Corporate
1. Definition of "Small and Medium Enterprises"
"Small and Medium Enterprises" are defined in Paragraph 1, Article 2 of Act for Development of Small and Medium Enterprises (Act) as enterprises having completed company registration or commercial registration under the Act and conforming to the prescribed standards. The Ministry of Economic Affairs, R.O.C. issued a ruling on January 30, 2016 (Ref. No.: Jing-Qi-Zi No. 10504600440) to clarify the so called "commercial registration" and it shall refer to, aside from the company registration, the registration of a commercial organization under relevant laws. This includes commercial registration in accordance with the Business Registration Act and limited partnership registration in accordance with the Limited Partnership Act.
Reported by: Mike Lu / Judy Tai
2. Accounting and Disclosure Requirement for Employees' Compensation and Compensation of Directors and Supervisors
On January 30, 2016, the Financial Supervisory Commission (FSC) issued a ruling to amend the requirements for accounting and disclosure for employee bonuses and compensation of directors and supervisors. We summarize the amendments below:
(1) To be in line with the amendment to the Company Act of May 20, 2015 the system of employee bonuses was removed and amended to follow the system of employee compensation in which the company shall distribute employees' compensation based on a certain amount or ratio of profit. The term under the ruling is amended from “employees' bonus” to “employees' compensation”; and
(2) For distribution of employees' compensation in the form of shares by a company listed on the Taiwan Stock Exchange or an OTC listing company, the share number to be distrusted shall be calculated based on the closing price on the day before the board resolution day.
Reported by: Stacy Lo / Mark Chen
Banking
3. Amendment to the "Regulations Governing Internal Operating Systems and Procedures for Banks Conducting Financial Derivatives Business"
The FSC announced the amendment to the "Regulations Governing Internal Operating Systems and Procedures for Banks Conducting Financial Derivatives Business" (Regulations) on January 30, 2016, in which:
(1) The term "professional client" mentioned in the Regulations shall not be limited to domestic juristic persons or individuals. The qualification for professional clients who are juristic persons is raised from total assets of more than NT$50 million (around US$1,666,667) to more than NT$100 million (around US$3,333,333), and a written application for "professional client" status is required.
(2) For professional clients who are juristic persons and have engaged in existing derivatives transactions before the amendment to the Regulations and whose total assets do not exceed the NT$100 million threshold, such transactions will not be affected by failing to meet the qualification and can be remained to maturity.
(3) For clients who are not professional institutional investors, banks shall consider the derivatives transaction amount of the clients with other financial institutions and the client's risk tolerance capability when granting or extending the limit for the clients to conduct derivatives transactions. Banks shall also establish a system for initial margin and margin call when providing derivatives that are not structured products to clients other than professional institutional investors or high net worth corporate investors.
(4) Banks shall not engage in transactions of complex high-risk product with clients who are individuals or ordinary juristic persons not for hedging purposes and shall follow certain requirements on the tenor and clients' maximum loss limit when providing complex high-risk product to clients other than professional institutional investors and high net worth corporate investors.
In light of the amendment to the Regulations, the FSC announced two rulings on February 1, 2016, which appointed local banks' offshore branches in Hong Kong and Singapore to report clients' transaction amounts in derivatives to the Joint Credit Information Center ("JCIC") when engaging in derivatives transaction with offshore clients being juristic persons other than professional institutional investors, and shall also report the same when granting or extending such clients' transaction amount limits before they can conduct such transactions. Additionally, when providing derivatives transaction services that are not structured products to clients other than professional institutional investors or high net worth corporate investors, the transaction amount for high-risk derivatives granted by banks to such clients shall not exceed 250% of clients' verifiable financial transaction capacity. (These two rulings will take effect from March 1, 2016.)
Furthermore, the FSC announced on February 1, 2016, a ruling to amend the standards for offshore banking units to accept clients when conducting derivatives business. For professional clients being juristic persons but not professional institutional investors or high net worth corporate investors, one of the following requirements shall be met:
(1) Its total assets exceed NT$100 million according to its latest CPA-audited or reviewed financial report.
(2) Guarantees or collateral are provided by its parent company and the total assets of the parent company exceed NT$100 million according to its latest CPA-audited or reviewed financial report.
(3) The total assets for transaction with financial institutions exceed NT$100 million.
(4) Other standards equivalent to or not less than the three requirements mentioned above and are reviewed by the risk management officer or compliance officer.
