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In a company's initial application for OTC listing, case-handlers shall review its CPA-audited and attested financial reports for the preceding two years, approved by the board of directors and recognized by the supervisors; where any individual account reveals irregularities, the same account in the previous year's financial reports shall be reviewed. In cases where the financial report approved by the shareholders meeting is inconsistent with the former report, the report approved by the shareholders meeting shall also be submitted. In the case of applications for OTC listing by government-operated enterprises, the financial report for the most recent fiscal year, CPA-audited and attested and approved by the board of directors and recognized by the supervisors, shall still be submitted, whereas for the previous year, an audit report from an auditing institution may be submitted as an alternative. Where the review period spans April, August, or October, the applicant shall be notified to additionally
submit, prior to the end of May, September, or November, financial reports for the first quarter, first half, and third quarter of the given fiscal year, reviewed by a CPA. Where the review period extends beyond September, the applicant shall be notified to additionally submit a financial forecast, reviewed by a CPA, for the following year. Where the assessment period extends for two months past the end of the year, then within four months of the end of the year, the applicant company shall additionally submit the financial report for the current year, audited by a CPA, along with the CPA's working papers and an updated underwriter's assessment report. If an applicant company fails to provide the required documents within the prescribed periods, the GreTai shall return its application.
The term "review period" in the preceding paragraph refers to the period extending from the date of the GreTai's acceptance of documents for application for OTC listing to a date determined by the GreTai's board of directors.In a company's initial application for OTC listing, case-handlers shall review its CPA-audited and attested financial reports for the preceding two years, approved by the board of directors and recognized by the supervisors; where any individual account reveals irregularities, the same account in the previous year's financial reports shall be reviewed. In cases where the financial report approved by the shareholders meeting is inconsistent with the former report, the report approved by the shareholders meeting shall also be submitted. In the case of applications for OTC listing by government-operated enterprises, the financial report for the most recent fiscal year, CPA-audited and attested and approved by the board of directors and recognized by the supervisors, shall still be submitted, whereas for the previous year, an audit report from an auditing institution may be submitted as an alternative. Where the review period spans April, August, or October, the applicant shall be notified to additionally
submit, prior to the end of May, September, or November, financial reports for the first quarter, first half, and third quarter of the given fiscal year, reviewed by a CPA. Where the review period extends beyond September, the applicant shall be notified to additionally submit a financial forecast, reviewed by a CPA, for the following year. Where the assessment period extends for two months past the end of the year, then within four months of the end of the year, the applicant company shall additionally submit the financial report for the current year, audited by a CPA, along with the CPA's working papers and an updated underwriter's assessment report. If an applicant company fails to provide the required documents within the prescribed periods, the GreTai shall return its application.
The term "review period" in the preceding paragraph refers to the period extending from the date of the GreTai's acceptance of documents for application for OTC listing to a date determined by the GreTai's board of directors. |
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Review guidelines:
The provisions of this paragraph apply without exception to all reviews of initial OTC listing applications. After receiving an application for OTC listing, case handlers shall review the application, its attachments, and all information provided by the applicant company and the recommending securities firm or CPAs, taking into consideration the matters below:
1. Certified Public Accountant's Audit Report:
(1) If there has been a change in CPAs during the two fiscal years preceding the application date, the issuing company, the original CPA, and the successor CPA shall submit a written report explaining the change of accountants, and the case handlers shall ascertain the facts and reasons underlying the change.
(2) For any CPA audit report issued with other than an unqualified opinion, the reviewers shall take note of the underlying facts and reasons and assess the extent to which they will affect the company's financial statements.
(3) The attesting CPA for the most recent two years shall be a practicing CPA at a joint accounting firm approved by the competent authority.
(4) The audit report shall state that the report is prepared in accordance with the Criteria for Compilation of Financial Reports by Securities Issuers or the Criteria for Compilation of Financial Reports by Securities Firms and in accordance with generally accepted accounting principles (GAAP).
(5) When the applicant's financial reports (including financial forecasts) for the most recent accounting year or the most recent period during the year of application reveal any of the following circumstances, its financial report must comply with applicable regulations:
(i) Fifty percent or more of the applicant's pre-tax income is from returns on investment in a single overseas reinvestment company.
