On 30 September, 2024, the Financial Supervisory Commission (“FSC“) announced the draft amendment to the “Regulations Governing Securities Investment Trust Funds” and related regulations to introduce Active Exchange-Traded Funds (i.e. Active ETFs).
Currently, the abovementioned draft amendments are still in the consultation stage which is expected to end on 29 November, 2024. The official amendments will be announced following the end of the consultation period. The Taiwan Stock Exchange Corporation is also expected to amend the relevant authorized regulations, including disclosure of daily positions, index review, information disclosure, securities coding, and various trading rules, following the announcement of the official amended provisions.
We summarize the draft amendments below:
1.The official name for Active ETFs will be “Active Exchange-Traded Funds;”
2.The Active Exchange-Traded Funds are defined as funds managed by a securities investment trust enterprise following a specific investment strategy, where fund managers actively analyze market conditions and make investment decisions, with fund beneficiary certificates traded on securities exchanges markets. Subscriptions and redemptions of Active Exchange-Traded Funds can be settled either in-kind or according to the methods specified in the securities investment trust agreement;
3.The investment scope of the Active Exchange-Traded Funds includes stocks, bonds, and other securities approved by the FSC;
4.The Active Exchange-Traded Funds that invest primarily in stocks or bonds will be subject to the respective regulations governing equity funds or bond funds;
5.The Active Exchange-Traded Funds are not required to set a performance benchmark. However, if a benchmark is established, the prospectus must explain the nature of the benchmark, highlight the differences between the fund and the performance benchmark regarding investment strategy and characteristics, and provide a comparison of the fund’s performance against the performance of the benchmark; and
6.By reference to the requirements of passive index ETF beneficiary certificates, the Active Exchange-Traded Funds will be allowed for margin trading and securities lending after being listed on the exchange.
