Financials
1.Regulations for Financial Institutions and Businesses or Individuals Providing Virtual Asset Services to Prevent Fraud Crimes and Related Hazard
On 29 December 2024, the Financial Supervisory Commission (FSC) announced the “Regulations for Financial Institutions and Businesses or Individuals Providing Virtual Asset Services to Prevent Fraud Crimes and Related Hazard.” We summarize below:
(1) Account Number Identification Standards and Inquiry Procedures: To provide the standards for identifying abnormal accounts, enhanced measures for customer identification authentication and continuous review, and the items and procedures for inter-institutional inquiries.
(2) Data Transaction Record Retention, Reporting, and Account Number Control Operations: Regulations for retaining data related to abnormal account numbers, procedures for reporting abnormal account numbers to judicial police authorities, and measures for subsequent control and deactivation of control.
(3) Joint Defense Reporting Mechanism and Earmarking Operations: The joint defense reporting mechanism for alert accounts, earmarking of fraudulent funds or virtual assets, cancellation of such earmarking, and the joint defense procedures for financial institutions or Virtual Asset Service Providers (VASPs) handling fraud reports.
(4) Return of Remaining Funds or Virtual Assets: Procedures for returning remaining funds or virtual assets from alert accounts notified for return by the original judicial police authorities, as well as the conditions, required documents, and procedures for financial institutions or VASPs to return the remaining funds or virtual assets.
Reported by: Stacy Lo / Eva Chiu
2.Regulations Related to Subparagraph 8, Paragraph 1, Article 5 of the Regulations Governing Banks Conducting Financial Products and Services for High-Asset Customers
On 5 December 2024, the FSC announced the regulations related to Subparagraph 8, Paragraph 1, Article 5 of the Regulations Governing Banks Conducting Financial Products and Services for High-Asset Customers. We summarize below:
(1) The collateral for foreign currency credit facilities provided by high-asset customers shall be limited to foreign bonds and principal-protected offshore structured products or foreign-currency-denominated structured bonds meeting certain rating standards held by the customers themselves.
(2) When handling foreign currency credit facilities, foreign-currency-denominated bonds or offshore structured products issued by the bank itself, its overseas branches, holding company, parent bank, head office, or affiliates in other countries within the same group cannot be accepted as collateral. However, for the purpose of securing its claims, the bank may collect aforementioned foreign-currency-denominated securities as auxiliary collateral.
(3) When handling foreign currency credit facilities, the bank may be exempted from the rule that “the total outstanding amount of a debtor’s unsecured debt across all financial institutions, divided by their average monthly income, should not exceed 22 times.”
(4) When handling this business, the bank must agree with high-asset customers that the funds obtained through pledged collateral may not be converted into New Taiwan Dollars. High-asset customers must also provide the bank with an explanation of the intended use of the funds and submit relevant supporting documents at the time of the pledge.
(5) When handling this business, the bank must establish internal risk control mechanisms.
Anti-Money Laundering
3.Announcement on Regulations Governing Anti-Money Laundering and Service Capability Registration for Enterprises or Personnel Providing Third-Party Payment Services
On 29 November 2024, the Ministry of Digital Affairs announced the “Regulations Governing Anti-Money Laundering and Service Capability Registration for Enterprises or Personnel Providing Third-Party Payment Services” (Regulations). We summarize below:
(1) To stipulate the positive qualifications for service capability registration applicants.
(2) To stipulate the negative qualifications for the responsible person, partners, or beneficial owners of third-party payment service providers.
(3) To stipulate the documents and materials required for service capability registration.
(4) To stipulate the review items for service capability registration.
(5) To stipulate the reasons for refusing or revoking registration.
(6) To stipulate the reasons for refusing or revoking registration.
(7) To stipulate that the total amount of payment received or paid by the registered service provider as an agent shall be entrusted to the trust account or for which a full amount performance guarantee shall be obtained from a bank, and proof of a dedicated trust account for the payment or a full amount performance guarantee shall be submitted to the MODA for record within six months after the registration and then the services can be commenced.
(8) To stipulate that after the registration the service providers shall display their service capability registration certificate, business and service details, and other items announced by the MODA prominently on their website or in the manner designated by the MODA.
(9) To stipulate that after the registration the service providers shall submit relevant documents to the MODA for record in the event of changes to their name, responsible person, or business address, etc.
(10) To stipulate that after the registration if the service provider intends to terminate the services, it shall apply to the MODA for cancellation of their service capability registration and return the registration certificate.
(11) To stipulate the reasons for which the MODA may revoke the registration of service providers.
(12) To stipulate that the service providers already completing the registration before the implementation of these Regulations will be considered as completing the registration under these Regulations during the effective period.
Reported by: Stacy Lo / Eden Hsieh
Electronic Payment
4.Draft Amendment to Implementation Rules for the Internal Audit and Internal Control System of Specialized Electronic Payment Institutions
On 3 December 2024, the FSC announced the draft amendment to “Implementation Rules for the Internal Audit and Internal Control System of Specialized Electronic Payment Institutions” for public consultation. We summarize below:
(1) When a specialized electronic payment institution entrusts a CPA to conduct an audit for its internal control system, the audit report shall be of reasonable assurance; and
(2) In the event a specialized electronic payment institution has total assets audited and certified by the CPA amounted to NTD 1 billion or more in the previous year or 2 million users or more, the specialized electronic payment institution shall establish a dedicated unit and appoint a supervisor for information security.