Reported by: Stacy Lo / Angela Lin
4. Qualifications for a Professional Investment Institution, Legal Entity and Individual Meeting Certain Financial or Professional Capacity
On February 2, 2016, the FSC issued a ruling to amend the Qualifications for a Professional Investment Institution, Legal Entity and Individual Meeting Certain Financial or Professional Capacity under the proviso of Paragraph 1, Article 4 of the Financial Consumer Act. We summarize the amendments below:
(1) When a legal entity receives the derivative products provided by a bank, the total assets of the legal entity shall exceed NT$100 million; and
(2) To add and amend the applicable regulations for the qualifications of an individual meeting certain financial or professional capacity, including (i) Regulations Governing Internal Operating Systems and Procedures for Banks Conducting Financial Derivatives Business, (ii) Self-regulations Governing Bills Finance Companies conducting Financial Derivatives, (iii) Taipei Exchange Rules Governing Leverage Transaction Merchants Conducting Leverage Contract and (iv) Taipei Exchange Rules Governing Management of Foreign Currency-Denominated International Bonds.
Reported by: Stacy Lo / Mark Chen
Consumer Protection
5. The Draft Mandatory Provisions and Prohibitory Provisions of Business Agreement for Instant Messenger Software Service
The Ministry of Economic Affairs preannounced the draft "Mandatory Provisions and Prohibitory Provisions of Business Agreement for Instant Messenger Software Service" on January 30, 2016. We summarize the draft below:
(1) Instant Messenger Software Service means the services provided to users for them to transmit voices, images, texts, data, files or other information to other users over the Internet via computers, smart devices or other electronic equipment so that two or more people may communicate privately.
(2) Key mandatory provisions include:
a. Business operators who provide value-added services or commodities must set forth certain information. The enterprises invested by Mainland China investors cannot provide value-added services, e.g. stickers.
b. Business operators shall be liable for the damages resulting from a third party's invasion to their electronic systems.
c. If business operators suspend the services for maintenance purpose, users shall be notified of such 7 days prior.
d. The causes to terminate contracts or suspend services (e.g. there are facts or evidences showing criminal use or users submit false identity information) are specified.
Reported by: Kang-Shen Liu / Robin Huang
SITE Fund
6. Amendments on Regulations Governing Matters Related to Beneficiary Certificates
On January 30, 2016, the Securities Investment Trust and Consulting Association issued a ruling (Ref. No.: Zhong-Xin-Gu-Zi-1050050112) to amend Regulations Governing Matters Related to Beneficiary Certificates. The amendments are to permit the enterprises to accept the account opening by electronic means from the clients and include relevant procedures accordingly.
Reported by: Jeffrey Liu / Judy Tai
SITE/SICE
7. Amendment to Schedule II of the ''Regulations Governing Advertising and Business Activities Conducted by Members and Its Sales Agents''
On February 1, 2016, Securities Investment Trust & Consulting Association of the R.O.C. issued a ruling (Ref. No.: Zhong-Xin-Gu-Zi-1050300040) to announce the amendment to Schedule II of the ''Regulations Governing Advertising and Business Activities Conducted by Members and Its Sales Agents'', thereof incorporated The Asset, Taiwan Stock Exchange, Taiwan Futures Exchange, Taipei Exchange, Taiwan Depository & Clearing Corporation and Securities & Futures Institute as the domestic or foreign institutions of which relevant statistics or analysis data may be referenced by securities investment trust enterprises/securities investment consulting enterprises where advertising for funds is based on other performance data rather than fund performance.
Reported by: Jeffery Liu / Caitlyn Kao
Food and Drug Administration
8. Regulations that Packaged Food with a Toy Must be Labeled with Warnings
The Ministry of Health and Welfare (MOHW) announced on February 4, 2016 the promulgation of the “Regulations that Packaged Food with a Toy Must be Labeled with Warnings”, effective as of January 1, 2017. The Regulations require that packaged food with a toy be conspicuously labeled with warnings of “This product contains toys inside. Be careful not to swallow or inhale, and it is recommended that the user be accompanied and supervised by an adult” or the like.
Reported by: Jolene Wang / Crick Liang
9. Amendment to Standards for the Limits of Heavy Metals in Vegetables and Fruits
On February 4, 2016, the MOHW announced the promulgation of and enforcement of the amendment to the “Standards for the Limits of Heavy Metals in Vegetables and Fruits”, which provide stricter and more specific limits on lead (Pb) and cadmium (Cd) in different kinds of vegetables and fruits, respectively. For example, the limit on Pb in root vegetables and tubers is lowered from 0.3 ppm to 0.1 ppm, and the limit on Cd in beans is lowered from 0.2 ppm to 0.1 ppm.
Reported by: Jolene Wang / Crick Liang
10. Draft Regulations Stipulating Dedicated Baby Wet Wipes are Regulated as Cosmetics
The MOHW announced on February 3, 2016 the draft “Regulations Stipulating Dedicated Baby Wet Wipes are Regulated as Cosmetics”, which is scheduled to take effect on June 1, 2017. From that date, dedicated Baby wet wipe products must comply with the Statute for Control of Cosmetic Hygiene. According to the announcement, “baby” as recited in this Regulations refers to any infants less than one year old, following the definition of the WHO.
Reported by: Jolene Wang / Crick Liang
2016-02-17
