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Securities
1. Permission for Securities Firms to Conduct Spot Foreign Exchange Transactions between Foreign Currencies
On March 17, 2014, the Financial Supervisory Commission (FSC) issued a ruling (Ref. No.: Jin-Guan-Zheng-Quan-Zi-1030006062) to allow securities firms which have applied with the Central Bank for spot foreign exchange transactions pertaining to their securities business, and acquired approval, to conduct spot foreign exchange transactions between foreign currencies pertaining to securities business. The ruling took effect immediately.
Reported by: Jeffrey Liu / Angela Lin
SITE
2. Relief of Restrictions on using Securities Investment Trust Funds to Invest in High Yield Bonds and Convertible Corporate Bonds
On March 31, 2014, the FSC issued rulings (Ref. No.: Jin-Guan-Zheng-Tou-Zi-10300046551 and Jin-Guan-Zheng-Tou-Zi-1030004655) to relieve restrictions on using securities investment trust funds ("SITE Funds") to invest in high yield bonds and convertible corporate bonds. This is intended to enhance the operational flexibility of SITE Funds. We summarize the key points below.
(1) balanced funds may invest in high yield bonds, provided that the total investment amount shall not exceed 30% of net asset value of the fund;
(2) classic bond funds may invest in high yield bonds, provided that the total investment amount shall not exceed 10% of the net asset value of the fund; and
(3) corporate bonds invested by a SITE Fund are not subject to credit rating restrictions. In addition, convertible corporate bonds with credit ratings below or not rated by a credit rating agency will not be calculated into high yield bonds.
Reported by: Jeffrey Liu / Judy Tai
Public Companies
3. Ruling Governing Special Reserve for Public Companies Adopting Fair Value Model
On March 18, 2014, the Financial Supervisory Commission issued a ruling (Ref. No.:Jin-Guan-Zheng-Fa-Zi-1030006415), stating that a special reserve shall be set aside if public companies adopt a fair value model for subsequent assessment of investment property. We summarize the key points below:
(1) Adoption for the first time: When a public company first adopts a fair value model to assess an investment property, a special reserve equivalent to the retained earnings transferred from the net increase of fair value shall be set aside.
(2) Following adoption: When a public company continues to adopt a fair value model to assess an investment property, a special reserve equivalent to the net additional value shall be set aside from the net income of the then-current period and the undistributed earnings of the previous period.
(3) When the net additional value of the accrued fair value of the investment property decreases, or the investment property is disposed of, the decreased amount or the loss can be booked for earnings distribution.
Reported by: Kang-Shen Liu / Judy Tai
Companies
4. Permission for Financial Leasing Subsidiary Companies in China to establish Factoring Company in China
On March 18, 2014, the FSC issued a ruling (Ref. No.: Jin-Guan-Yin-Kong-Zi-10260005250) to permit financial leasing subsidiary companies in China, with the approval of the FSC, to establish factoring companies in China. Such applicants must be a financial leasing company 100% owned (either directly or indirectly) by a bank or financial company in Taiwan, whose investment capital in China has reached US$30 million. In addition, the financial leasing company must hold 100% of shares of the factoring company.
Reported by: Jeffrey Liu / Judy Tai
Finance
5. Draft amendment to Implementation Rules for Internal Audit and Internal Control Systems of Financial Holding Companies and Banking Industries by the FSC
The FSC announced a draft amendment to the Implementation Rules of Internal Audit and Internal Control Systems of Financial Holding Companies and Banking Industries ("Amendment") on March 20. We summarize the key amendments below:
(1) Annual audit plans of financial holding companies and banking industries shall be approved by the board of directors ("board"), as per the amendment. Internal control statements shall be filed to the competent authority within 3 months from the end of each fiscal year.
(2) The legal and compliance units of the headquarters of financial holding companies and banking institutions shall be exclusively responsible units. The legal and compliance head of the headquarters shall be a full-time position at vice presidential level, providing that the legal and compliance head of the headquarters of a financial holding company and its subsidiary bank may be the same person.
(3) Any major legal and compliance deficiency of each unit shall be filed to the board by the legal and compliance unit. For any new product or service of financial institutions, the legal and compliance head shall issue opinion on compliance with laws and regulations as well as internal regulations.
(4) Financial holding companies and banking institutions shall establish anti-money laundering risk control systems.