(ii) After-tax losses at a single overseas reinvestment company for the current period reach either 50 percent of its paid-in capital or NT$100 million or more.
(iii) Fifty percent or more of the applicant's operating revenues, gross profits, or total purchase amounts are from a single overseas reinvestment company.
(iv) The value of a single overseas reinvestment company's production accounts for 50 percent or more of the applicant's gross production value (including internal production, outsourcing, and external purchasing).
(v) The applicant company's original investment in a single overseas reinvestment company cumulatively equals 20 percent or more of the applicant's paid-in capital or NT$100 million or more.
The term "comply with applicable regulations" above herein means:
(i) When the applicant has a controlling interest in the overseas reinvestment company (in accordance with the definition given in the Statement of Financial Accounting Standards), or while not having a controlling interest, adopts the equity method for recognizing gains and losses on investment:
When the financial reports of the given overseas reinvestment company are audited and attested by other CPAs and the applicant company's use of the equity method of recognizing gains and losses or production of consolidated financial statements is based on those reports, the applicant company's CPA shall produce an audit report on the applicant company's financial statements with an unqualified opinion and without reference to any other accountant's audit. Case handlers shall inspect the materials used by the applicant company's CPA for its assessment and verification of the overseas reinvestment company's CPA and audit report, in order to determine whether the assessment and auditing procedures were comprehensive and in conformance with the relevant provisions of the ROC Statements of Financial Accounting Standards.
In addition, when a company applying for OTC listing employs the same CPA for auditing and attestation as the overseas reinvestment firm, and when, in the preceding three years, disciplinary action has been taken against that CPA by the competent authority or a disposition issued under Article 37, paragraph 2 of the Securities and Exchange Act, or when the CPA has accumulated two or more demerits within the preceding year in accordance with the GreTai Regulations Governing the Handling of Auditing Errors by Certified Public Accountants in Guidance for OTC Market Listing and Applications for OTC for Market Listing and the GreTai Regulations Governing the Handling of Errors by Certified Public Accountants in Auditing of Initial Applications for Market Listing, another CPA shall be engaged to perform the auditing and attestation.
(ii) The provisions of the preceding paragraph need not apply to an applicant company that does not use the equity method for to account for gains and losses on investment for an overseas reinvestment company.
2. Content of Financial Reports:
(1) Whether the type, format, and content of financial reports (including financial statements, notes, itemized statements of individual accounts, and other disclosures and explanations relevant to informed judgment) comply with the Criteria for Compilation of Financial Reports by Securities Issuers or the Criteria for Compilation of Financial Reports by Securities Firms and with generally accepted accounting principles and applicable laws and regulations.
(2) Case handlers shall perform an overall analysis of the report both on its own and in comparison with those from other companies in the same industry, to ascertain emerging trends and possible irregularities in the applicant company's financial condition and profitability.
(3) If unusual accounting items are found in the financial report (such as amounts entered under the names of individuals or organizations in a receivable/payable relationship, dealings between shareholders, temporary debits, start-up costs, or unamortized expenses) and a large sum of money is involved, the item in question shall be audited to ascertain its composition and categorization.
(4) Case handlers shall determine the status of adjustments or improvements required in the financial statements as instructed in writing by the competent authority.
(5) The case handlers shall examine in depth any of the following special or irregular circumstances through a review of the certified public accountant (CPA)'s working papers:
(i) Transactions between major affiliated persons: any large transactions between affiliated persons indicating arrangements contrary to normal operating practice or illicit exchanges of profits or benefits.
(ii) Any improper or irregular matters with respect to categorization, cross transfers, or accounting in long and short-term investments.
(iii) The status of allocation of reserve funds to offset bad debt and the content of the auditing CPA's assessment.
(iv) Basis of account entry and valuation of inventory; where there are large gains or losses on physical inventory, the reasons shall be investigated.
(v) Any major, irregular changes to fixed assets involving transactions among associated persons.
(vi) The accounting treatment of capitalization of interest.
(vii) Leasing transactions: the accounting and categorization of business leasing or capital leasing.
(viii) Deferred assets: items which should be listed as expenses or losses for the current period, such as losses due to suspension of work, extraordinary losses, losses during the start-up period, or employee benefits, shall not be listed as amortization of deferred assets.
