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Banking
1. Proposed amendment of Financial Consumer Protection Act
To enhance protection of the rights of financial consumers and to improve the development of Taiwan's financial market, the Executive Yuan approved a draft amendment of the Financial Consumer Protection Act ("Draft Amendment") on November 20, 2014. We summarize the key points below:
(1) Financial service enterprises ("Enterprises") shall establish remuneration systems for sales persons after considering clients' interests and the risk possibly generated from financial products. Such systems shall be submitted to the board of directors for approval.
(2) The initial selling of complicated high risk products by Enterprises shall be submitted to the board of directors or board of managing directors for approval. If such Enterprises are local branches of foreign financial institutions, it shall be approved by the local responsible person.
(3) Upon financial consumers' requests, courts may order punitive damages up to one (1) to three (3) times the amount of actual damages suffered by financial consumers as a result of the willful or negligent violation of the Act.
(4) If Enterprises fail to act according to financial consumer protection requirements under Chapter 2 of this Act, the Financial Supervisory Commission (FSC) may take administrative measures such as warnings, suspension of financial product selling, operation suspension or suspending or terminating the duty of the responsible persons or employees of the Enterprises, depending on the severity of the circumstances.
(5) The Draft Amendment provides the mechanism for a class ombudsman.
(6) Violation of this Act will be subject to an administrative fine of no less than NT$300,000 (around US$10,000) and no more than NT$10 million (around US$333,333). The FSC may further increase such fines in line with the profits made by the Enterprises. This is not subject to the maximum fine amount above.
Reported by: Stacy Lo / Angela Lin
Food Administration
2. Amendment to Act Governing Food Safety and Sanitation
On November 18, 2014, the Legislative Yuan passed the third reading of draft amendments to 20 articles of the Act Governing Food Safety and Sanitation (Act) in response to recent the lard scandal. This is the fourth amendment of this Act since 2012. We summarize the key features below:
(1) The maximum administrative fine for disqualified food or food additives is increased from NT$50,000,000 to NT$200 million. (Article 44)
(2) The maximum prison term for contaminating food with toxins or hazardous substances, adulteration or counterfeiting of food, or addition of any food additives not approved by the central competent authority is increased from 5 to 7 years with a maximum criminal fine increased to NT$80 million. If such violations prove detrimental to human health, prison terms of 1 to 7 years are applicable, with the maximum fine increased to NT$100 million. If such detriment is severe, the maximum criminal fine is increased to NT$150 million. If the violation results in death, the maximum criminal fine is increased to NT$200 million. All maximum criminal fines in the scenarios above are increased by up to 10 times the original amount. The maximum imprisonment term for negligence is increased from 1 to 2 years. (Article 49)
(3) If the relevant violation of the Act is material and significant enough to create a danger to human health, imprisonment of not more than 7 years with a maximum criminal fine of NT$80 million may be imposed. Actual injury is not necessary for establishment of a criminal act. (Article 49)
(4) Provision for criminal fines against juristic persons remains unchanged. However, as well as criminal and administrative fines, the competent authority may now pursue payment of or seizure of improper gains of violators to prevent huge fines under the Principle of Double Jeopardy. (Articles 49 and 49-2)
(5) Listed companies, OTC companies and food enterprises in certain categories or with certain scales must establish laboratories for self-testing. Food enterprises should prescribe food-safety monitoring programs. Food enterprises are also subject to the establishment of traceability systems and should follow the requirements of competent authorities to use electronic invoices for accuracy of tracing. Any failure to take appropriate action after notification of violation is subject to an administrative fine of between NT$30,000 to NT$3 million. (Articles 7, 9 and 48) Any impediment to the checking of traceability will be subject to an administrative fine of between NT$30,000 and NT$3 million. (Articles 7 and 47)
