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Review procedures:
1. Case handlers reviewing an OTC listing case shall carry out the review in accordance with the following inspection 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 Directions for the Particulars to be Recorded in Prospectuses for OTC Trading of Securities and other relevant regulations, and re-examine the Checklist of Legal Issues to be Examined upon Application by Issuers for OTC Listing 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 check whether each item was assessed in accordance with the rules and regulations of the GTSM and whether it draws clear and definitive conclusions, and enter an opinion in the "remarks" column for the GTSM in the "Abstract of the Underwriter's Assessment Report" (Attachment 3). When any of the matters set forth in the GTSM's Regulations for Handling Deficiencies in an Assessment Report or Related Information Submitted by a Recommending Securities Firm are found to exist, the matter shall be referred to a meeting of the Administration Department Review Committee for Compliance, convened by the president of the GTSM and attended by GTSM-related personnel (“Administration Department Review Committee”), for passage of a resolution which shall serve as the basis for subsequent implementation. The Regulations for Handling Deficiencies in an Assessment Report or Related Information Submitted by a Recommending Securities Firm shall be
separately promulgated by the GTSM.
(4) Internal Control Systems:
(i) Case handlers shall examine the internal audit report for the self-inspection period given in the statement of internal control and gain an understanding of internal control deficiencies and the status of corrective measures.
(ii) Case handlers shall gain an understanding of comprehensive opinions expressed in the CPA's recommendations for improvement of the internal control system for the preceding three years and the attached internal control system data in Item 2 of the Questionnaire for OTC Listing of Stock (Appendix 4).
(iii) Case handlers shall carry out the review in accordance with the Procedures for Review of Internal Control Systems Audit Reports Issued by CPAs. The Procedures for Review of Internal Control Systems Audit Reports Issued by CPAs will be separately adopted by the GTSM.
(iv) Case handlers shall fill out the "Document Review Record and CPA Review Report Inspection Form" (Appendix 5).
(5) Comprehensive Analysis of Financial Information:
Case handlers shall review 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, financial 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 re-examine the "Certified Public Accountant Audit and Attestation Procedure Checklist" (Attachment 7) and ascertain that the CPA's audit report was prepared in accordance with the Generally Accepted Auditing Standards and the Regulations for Auditing and Attestation of Financial Statements by Certified Public Accountants, and that the content of the applicant company's financial reports is in compliance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers or the Regulations Governing the Preparation of Financial Reports by Securities Firms, Generally Accepted Accounting Principles, and all other applicable regulations. Case handlers shall then note their opinion in the opinion column of the Certified Public Accountant Auditing Procedure Checklist. If the case handlers find any circumstances in violation 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 GTSM.
(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, the ratio of shares is in compliance with GTSM regulations.
(ii) Whether equity distribution is in compliance, after the underwriting is finished, with the provisions of the GreTai Regulations 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 GTSM regulations.
(8) Case handlers shall examine the following:
(i) Whether the applicant company is in compliance with the requirements for OTC listing under Article 3 of the GTSM Securities Review Rules, and whether the GTSM opinion has been noted in the applicable column in the Questionnaire for OTC Listing of Stocks.
(ii) Whether the applicant company is in compliance with each of the subparagraphs of Article 10, paragraph 1 of the GTSM Securities Review Regulations, and complete the "Checklist for Matters Set Forth under Article 10, Paragraph 1, of the Regulations for the Review of OTC Listings" (Appendix 9).
(iii) Whether the applicant company is in conformance with all of the supplementary provisions of the GTSM Securities Review Rules and has filled out the "Checklist for Compliance with Supplementary Provisions to the GTSM Securities Review Rules" (Appendix 9).
(9) During review, case handlers shall consolidate all the above review data and relevant documentation (Attachments 1 through 10) 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 shall conduct the following procedures:
(i) Ascertaining the following matters and obtaining related information:
(a) Major products, raw materials and their main sources, and the differences in their main product's applications, product segmentation, and competitiveness in comparison with products of other enterprises in the industry.
(b) Management approach and performance.
(c) Members of the board of directors and supervisors and changes in their shareholdings over the preceding three years.
(d) Market overview and company positioning (including response strategies for peer competition, product substitutability, and business cycles).
(e) Operational risk for the industry and the company.
(f) Financial interactions with related parties and the group enterprise.
(g) An analysis of financial ratios in comparison with already OTC-listed or exchange-listed and non-OTC-listed or exchange-listed companies of the same type.
(h) Research and development results and future research and development plans (including analysis of staff quality in the research and development department, direction of R&D, R&D capabilities of same-sector enterprises, the outlook for future mass production and market competitiveness, and the marketability of future products).
