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Enforcement Letter

Organisation
Organisation Order of the Financial Supervisory Commission
Issue No.
Issue No. Financial-Supervisory-Securities-SITC 1140386137 CH
Issue Date
Issue Date 2026/02/04
Content
Content     Order of the Financial Supervisory Commission

    Issue Date: 4 February 2026
    Issue No.: Financial-Supervisory-Securities-SITC-1140386137

  1. Pursuant to Article 56, paragraph 1 of the Securities Investment Trust and Consulting Act and Article 14 of the Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises, private equity funds and offshore funds that have not been approved by or effectively registered with the FSC are not prohibited items for investment in the utilization of discretionary investment assets by a securities investment trust enterprise (SITE) or securities investment consulting enterprise (SICE) conducting discretionary investment business.
  2. To invest in private equity funds and offshore funds that have not been approved by or effectively registered with the FSC, the clients shall satisfy the requirements set forth in Article 11, paragraph 1 and Article 16, paragraph 2 of the Securities Investment Trust and Consulting Act, Article 52, paragraph 1 of the Regulations Governing Offshore Funds, and the conditions set by the FSC pursuant to Article 11, paragraph 1, subparagraph 2 of the Securities Investment Trust and Consulting Act.
  3. A SITE or SICE conducting discretionary investment business that utilizes discretionary investment assets to invest in funds mentioned in the preceding point shall comply with the following provisions:
    1. The discretionary investment contract shall expressly stipulate that the assets "may be invested in private equity funds or offshore funds that have not been approved by or effectively registered with the Financial Supervisory Commission" and the selection criteria for such funds.
    2. Private equity funds shall comply with the following requirements:
      1. The fund management entity has been established for at least one year and has not had any sanction, of which there is a record, imposed by its local competent authority within the past two years.
      2. There shall be regularly available fair prices sufficient for valuation purposes.
      3. The fund complies with the relevant legal and regulatory requirements applicable to it.
      4. Independent annual audits of the fund are conducted in accordance with generally accepted accounting principles or international auditing standards.
      5. The fund's asset valuation, accounting, and investment functions are mutually independent.
    3. The investment prospectus shall disclose or specify the following matters, and a dedicated person shall be assigned to explain them to the client; the client shall be requested to sign or seal the investment prospectus to confirm that they have been fully informed:
      1. Fund characteristics, investment strategies, investment risks, past performance of the fund, valuation methodology, fund management entity, and the experience and qualifications of the fund managers.
      2. If there will be investment in any private equity fund, the following matters shall additionally be disclosed:
        1. The risks entailed to the discretionary investment assets and the subscription and redemption procedures, the liquidity management provisions adopted, including an explanation of the effect of such provisions and relevant illustrations, and the risk diversification and risk monitoring and management measures adopted.
        2. If the discretionary investment assets are invested in any private equity fund managed or operated by an enterprise belonging to the same group, the maximum fee schedule applicable to such fund transactions and the extent to which relevant fees will be returned to the discretionary investment assets shall be specified.
      3. A statement that the discretionary investment assets may be invested in private equity funds or offshore funds that have not been approved by or effectively registered with the Financial Supervisory Commission, that such funds are subject to lower levels of supervisory regulation, and that their particular risks may result in the loss of most or all of the amount invested; accordingly, such investments are not suitable for clients who cannot bear the risks involved.
  4. A SITE or SICE conducting discretionary investment business that utilizes discretionary investment assets to invest in private equity funds shall, in addition to complying with the two preceding points, ensure that the investment ratio in such funds—calculated in aggregate with the investment ratio in spot commodities such as gold, minerals, and bulk commodities pursuant to FSC Order No. Financial-Supervisory-Securities-SITC-1040039378 of 26 October 2015—does not exceed 40 percent of the net asset value of the discretionary investment account.
  5. A SITE or SICE conducting discretionary investment business that utilizes discretionary investment assets to invest in any private equity fund or any offshore fund that has not been approved by or effectively registered with the FSC shall establish in its internal control system the standards for selecting such funds and the risk monitoring and management measures. For investments in private equity funds, it shall additionally formulate valuation policies and operational mechanisms, as well as operating procedures for handling exceptional circumstances in which it is difficult to implement the valuation policies. The relevant internal controls shall be submitted to and approved by the Board of Directors.
  6. This Order is effective from this day forward.
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