(ix) Monetary transactions: The interest rates and payment status on large interest-free or low interest loans obtained from affiliates, shareholders, or related parties, and high-interest loans to affiliates, shareholders or related parties.
(x) Retirement rules and pension fund withholding status.
(xi) Income tax accounting and offsetting of assets and liabilities with respect to deferred income tax.
(xii) Status of disclosure of contingent liabilities and of lines of credit obtained jointly from banks by the applicant company and its affiliates.
(xiii) Assets obtained on installment plans and accounting of sales.
(xiv) Gross profit margin on sale of goods, inventory turnover rate, and accounts receivable turnover rate for the most recent two fiscal years.
(xv) Reasons for any extraordinary losses or gains, or large non-operating income or expenditures, and the treatment and presentation of extraordinary losses and gains.
(xvi) Whether in the most recent fiscal year there have been any irregularities in the process of capital formation through cash subscription, or in the sources funds or their use.
(6) Where the review period extends beyond September, the recommending securities firm shall be contacted for a supplementary assessment in regard to the financial forecast for the coming year, and for companies easily affected by industry business cycles or experiencing rapid changes in performance, consideration shall be given to taking the reasonableness of the accounting assumptions in the production of the financial forecast and the possibility of achieving the forecasted results as important review criteria.
3. The internal control system and internal control declarations and project audit reports:
(1) Ascertain the status of the formulation and implementation of internal control systems.
(2) Investigate whether the applicant company has performed a self-inspection of the effectiveness of the design and implementation of its internal control system and produced an internal control declaration in compliance with the Criteria Governing Establishment of Internal Control Systems by Public Companies, and obtained a CPA's project audit report with an unqualified opinion (1).
(3) Self-inspection of internal control systems and performance of project audits by CPAs shall cover the following periods: For applications submitted from February through April, the period covered shall be 1 January through 31 December of the previous year; for applications submitted from May through July, the period covered for shall be from 1 April of the previous year until 31 March of the year of application; for applications submitted from August through October, the period covered shall be from 1 July of the previous year until 30 June of the year of application; for applications submitted from November through January of the following year, the period covered shall be from 1 October of the previous year until 30 September of the year of application. Two or more practicing CPAs of a joint accounting firm shall jointly perform the inspections or audits and issue a report. The "Operating Procedures for Review of Internal Control Systems Inspection Reports Issued by CPAs" will be separately adopted by the GreTai.
4. During the review process, the case handlers shall note whether the CPA has complied with Generally Accepted Accounting Principles, the Criteria Governing Establishment of Internal Control Systems by Public Companies and all other applicable laws and regulations and shall, through scrutiny of the CPA's working papers for the relevant fiscal year, fully ascertain the tests applied, scope, time frame, characteristics, whether there has been full factual disclosure, whether the accountant has omitted any procedural requirements (e.g. monitoring of remaining inventory, certification and reconciliation of bank account balances) and failed to adopt other substitute procedures. If it is determined that the auditing procedures executed by the CPA are insufficient to reach the necessary conclusions, the case handlers shall request that the accountant provide supplementary explanations.
5. The recommending securities firm's assessment report:
Case handlers shall inspect the format and content of the underwriter's assessment report to determine:
(1) Whether the report has been compiled in accordance with the requirements of Guidelines Governing the Particulars to be Recorded in the Underwriter's Assessment Report for Applications for OTC Listing of Securities and signed by the lead underwriter and sponsoring underwriter. The Guidelines Governing the Particulars to be Recorded in the Underwriter's Assessment Report for Applications for OTC Listing of Securities shall be separately promulgated by the GreTai.
(2) For OTC listing guidance plans submitted to the GreTai, whether the period prescribed under paragraph 3 has been completed.
(3) Whether there have been consecutive monthly reports on the progress and results of the guidance and working papers have been prepared in accordance with applicable GreTai regulations.
(4) Whether a Declaration has been produced testifying that the assessment report is free of any misrepresentations or nondisclosures.
6. The public prospectus:
The case handlers shall examine the format and content of the prospectus to ensure that it has been compiled in accordance with the Guidelines for the Particulars to be Recorded in Prospectuses for Initial OTC Listing of Securities and other relevant laws and regulations.