Reported by: Stacy Lo / Angela Lin
6. Draft amendment to Regulations Governing Internal Operating Systems and Procedures for the Outsourcing of Financial Institution Operations by the FSC
The FSC announced a draft amendment to the Regulations Governing Internal Operating Systems and Procedures for the Outsourcing of Financial Institution Operations ("Amendment") on March 13. We summarize the key amendments below:
(1) The qualifications for domestic banks to outsource offshore data entry, processing, and output of information systems related to retail financial business and necessary documents for application.
(2) The cross-border risk management system for domestic banks to outsource offshore data entry, processing, and output of information systems related to retail financial business.
Reported by: Stacy Lo / Angela Lin
7. Principle for Banks Conducting Gold Business
On March 21, the FSC announced an amendment to the Principle for Banks Conducting Gold Business (Ref No.: Jin-Guan-Yin-Wai-Zi--No. 10300046060), which took effect immediately. We summarize the key points below:
(1) The product of the gold business of banks includes gold coins issued in mainland China.
(2) Banks applying to conduct gold business shall provide the meeting minutes of the board of director and engagement contract if engaging third parties for custody.
(3) Business plans shall describe the matters for protection of customers' rights and interests.
(4) If the bank conducts gold business involving futures, options and margin trading, the "Directions for Banks Conducting Financial Derivatives Business" shall be followed.
Reported by: Stacy Lo / Mark Chen
Labor
8. Regulations for Regular Work Hours stated in Labor Standard Act not applicable to Employment Lawyers
On March 25, 2014, employment lawyers were categorized as workers as stated in Article 84-1 of the Labor Standard Act ("LSA")" by the Ministry of Labor. As employment lawyers are professional workers with designated responsibility, they cooperate with clients, courts, prosecutors, or investigation authorities when performing their duties. Thus, the working hours of employment lawyers are not regular. In addition, employment lawyers frequently need to work overtime. As it is difficult for Articles 30, 32, 36, 37 and 49 of the LSA to apply to employment lawyers, they are categorized as workers as stated in Article 84-1 of the LSA.
Reported by: David Tsai / Robin Huang
Operational Headquarters
9. Draft Article 2 of Operational Headquarters Identification Rules
To encourage enterprises to set up operational headquarters in Taiwan, the Ministry of Economic Affairs (MOEA) on March 20, 2014 proposed to amend Paragraph 2 of Article 2 of the Operational Headquarters Identifying Rules. The proposal relaxed the current restriction on repetitive recognition of operational income between Taiwanese headquarters and their offshore affiliates. Namely, offshore affiliates could recognize operational income when they manufacture products for Taiwanese headquarters to meet "the annual aggregate net operational income of no less than NT$50 million" requirement, making them qualified as operational headquarters for favorable treatment if other requirements are satisfied.
Reported by: Kang-Shen Liu / Jenny Chang
Food and Drugs Administration
10. Draft Regulations Governing Matters for Compliance on Labeling of Flavor Ingredient Food Additives on Food Products
Following the amendment to the Act Governing Food Sanitation (now the Act Governing Food Safety and Sanitation) as reported in Issue No. 193 of our Newsletter, the Ministry of Health and Welfare (MOHW) announced a draft version of the Regulations Governing Matters on Compliance of Labeling of Flavor Ingredient Food Additives on Food Products. According to the regulations, flavor ingredient food additives may be labeled as “flavors” on a food product, and as “natural flavors” if they are of natural flavors. However, food additives other than flavors must still be labeled on food products by their individual names. These regulations can be regarded as a “Coca Cola clause.”
Reported by: Jolene Wang / Crick Liang
11. Registration Platform for Food Enterprises Available Online as of April 1, 2014
On April 1, 2014, the MOHW's Food and Drug Administration Registration Platform for Food Enterprises (http://fadenbook.fda.gov.tw), became available online for the first time and started to accept registrations by food enterprises. As of May 1, 2014, enterprises dealing in the manufacture, processing and import of food additives must register before commencing business. Likewise, from October 1, 2014, enterprises selling food additives must register before commencing sales.
Reported by: Jolene Wang / Crick Liang
Transactions Secured by Movables
12. "National Online Database of Transactions Secured by Movables" now officially available online
The "National Online Database for Transactions Secured by Movables" (Online Database) was established by the Ministry of Economic Affairs and became operational on March 26, 2014. Currently, transactions secured by movables in Taiwan must be registered at one of 16 different central or local administrative authorities depending on where the movables locate. The Online Database collects all the registration information from different registries, making checks by potential creditors on mortgaged movables easier, transparent and facilitating business in Taiwan.
Reported by: Kang-Shen Liu / Angela Lin
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2014-04-07