(6) Factories for food or food additives (Food Factory) should be established independently and production, processing and preparation of non-food commodities is prohibited in such factories. Existing food factories conducting non-food operations need to inform competent authorities of such operations within 6 months of the enforcement of this Act with improvements completed within 1 year. Any failure to take corrective action after notification of violation is subject to an administrative fine of between NT$30,000 to NT$3 million. (Articles 10 and 48)
(7) To prevent violators from transferring properties fraudulently, property or benefits obtained as a consequence of violations of this Act will be subject to confiscation, whether their owners are violators or third parties. Such third parties include natural persons, juristic persons and unincorporated bodies. Competent authorities may also seize such properties or benefits or pursue for payment of the same. Anyone transferring properties or benefits to any third party to evade payment may be subject to the competent authorities seizing properties of such third parties or pursuing for payment of the same. (Articles 49-1 and 49-2)
(8) If any actions by food enterprises in connection with food containing toxins or hazardous substances, adulteration or counterfeiting of food, or addition of any food additives not approved by the central competent authority cause harm to consumers, the enterprises concerned will be liable for damages. Unless such enterprises can prove that such harm was not caused by their actions or that they have exercised all due diligence to prevent it, they shall be subject to such liability. (Article 56)
(9) If any employee is penalized by means such as dismissal or transfer by an employer because he/she informs the authorities of irregularities, the food safety protection fund should pay all relevant fees and lawyer remuneration incurring from civil suits. (Article 56-1)
Reported by: Chenchi Wang
3. Regulations Governing Advertising and Promotion of Unsuitable Food for Children's Long-term Consumption (Children Food Regulation)
On November 11, 2014, in order to promote balanced diets for children, the Ministry of Health and Welfare announced the draft Children Food Regulation under the authorization of Article 28 of the AGFSS, which will take effect on January 1, 2016. We summarize its key points below:
(1) The Children Food Regulation applies to snacks, sweets, drinks, ices, and meals supplied by direct food suppliers, to which any of the following conditions apply: calories from fats account for 30% or more of total calories, calories from saturated fat account for 10% or more of total calories, 400 milligrams or more of sodium per serving, or calories from added sugar account for 10% or more of total calories.
(2) The following methods are prohibited from use in the advertising or promotion of the aforesaid food products: advertising on children's television channels from 5pm to 9 pm; advertising expressing or implying that these food can replace normal meals; promoting such food by using free toys as gifts, giving toys for an additional payment or giving toys as rewards.
Reported by: Chenchi Wang
Labor
4. Draft Regulations for Implementing Maternal Health Management
On November 24, 2014, Ministry of Labor announced draft Regulations for Implementing Maternal Health Management pursuant to article 31 of the Occupational Safety and Health Act. This designates industries which shall implement maternal health management and the types of work that are hazardous to maternal health. Such regulation also provides hazard assessment measures, procedures, controls and hierarchy management methods.
Reported by: David Tsai / Robin Huang
5. Amendment to Act of Gender Equality Employment
The Legislative Yuan passed the three readings of the amendment to the Act of Gender Equality Employment on November 21, 2014, which is pending announcement by the President. See our summary below:
(1) To amend existing provision of wage calculation for menstrual leave, to provide that such wages shall be paid at half of the regular payment during such leave.
(2) To provide employees with 5 days of prenatal examination leave.
(3) To increase the paid paternity leave of employees' spouses from 3 to 5 days.
Reported by: David Tsai / Robin Huang
Copyright
6. Intellectual Property Office announces that Music Copyright Society of Chinese Taipei (MUST) is the Single Window for collecting joint royalties for public performance of digitized karaoke machines
On November 21, 2014, the Intellectual Property Office announced that the Music Copyright Society of Chinese Taipei (MUST) will become the "Single Window" to collect joint royalties for public performance of digitized karaoke machines for 3 years in accordance with the Copyright Collective Management Organization Act. This takes effect on January 1, 2015.