7. The case handlers shall ascertain whether any of the negative criteria detailed in the subparagraphs of Article 10, Paragraph 1 of the GreTai's Criteria for the Review of Securities Listings, or any of its supplementary provisions, apply to the applicant company, whether it has complied with instructions contained in official notifications by the competent authority, and whether there were significant changes in the applicant company's most recent capital increase plan or any failure to carry out those plans. Such information shall be provided in detail in the review report and working papers. If any nonconformance with regulations is found, the case handlers shall attach their opinions and submit them for further review by higher levels.
8. The case handlers shall carry out on-site observation of the applicant company's operations and interview the applicant company's responsible person regarding his or her management approach and performance over recent years. If irregularities are found during the formal review, the case handlers shall examine the working papers prepared by the CPA or other documentation provided by the applicant company, the accountant, and the underwriters. If after due examination of the above, the case handlers are still unable to gain a complete picture of the applicant company's operations, an on-site inspection of the applicant company may be undertaken. If the applicant company is an investment holding company or a financial holding company, all above procedures shall be conducted for its subsidiaries or for holding company subsidiaries in which are held more than 80 percent of outstanding voting shares. However, where such a subsidiary or holding company subsidiary is located offshore, a formal review shall
suffice. The term "subsidiary" shall be construed in accordance with its meaning under Article 4, subparagraph 4 of the Financial Holding Company Act.Review guidelines:
The provisions of this paragraph apply without exception to all reviews of initial OTC listing applications. After receiving an application for OTC listing, case handlers shall review the application, its attachments, and all information provided by the applicant company and the recommending securities firm or CPAs, taking into consideration the matters below:
1. Certified Public Accountant's Audit Report:
(1) If there has been a change in CPAs during the two fiscal years preceding the application date, the issuing company, the original CPA, and the successor CPA shall submit a written report explaining the change of accountants, and the case handlers shall ascertain the facts and reasons underlying the change.
(2) For any CPA audit report issued with other than an unqualified opinion, the reviewers shall take note of the underlying facts and reasons and assess the extent to which they will affect the company's financial statements.
(3) The attesting CPA for the most recent two years shall be a practicing CPA at a joint accounting firm approved by the competent authority.
(4) The audit report shall state that the report is prepared in accordance with the Criteria for Compilation of Financial Reports by Securities Issuers or the Criteria for Compilation of Financial Reports by Securities Firms and in accordance with generally accepted accounting principles (GAAP).
(5) When the applicant's financial reports (including financial forecasts) for the most recent accounting year or the most recent period during the year of application reveal any of the following circumstances, its financial report must comply with applicable regulations:
(i) Fifty percent or more of the applicant's pre-tax income is from returns on investment in a single overseas reinvestment company.
(ii) After-tax losses at a single overseas reinvestment company for the current period reach either 50 percent of its paid-in capital or NT$100 million or more.
(iii) Fifty percent or more of the applicant's operating revenues, gross profits, or total purchase amounts are from a single overseas reinvestment company.
(iv) The value of a single overseas reinvestment company's production accounts for 50 percent or more of the applicant's gross production value (including internal production, outsourcing, and external purchasing).
(v) The applicant company's original investment in a single overseas reinvestment company cumulatively equals 20 percent or more of the applicant's paid-in capital or NT$100 million or more.
The term "comply with applicable regulations" above herein means:
(i) When the applicant has a controlling interest in the overseas reinvestment company (in accordance with the definition given in the Statement of Financial Accounting Standards), or while not having a controlling interest, adopts the equity method for recognizing gains and losses on investment:
When the financial reports of the given overseas reinvestment company are audited and attested by other CPAs and the applicant company's use of the equity method of recognizing gains and losses or production of consolidated financial statements is based on those reports, the applicant company's CPA shall produce an audit report on the applicant company's financial statements with an unqualified opinion and without reference to any other accountant's audit. Case handlers shall inspect the materials used by the applicant company's CPA for its assessment and verification of the overseas reinvestment company's CPA and audit report, in order to determine whether the assessment and auditing procedures were comprehensive and in conformance with the relevant provisions of the ROC Statements of Financial Accounting Standards.
In addition, when a company applying for OTC listing employs the same CPA for auditing and attestation as the overseas reinvestment firm, and when, in the preceding three years, disciplinary action has been taken against that CPA by the competent authority or a disposition issued under Article 37, paragraph |
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Review procedures:
1. After they have been delegated an OTC listing case, the case handlers shall complete the following review procedures:
(1) Application Documents:
Case handlers shall check all application documents received and complete an "Application Document Receipt Record for OTC Trading of Securities." (Appendix 1).