Reported by: Stacy Lo/ Zoe Chen
SITE/SICE
5.Amendment to the Ruling Related to Paragraph 2, Article 77 of the Securities Investment Trust and Consulting Act and Paragraph 3 and 5, Article 14 of the Regulations Governing Responsible Persons and Associated Persons of Securities Investment Trust Enterprises
On 27 November 2024, the FSC announced amendment to the ruling related to Paragraph 2, Article 77 of the Securities Investment Trust and Consulting Act and Paragraph 3 and 5, Article 14 of the Regulations Governing Responsible Persons and Associated Persons of Securities Investment Trust Enterprises. The amendment adds that responsible persons, department heads, branch managers, fund managers, and investment managers of securities investment trust enterprises, as well as their spouses and minor children, must report any transactions involving the company’s stocks and equity-related derivatives to their respective securities investment trust enterprises prior to executing the transactions.
Reported by: Jeffrey Liu / Amy Su
6.Draft Amendments to SITE related Regulations
On 27 November 2024, the FSC announced amendments to Article 4-1 of the Regulations Governing Responsible Persons and Associated Persons of Securities Investment Trust Enterprises, Article 19-1 of the Regulations Governing Securities Investment Trust Enterprises, and Article 19-2 of the Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises for public consultation, so as to strengthen the fund manager’s conflict of interest transaction prevention mechanism. We summarize below:
(1) Require that the head of internal audit shall meet certain qualification requirements and hold a position equivalent to vice president or similar position If the head of internal audit doesn’t meet the qualifications, the SITE must make necessary adjustments within 1 year from the effective date of the amendment to Article 4-1 of Regulations Governing Responsible Persons and Associated Persons of Securities Investment Trust Enterprises (i.e., November 27, 2024). (Article 4-1 of the Regulations Governing Responsible Persons and Associated Persons of Securities Investment Trust Enterprises); and
(2) Upgrade the existing self-disciplined regulations on the management of information and communication equipment of securities investment trust enterprises (SITE) to delegated regulations, so as to further prevent fund managers from engaging in conflict-of-interest transactions, and require the SITE to stipulate conflict-of-interest prevention measures in the internal control system. (Article 19-1 of the Regulations Governing Securities Investment Trust Enterprises and Article 19-2 of the Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises.)
Reported by: Jeffrey Liu / Winnie Su
7.Amendment to Operating Procedure for the Offering and Sale of Securities Investment Trusts Enterprise and their Subscription or Repurchase
On 5 December 2024, the Securities Investment Trust and Consulting Association (SITCA) announced the amendment to the “Operating Procedure for the Offering and Sale of Securities Investment Trusts Enterprise (SITE) and their Subscription or Repurchase (Operating Procedure)”. The Operating Procedure stipulates that if the SITE submitting an application/report for securities investment trust fund(s) registration fails to meet the eligibility requirements, lacks documents, submits incorrect information, still has deficiencies or errors after supplement, or has not improved the deficiencies of the previous submission with the last two (2) years, the SITE will be penalized with a deficiency point.
If the total number of deficiency points of the SITE reaches fifteen (15) or more, the SITE shall, upon receipt of the notification letter from the SITCA, assign the personnel responsible for the securities investment trust fund(s) application/report to attend the securities investment trust fund(s) regulation related training course held by the SITCA for six (6) hours, and submit an improvement plan for the deficiencies, which has been approved by the general manager and the head of internal audit, to the most recent board of directors’ meeting for report. Failure to comply with the above-mentioned requirements will result in an additional review period for subsequent securities investment trust fund(s) applications/reports.
Reported by: Jeffrey Liu / Eva Chiu
8.Amendment to Guidelines for Advertisements and Business Activities Performed by Members and Their Sales Agent
On 4 December 2024, the SITCA announced the amendment to “Guidelines for Advertisements and Business Activities Performed by Members and Their Sales Agent”(Guidelines). We summarize below:
(1) Addition of a provision prohibiting the use of dividend payout rates or dividend amounts as the primary focus of contents of advertisements and articles.
(2) Addition of a provision prohibiting the use of a fund’s investment portfolio yield as a sales appeal.
((3) Addition of a provision requiring funds emphasizing investments in bonds issued by financial institutions with total loss-absorbing capacity to include a specified warning statement.
(4) Addition of a provision requiring funds with names such as “High Dividend” to include a specified warning statement.
(5) Addition of a provision requiring advertisements of ETFs based on the performance or yield of the index they track to include a specified warning statement, and prohibiting the prominent emphasis of the performance of the index tracked by the ETF.
Reported by: Jeffrey Liu / Eden Hsieh
Electricity Act
9.Draft Amendment to Regulations on Registration of Electricity Industry
On 6 December 2024, the Ministry of Economic Affairs announced the draft amendment to “Regulations on Registration of Electricity Industry” for public consultation. We summarize below:
(1) To add that when solar photovoltaic operators apply for establishment or expansion permits, except that all primary power generation equipment is installed on building rooftops, proof of conducting a local briefing session shall be provided.
(2) To add that the format of the checklist for issuing consent letters to solar photovoltaic operators shall be separately stipulated by the competent authority.
(3) To add the procedures, required explanations, and related matters for solar photovoltaic operators to conduct local briefing sessions for establishment, expansion, or project plans.
Reported by: Stacy Lo / Joe Liao
| Editors: Mike Lu (Partner) Stacy Lo (Partner) Jeffrey Liu (Partner) Kang-Shen Liu (Partner) David Tsai (Partner) Angela Lin (Partner) Paul Hsu (Partner) | Counselors: Echo Yeh Sue Su Jolene Wang (Lexcel Partners IP Firm) |