Reported by: Chenchi Wang
Fair Trade Act
7. Trade Commission Guidance on Presale House Sales
On December 1, 2014, the Fair Trade Commission announced amendments to the "Fair Trade Commission Explanation on Presale House Sales" changing its name to the "Fair Trade Commission Guidance on Presale House Sales " ("Amendment"). The key points are summarized below.
(1) Real estate brokerage enterprises are regulated under this Guidance.
(2) If a real estate development enterprise or real estate brokerage enterprise fails to provide information to be disclosed in writing before a contract is signed, this will constitute an unfair conduct.
(3) Real estate development enterprises or real estate brokerage enterprises shall not require the purchaser of presale houses to pay deposits or any other fee to bring the sale agreement back for review.
Reported by: Stacy Lo/ Mark Chen
Consumer Protection
8. Draft Compulsorily Required Items and Prohibited Items in the Template Contract for Individual Residence Mortgage Loans and Draft Compulsorily Required Items and Prohibited Items in the Template Contract for Individual Car Mortgage Loans
The Consumer Protection Committee, Executive Yuan announced on 24 November 2014 that it approved the draft "Compulsorily Required Items and Prohibited Items in the Template Contract for Individual Residence Mortgage Loans" and "Compulsorily Required Items and Prohibited Items in the Template Contract for Individual Car Mortgage Loans" prepared by the Financial Supervisory Commission (FSC). Key changes are:
(1) A mortgage created by the borrower or a third party in favor of financial institutions only secures the debt arising from the mortgage loan contract unless the mortgagor agrees otherwise in writing.
(2) The rights and obligations to collect, process and utilize personal information of the borrower (including mortgagor) by financial institutions to perform a mortgage loan contract are specified.
(3) Financial institutions are obliged to urge the commissioned party to keep relevant information in confidence when they lawfully outsource their business. Financial institutions need to inform borrowers (including mortgagors) if they commission a third party to collect outstanding loans.
(4) Financial institutions cannot request that a borrower who has signed borrowing slips or certificates issue a note to secure his/her debt.
(5) Financial Institutions cannot seek joint and several guarantors when lending is made for a self-use residence (or car for self-use) under Article 12-1 of the Banking Act. Nor shall they seek a guarantor(s) if the security is sufficient. Without a guarantor's written consent, the term of a guaranty contract is no more than 15 years from its effective date.
Reported by: Kang-Shen Liu
Banking Act
9. Ruling on Article 4 of the Enforcement Rules of the Banking Act
The FSC issued a ruling on November 20, 2014, explaining that foreign financial institutions of which 50% or more are solely or jointly invested in by a bank(s) with the approval of the competent authority under Article 4 of the Enforcement Rules of the Banking Act, refer to foreign subsidiary banks established with the approval of a competent foreign financial authority. For credit (including bank overdrafts) extended by subsidiary banks of financial holding companies to the aforementioned foreign subsidiary banks of which 50% or more of the shares are held by financial holding companies, Article 44 of the Financial Holding Company Act does not apply.
Reported by: Stacy Lo / Angela Lin
Securities Firms
10.Draft Amendments to Regulations related to Securities Firms
On November 11 and November 24, 2014, the FSC announced the draft amendments to "Standards Governing the Establishment of Securities Firms", "Regulations Governing Borrowing or Lending Money in Connection with Securities Business by Securities Firms", "Regulations Governing Securities Lending by Securities Firms". "Regulations Governing Custody and Investment of Funds by Securities Firms on Behalf of Customers", "Regulations Governing the Conduct of Securities Trading Margin Purchase and Short Sale Operations by Securities Firms" and "Directions for the Conduct of Wealth Management Business by Securities Firms". We summarize major points below:
(1) The required capital adequacy ratio for applying businesses such as borrowing or lending money in connection with securities business, securities lending, custody and investment of funds on behalf of customers, securities trading margin purchase and short sale operation and wealth management, is reduced to 150 %;
(2) The financing period for money lending regarding the securities business may be extended for an additional six months. The scope of collateral is extended to securities eligible for margin purchases and short sales and the limit of the total financing amount is increased to NT$80 million.