(2) Preliminary prospectus:
Case handlers shall check each item of the content of the preliminary prospectus against the Guidelines Governing Information to be Published in Public Prospectuses in Applications for OTC Listing of Securities and other relevant regulations, and re-examine the Preliminary Prospectus Review Chart for Initial OTC Listings of Stock (Appendix 2) completed by the securities underwriter.
(3) The recommending securities firm's assessment report:
Case handlers shall review the underwriter's assessment report and its abstract and check whether each item was assessed in accordance with the rules and regulations of the competent authority and the GreTai and whether it draws clear and definitive conclusions, and enter an opinion in the "remarks" column for the GreTai in the "Abstract of the Underwriter's Assessment Report" (Attachment 3). Any matters relating to the requirements of the GreTai Regulations for Handling Deficiencies in the Information on Guidance Progress and Results, the Assessment Report, or Other Relevant Information Submitted by the Recommending Securities Firm shall be handled by submission to a meeting of the Administration Department Review Committee for Compliance convened by the president of the GreTai (“Administration Department Review Committee”) for passage of a resolution which shall serve as the basis for subsequent implementation. The Regulations for Handling Deficiencies in the Information on Guidance Progress and
Results, the Assessment Report shall be separately promulgated by the GreTai.
(4) Internal Control Systems:
(i) Case handlers shall examine whether the applicant company's written accounting system and its implementation are in compliance with the Criteria Governing the Preparation of Financial Reports by Securities Issuers or the Criteria Governing the Preparation of Financial Reports by Securities Firms.
(ii) Case handlers shall gain an understanding of, and compile and collate, comprehensive opinions including the underwriter's assessment opinion, the results and attached assessment opinion from the CPA's internal control system investigation, the CPA's recommendations regarding internal control systems as stated in the recommendation report and the attached internal control system data in Item 2 of the Questionnaire for OTC Listing of Stock (Appendix 4) in compiling the Record of the Internal Control System Formal review (Appendix 5).
(iii) Case handlers shall carry out the review in accordance with the GreTai Procedures for Reviewing Internal Control System Audit Reports Issued by Certified Public Accountants, and fill out the "Chart for Review of the Internal Control System Audit Reports."
(5) Comprehensive Analysis of Financial Information:
Case handlers shall review the content of the Questionnaire for OTC Listing of Stocks and the annexed survey report for related industries, explanations of major changes in accounting items published in the prospectus, analytical data from the CPA's permanent records, and the recommending securities firm's assessment report to ascertain and assess the financial condition and trends of the applicant company and excerpt any important items or irregularities to compile the "Comprehensive Analysis of Financial Data" (Appendix 6).
(6) Certified public accountant auditing procedures and financial report:
Case handlers shall review the CPA's permanent files, the working papers for the internal accounting control system for the most recent fiscal year and the audit working papers for the two years immediately preceding the date of application and re-examine the "Certified Public Accountant Audit and Attestation Procedure Checklist" (Attachment 7) completed by the CPA to ensure compliance with the Audit Working Paper Standards published in the Audit Standards Gazette No. 3, Investigation and Assessment of Internal Accounting Control Systems as published in Audit Standards Gazette No. 5, the Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountants, and all other applicable regulations. Include excerpts or photocopies of important or irregular items in the report. Examine the content of the Questionnaire for OTC Listing of Stocks and supporting documentation, and the audit reports from a CPA for the most recent two fiscal years and the notes and itemized breakdowns of
each accounting item therein to ensure that the content of the applicant company's financial reports is in compliance with Criteria Governing the Preparation of Financial Reports by Securities Issuers, the Criteria Governing the Preparation of Financial Reports by Securities Firms, Generally Accepted Accounting Principles, and all other applicable regulations. [After completion of the above] the case handlers shall note their opinion in the opinion column of the Certified Public Accountant Auditing Procedure Checklist. If the applicant company is found in violation of any of the requirements of the Regulations for Handling Deficiencies in Certified Public Accountants' Reviews of OTC Stock Listing Applications, the case handlers shall refer the matter to the Review Committee and execute the resolution passed by the committee. The above-mentioned Regulations for Handling Deficiencies in Certified Public Accountants' Reviews of OTC Stock Listing Applications shall be separately promulgated by the GreTai. (7) Equity distribution and Custodial Undertaking:
Case handlers shall examine the following items and complete an "Equity Distribution and Custodial Undertaking Chart" (Appendix 8):
(i) Whether, at the time of underwriting and subscription on the underwriter's own accounts, the ratio of shares is in compliance with GreTai regulations.
