specific private equity fund, and the contract shall specify that no other institution may be mandated in Taiwan to handle the matters for that private equity fund.
- It may sign a mandate contract with a trust enterprise to introduce participation in investment in the private equity fund by means of a trust of money, and shall comply with the following matters:
- The trust enterprise shall meet the qualifications for a fund distributor as set out in Article 20 of the Regulations Governing the Public Offering of Securities Investment Trust Funds by Securities Investment Trust Enterprises.
- The SITE shall enter into a written contract with the trust enterprise specifying the rights and obligations of both parties.
- The SITE remains ultimately responsible for confirming investor qualifications, and shall, in its internal control system, establish risk control and management measures for the relevant operations.
- Except as provided in the preceding subparagraph, a SITE shall not sub-mandate any other institution to handle introductions for participation in investment in a private equity fund.
- A SITE that has been approved to engage in business under Point 1 shall, by the 10th business day of each month, perform information reporting in accordance with the rules of the SITCA.
- Under any of the following circumstances with respect to a SITE that has been approved to engage in business under Point 1, the FSC may void the approval for that business.
- Falsehood or misrepresentation in a document under Point 3.
- Material violation of a requirement under Point 1, Point 4, or Point 5.
- Material violation of a restriction or prohibition imposed by the FSC at the time of approval of the application.
- Material violation of a mandatory or prohibitive provision of other laws or regulations that would affect the rights and interests of investors.
- This Order is effective from this day forward.
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