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Order of the Financial Supervisory Commission
Issue date: 27 June 2025
Issue no.: Financial-Supervisory-Securities-Firms-1140382354
- Pursuant to Article 15 of the Regulations Governing Securities Firms, for an overseas subsidiary in which a securities firm directly or indirectly holds more than 50 percent of the issued voting shares, the securities firm may act as its guarantor, endorse negotiable instruments for transfer, or provide property for the creation of security interests for it (hereinafter, "endorsements and guarantees") for the following needs of the subsidiary:
- For the needs of conducting securities underwriting business, the domestic parent company may provide guarantees or provide property for the creation of security interests.
- For the issuance of call (put) warrants overseas, the domestic parent company may provide guarantees or provide property for the creation of security interests, provided that the subsidiary is registered in a jurisdiction that is a signatory member of the International Organization of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding.
- For serving as an offshore structured product issuer or guarantor, when the product is sold within the Republic of China in accordance with the Regulations Governing Offshore Structured Products, and where the domestic parent company serves as the master agent, the domestic parent company may assume joint and several liability for the subsidiary's obligations with respect to the offshore structured products.
- For issuance of offshore structured products that are sold within the Republic of China through securities firms or banks to high-asset customers as defined by the relevant business laws and regulations, and where the domestic parent company serves as the domestic agent, the domestic parent company may assume joint and several liability for the obligations borne by the subsidiary or the guarantor with respect to the offshore structured products, or may itself serve as the guarantor.
- For the needs of issuance of corporate bonds, the domestic parent company may provide guarantees or provide property for the creation of security interests.
- If there is a need for financing from local financial institutions due to business needs, the domestic parent company may provide endorsements and guarantees.
- When a securities firm handles endorsements and guarantees, it shall comply with the provisions set out below, in addition to which it shall comply with the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees by Public Companies:
- The amount of endorsements and guarantees shall not exceed 40 percent of the securities firm's net worth; the combined endorsement and guarantee amount for items E and F of the preceding point to a single overseas subsidiary shall not exceed 5 percent of the securities firm's net worth. However, the above ratio limit for endorsement and guarantee amounts to a single overseas subsidiary shall not apply if there are special needs approved on a case-by-case basis.
- Before providing an endorsement or guarantee, a securities firm shall calculate its imputed regulatory capital adequacy ratio after the endorsement or guarantee to ensure that it will not be lower than 200 percent, and may proceed only after submitting the proposal and obtaining a board of directors' resolution, and may not authorize any other person to make such decisions.
- When a securities firm provides guarantees or provides property to create security interests for its overseas subsidiaries' issuance of call (put) warrants, such issuance shall be included in the combined control of the total outstanding market value of the securities firm's existing listed, over-the-counter, and negotiated call (put) warrants that have been issued domestically but have not yet matured, together with call (put) warrants issued overseas but not yet matured. If its subsidiaries issue call (put) warrants with domestic securities as underlying assets, the total quantity of any single underlying security represented shall be handled in accordance with the relevant regulations of the Taiwan Stock Exchange Corporation and the Taipei Exchange.
- When a securities firm provides guarantees or provides property to create security interests for its overseas subsidiaries' issuance of call (put) warrants, the securities firm shall obtain accreditation as a qualified issuer of domestic call (put) warrants. If thereafter its regulatory capital adequacy ratio falls below 200 percent for 3 consecutive months, it shall cease providing guarantees for its subsidiaries and may resume providing guarantees only after correction is completed (guarantees already provided shall remain effective).
- A securities firm shall establish relevant risk management measures and internal control systems. When providing endorsements and guarantees for its overseas subsidiaries in accordance with items C and D of the preceding point, a securities firm shall establish a product review committee to review the offshore structured products, and shall incorporate the composition and operation of the product review committee into its internal control systems.
- When filing monthly reports, it shall submit therewith the status of its endorsements and guarantees.
- When a securities firm, under Point 1, subparagraph D, provides an endorsement or guarantee for an overseas subsidiary not supervised by overseas financial regulatory authorities, or when handling an endorsement or guarantee under Point 1, subparagraph E or F, it shall submit the following documents to apply to the Financial Supervisory Commission (FSC) for approval:
- Minutes of the board of directors' meeting approving the endorsement or guarantee.
- Most recent financial reports audited or reviewed by certified public accountants.
- Trial calculation data of the regulatory capital adequacy ratio after adding the proposed guarantee amount to the most recently reported regulatory capital adequacy ratio.
- Endorsement and guarantee operating procedures adopted by the securities firm.
- Description of the overseas subsidiary's financial condition for the most recent fiscal year.
- Assessment of the necessity and reasonableness of providing the endorsement or guarantee for the overseas subsidiary: fund utilization or fundraising plan, including items such as the funding sources, uses, expected timeline, expected benefits, benefits from the most recent financing or fundraising, and risk management methods.
- Other documents required to be submitted as specified by the FSC.
- Pursuant to Article 15 of the Regulations Governing Securities Firms, if a securities firm is a domestic subsidiary of a foreign financial holding company, foreign bank, foreign securities firm, or foreign insurance company that directly or indirectly holds more than 50 percent of its issued voting shares, and its establishment has been approved by the FSC, when its foreign parent company serves as an offshore structured product issuer or guarantor and the product is sold within the Republic of China in accordance with the Regulations Governing Offshore Structured Products or by contract, and the securities firm serves as the master agent, the securities firm may assume joint and several liability for the obligations borne by its foreign parent company with respect to the offshore structured products, and the provisions of the preceding two points shall apply mutatis mutandis.
- This Order is effective from this day forward. The 10 September 2020 Order No. Financial-Supervisory-Securities-Firms-10903641202 of the Financial Supervisory Commission is repealed from this day forward.
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