(i) Plans for future development, factors advantageous and disadvantageous to the company's future development, and response strategies.
(j) Staff turnover rates for the preceding two years and the year of application, reasons for employee separation, and concrete measures for retention of staff.
(k) Other.
(ii) Inspection of factories, with particular attention to the operational status of machinery and inventory checks.
(iii) Where other significant irregularities are discovered in the formal review, and where such irregularities still cannot be fully understood after examination of the CPA's audit working papers and other documentary materials submitted by the certifying CPA and the recommending securities firm, case handlers shall conduct an on-site inspection of the irregularities in accordance with an inspection plan that shall be then drawn up and submitted to the manager of the case-handling department for approval.
(iv) Findings of on-site inspections shall be recorded in detail in the "On-Site Inspection Record" (Appendix 11).
If the applicant company is a financial holding company or an investment holding company, all above procedures shall be conducted for the subsidiaries of the financial holding company or for subsidiaries of the investment holding company in which more than 80 percent of outstanding voting shares are held. However, where such a subsidiary of a financial holding company or an investment holding company is located offshore, only a formal review need be undertaken. The term "subsidiary" shall be construed in accordance with the meaning given in Article 4, subparagraph 4 of the Financial Holding Company Act.
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 11) and supporting documentation in a binder as their working papers, file them together with other public issuance approval information, and retain them on file 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 12) 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 case-handling 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 GTSM. Extensions granted at the request of the applicant company shall be limited to a maximum period of one month.
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, certifying CPAs, or attorneys. Therefore, in reviewing initial applications for OTC listing:
(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, the recommending securities firm, the certifying CPA, and attorneys, except where any nondisclosure, fraud, falsehood, or error is discovered.
(2) Where information or statements of opinion provided by the applicant company, recommending securities firm, certifying CPA, and attorneys are found to contain any nondisclosure, fraud, error, falsehood, or otherwise seriously violate related laws or GTSM 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 GTSM pursuant to relevant regulations or shall be directly reported to the competent authority. The GTSM 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 or the GreTai's Directions Concerning 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 Rules 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 the recommending securities firm and request that they take the initiative to collect relevant information in timely fashion and provide explanations.Review procedures:
1. Case handlers reviewing an OTC listing case shall carry out the review in accordance with the following inspection 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 Directions for the Particulars to be Recorded in Prospectuses for OTC Trading of Securities and other relevant regulations, and re-examine the Checklist of Legal Issues to be Examined upon Application by Issuers for OTC Listing 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 check whether each item was assessed in accordance with the rules and regulations of the GTSM and whether it draws clear and definitive conclusions, and enter an opinion in the "remarks" column for the GTSM in the "Abstract of the Underwriter's Assessment Report" (Attachment 3). When any of the matters set forth in the GTSM's Regulations for Handling Deficiencies in an Assessment Report or Related Information Submitted by a Recommending Securities Firm are found to exist, the matter shall be referred to a meeting of the Administration Department Review Committee for Compliance, convened by the president of the GTSM and attended by GTSM-related personnel (“Administration Department Review Committee”), for passage of a resolution which shall serve as the basis for subsequent implementation. The Regulations for Handling Deficiencies in an Assessment Report or Related Information Submitted by a Recommending Securities Firm shall be
separately promulgated by the GTSM.
(4) Internal Control Systems:
(i) Case handlers shall examine the internal audit report for the self-inspection period given in the statement of internal control and gain an understanding of internal control deficiencies and the status of corrective measures.
(ii) Case handlers shall gain an understanding of comprehensive opinions expressed in the CPA's recommendations for improvement of the internal control system for the preceding three years and the attached internal control system data in Item 2 of the Questionnaire for OTC Listing of Stock (Appendix 4).
(iii) Case handlers shall carry out the review in accordance with the Procedures for Review of Internal Control Systems Audit Reports Issued by CPAs. The Procedures for Review of Internal Control Systems Audit Reports Issued by CPAs will be separately adopted by the GTSM.
(iv) Case handlers shall fill out the "Document Review Record and CPA Review Report Inspection Form" (Appendix 5).
(5) Comprehensive Analysis of Financial Information:
Case handlers shall review 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, financial 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 re-examine the "Certified Public Accountant Audit and Attestation Procedure Checklist" (Attachment 7) and ascertain that the CPA's audit report was prepared in accordance with the Generally Accepted Auditing Standards and the Regulations for Auditing and Attestation of Financial Statements by Certified Public Accountants, and that the content of the applicant company's financial reports is in compliance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers or the Regulations Governing the Preparation of Financial Reports by Securities Firms, Generally A |