(ii) Whether, underwriting and subscription on the underwriter's own accounts, equity distribution is in compliance with the provisions of the GreTai Criteria Governing Review of Securities Traded on Over-the-Counter Markets.
(iii) Whether the ratio of shares held by directors and supervisors is in compliance with the regulations of the competent authority.
(iv) Whether the percentage of shares to be placed in centralized custody by the directors, supervisors, and shareholders holding 10 percent or more of outstanding shares, and their related undertakings, are in accordance with GreTai regulations.
(8) Case handlers shall examine whether the applicant company is in compliance with each of the subparagraphs of Article 10, paragraph 1 of the GreTai Criteria for the Review of Securities Listings, and complete the "Criteria for the Review of Securities Listings Article 10, paragraph 1 Itemized Checklist" (Appendix 9).
(9) During review, case handlers shall consolidate all the above review data and relevant documentation (Attachments 1 through 9) into a binder.
(10) To ascertain the actual status of the financial and business operations of the applicant company or gross irregularities left unresolved by the relevant review data, case handlers may conduct the following procedures:
(i) Briefings to ascertain the following:
The management approach and performance record of the applicant company's responsible person in recent years.
Changes in the shareholdings of directors, supervisors, and shareholders with a greater than 10 percent share of the company's total issued equity during the most recent three fiscal years and random checks of actual shareholdings when necessary.
Management and operational objectives of the company.
Financial structure and management policies.
Production processes.
Production status.
Analysis of sales income and costs and the state of competition in the industry.
Inventorying and stock valuation methods; warehousing management.
Dealings among affiliates.
Salary and benefit regime.
(ii) Inspection of factories, paying particular attention to the operational status of machinery and equipment.
(iii) Where on-site inspections are necessary to understand other significant irregularities discovered in the formal review, case handlers may draft an inspection plan and conduct an on-site inspection of the irregularities following approval of the inspection plan by the Listing Department.
(iv) Findings of on-site inspections shall be recorded in detail in the "On-Site Inspection Record" (Appendix 10).
(11) Case handlers may, subject to the signed approval of the GreTai's president, consult with experts in relevant fields to ascertain information with respect to the current status and future development prospects of the applicant company within the industry.
2. Compilation of Working Papers: Case handlers shall consolidate and record in detail all review items and findings of the review, together with all relevant information, and number them in order for cross-referencing. Upon completion of the review, case handlers shall compile all review information (Appendices 1 through 10) and supporting documentation in a binder as their working papers and file them together with other public issuance approval information and keep them in the custody of the Listing Department (for a minimum of five years) for future reference and case management.
3. After completion of the working papers, case handlers shall compile the key findings, the opinions of relevant experts, and other relevant information into a "Review Report" (Appendix 11) and annex it to the working papers for reference during the review and deliberation of the case.
4. Review Period: Applications for initial OTC stock listing submitted by the first day of the current month shall be submitted for deliberation by the OTC Securities Review Committee in the following month. Under extraordinary circumstances, however, the Listing Department may, based upon review requirements or at the request of the applicant company and prior to the Review Committee meeting, extend the deadline for submission to the Review Committee, subject to the signed approval of the president of the GreTai. Extensions granted at the request of the applicant company shall be limited to a maximum period of one month and shall not extend into the following year.
5. Effect of the OTC Listing Review: The findings of the review of an application for OTC listing reflect the financial and business condition of the applicant company during only during a specific period, and should not be taken as a reflection of the overall or future performance of the applicant company. The results also depend largely on whether the applicant company has made full disclosure of information relating to its financial and business condition. The review results do not provide a guarantee of the quality of the applicant company and shall not be taken as a substitute for the functions and status of [reports of] securities underwriters and CPAs. Therefore, case handlers reviewing initial applications for OTC listing shall:
(1) Case handlers shall carry out the review work with a positive service attitude and rely fully on all information and opinions provided by the applicant company, CPAs, and securities underwriters, except where any nondisclosure, fraud, falsehood, or error is discovered.