(3) Where a securities firm conducts semi-discretionary collective management for which the principal designates the scope or method of use, and such business involves discretionary investment, the securities firm shall establish a dedicated department.
Reported by: Jeffrey Liu / Judy Tai
11.Proposed amendment to Rules Governing Securities Firms Engaging in Consigned Trading of Foreign Securities
The Financial Supervisory Commission issued a press release on November 19, 2014, announcing a draft amendment to the Rules Governing Securities Firms Engaging in Consigned Trading of Foreign Securities ("Draft"). We summarize the key points below:
(1)Relaxation of the marketing procedures to accept orders from professional institutional investors; such as exemption from risk explanation, risk disclosure statement execution and research reports, need not to be provided with a Chinese excerpt.
(2)Order prices from investors may be handled in accordance with the local market rules in foreign countries. Principals may make orders by facsimile.
(3)Principals who have not been disqualified are allowed to open accounts. Regarding the development of electronic commerce, the Draft specifies measures to handle accounts not opened in person.
(4)Specifying of exceptions to handle reconciliation statements of which investors have not engaged in transactions in the preceding month.
(5)Specifying the exceptions to handle the funds of which clients consigning to trade foreign securities of countries with exchange control.
Reported by: Jeffrey Liu / Angela Lin
OSU
12.Amendments to Scope of Products Conducted by Offshore Securities Units ("OSU")
On November 21, 2014, the FSC issued a ruling (Ref. No.: Jin-Guan-Zheng-Quan-Zi-1030043860) to amend the scope of products engaged by OSUs. We summarize the major points below:
(1) Non-residents are permitted to trade foreign currency credit derivatives and foreign currency structured products which link to the credit objective.
(2) The scope of underlying foreign currency derivatives a non resident may trade is extended to securities listed on the Taiwan Stock Exchange Corporation and GreTai Securities Market, the stock index and the exchange traded fund of the R.O.C., including the stock index of the R.O.C. listed on the overseas exchange.
(3) The restriction whereby securities investment trust funds distributed through the OSU cannot invest more than 30% of their net asset value in the Taiwan securities market is removed.
Reported by: Jeffrey Liu / Judy Tai
Offshore Funds
13.Restrictions on Offshore Funds
On November 26, 2014, the FSC issued a ruling (Ref. No.: Jin-Guan-Zheng-Tou-Zi-1030043688) imposing new restrictions on registered offshore funds. These take effect on January 1, 2016. In the future, the ceiling for offshore funds registered in Taiwan (i) to have investors from Taiwan, and (ii) to invest in Taiwanese products will be reduced from the current 70% to 50%. For (I), regarding the Taiwan investor threshold, there are the following exceptions:
(1) If the fund domicile is recognized by Taiwan, the ceiling can be 70%.
(2) If the master agent or financial institution is recognized under an incentive plan, the ceiling can be 70%.
(3) If the FSC considers it necessary for management of the securities market, the ceiling can be reduced to 40%.
Funds failing to meet the new requirements will be suspended from sale, except subscriptions under a regular saving plan. Existing investors will not be affected and may still apply for transfer or redemption.
Reported by: Jeffrey Liu / Judy Tai
SITE
14.Amendments to '' Regulations Governing Securities Investment Trust Enterprises ''and ''Standards Governing the Establishment of Securities Investment Trust Enterprises''
On November 28, 2014, the FSC formally announced amendments to Article 3, Article 24-1 and Article 25 of ''Regulations Governing Securities Investment Trust Enterprises'' and Article 15, Article16 and Article 45 of ''Standards Governing the Establishment of Securities Investment Trust Enterprises''. We reported the major points of the draft amendments in point 13 of Issue No. 211 of the Lexgroup Newsletter.
Reported by: Jeffrey Liu / Caitlyn Kao
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2014-12-08