(2) Where information or statements of opinion provided by the applicant company, securities underwriter, or CPA are found to contain any nondisclosure, fraud, error, falsehood, or otherwise seriously violate applicable laws or GreTai rules and regulations, those responsible shall be held fully liable under the law, and the matter shall be duly reported to the Competent Authority after handling by the GreTai pursuant to relevant regulations. The GreTai undertakes only the review and deliberation of applications. Responsible personnel shall, at the time of processing applications, act in accordance with the provisions of the GreTai's Disciplinary Standards for OTC Listing Review Personnel and Matters for Collective Compliance by OTC Listing Review Committee Members, and remain detached, impartial, and objective to ensure compliance with all the procedural requirements of these Directions and other applicable regulations. In the event of any violation or negligence, where verified by investigation,
personnel shall be responsible for matters that fall within the scope of their duties.
(3) Where any concerns arise during the review period, case handlers shall contact the applicant company and securities underwriter and request that they take the initiative to collect relevant information in timely fashion and provide explanations.Review procedures:
1. After they have been delegated an OTC listing case, the case handlers shall complete the following review procedures:
(1) Application Documents:
Case handlers shall check all application documents received and complete an "Application Document Receipt Record for OTC Trading of Securities." (Appendix 1).
(2) Preliminary prospectus:
Case handlers shall check each item of the content of the preliminary prospectus against the Guidelines Governing Information to be Published in Public Prospectuses in Applications for OTC Listing of Securities and other relevant regulations, and re-examine the Preliminary Prospectus Review Chart for Initial OTC Listings of Stock (Appendix 2) completed by the securities underwriter.
(3) The recommending securities firm's assessment report:
Case handlers shall review the underwriter's assessment report and its abstract and check whether each item was assessed in accordance with the rules and regulations of the competent authority and the GreTai and whether it draws clear and definitive conclusions, and enter an opinion in the "remarks" column for the GreTai in the "Abstract of the Underwriter's Assessment Report" (Attachment 3). Any matters relating to the requirements of the GreTai Regulations for Handling Deficiencies in the Information on Guidance Progress and Results, the Assessment Report, or Other Relevant Information Submitted by the Recommending Securities Firm shall be handled by submission to a meeting of the Administration Department Review Committee for Compliance convened by the president of the GreTai (“Administration Department Review Committee”) for passage of a resolution which shall serve as the basis for subsequent implementation. The Regulations for Handling Deficiencies in the Information on Guidance Progress and
Results, the Assessment Report shall be separately promulgated by the GreTai.
(4) Internal Control Systems:
(i) Case handlers shall examine whether the applicant company's written accounting system and its implementation are in compliance with the Criteria Governing the Preparation of Financial Reports by Securities Issuers or the Criteria Governing the Preparation of Financial Reports by Securities Firms.
(ii) Case handlers shall gain an understanding of, and compile and collate, comprehensive opinions including the underwriter's assessment opinion, the results and attached assessment opinion from the CPA's internal control system investigation, the CPA's recommendations regarding internal control systems as stated in the recommendation report and the attached internal control system data in Item 2 of the Questionnaire for OTC Listing of Stock (Appendix 4) in compiling the Record of the Internal Control System Formal review (Appendix 5).
(iii) Case handlers shall carry out the review in accordance with the GreTai Procedures for Reviewing Internal Control System Audit Reports Issued by Certified Public Accountants, and fill out the "Chart for Review of the Internal Control System Audit Reports."
(5) Comprehensive Analysis of Financial Information:
Case handlers shall review the content of the Questionnaire for OTC Listing of Stocks and the annexed survey report for related industries, explanations of major changes in accounting items published in the prospectus, analytical data from the CPA's permanent records, and the recommending securities firm's assessment report to ascertain and assess the financial condition and trends of the applicant company and excerpt any important items or irregularities to compile the "Comprehensive Analysis of Financial Data" (Appendix 6).
(6) Certified public accountant auditing procedures and financial report:
Case handlers shall review the CPA's permanent files, the working papers for the interna |