Chapter I General Principles
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| Article 1 | These Rules are adopted in accordance with the provisions of Article 28 of the Regulations Governing Securities Firms. |
| Article 2 | These Rules are applicable to the underwriting and re-sale of stocks, corporate bonds, financial bonds, depositary receipts, and any other securities specified by the Financial Supervisory Commission, Executive Yuan (FSC). |
| Article 3 | In the underwriting of securities, a securities underwriter shall conduct such business in accordance with these Rules. |
| Article 3-1 | The lead underwriter shall organize an underwriting syndicate and handle allocation with consideration to the needs of the particular case, and in handling such matters shall not be influenced by the issuing company. |
| Article 4 | In the underwriting of securities, a securities underwriter shall determine the offering price of the securities according to the following methods:
1. By competitive auction;
2. By book building; or
3. As resolved by negotiations between the underwriter and the issuing company, issuing institution, or holder of the securities.
The offering price referred to in the preceding paragraph shall refer to the unit price, stock price discount (premium) rate (applicable only where no bid deposit has been collected), coupon rate, conversion (exchange) premium ratio, and yield to put.
"Issuing institution" as used in these Rules refers to an institution that issues beneficial interest securities or asset-backed securities under one of the following circumstances:
1. where a trustee institution or a special-purpose company accepts financial assets in trust or in transfer from the originator, and issues beneficial interest securities or asset-backed securities based on those assets; or
2. where a trustee institution accepts transfer from a principal of real estate or real estate-related rights, and offers real estate asset trust beneficial interest securities to unspecified parties. |
| Article 4-1 | In the underwriting of securities on a firm commitment basis, except where prescribed by other laws and regulations, a securities underwriter shall act as prescribed by the following provisions with respect to the proportion of securities held for its own account; provided, however, that for any units purchased for its own account that remain unsubscribed at the closure of the underwriting period, these restrictions shall not apply:
1. In an underwriting case involving cash capital increase, convertible (or exchangeable) corporate bonds, ordinary corporate bonds not handled by negotiated sale, financial bonds not handled by negotiated sale, or Taiwan depositary receipts for exchange (or over-the-counter (OTC)) listed companies, the underwriter shall hold for its own account from 5 percent to 15 percent of the total number of units underwritten;
2. In the underwriting of a cash capital increase for a company that is an emerging stock company or that is not exchange (or OTC) listed, the underwriter may hold for its own account a proportion not to exceed 15 percent of the total number of units underwritten;
3. In an underwriting case involving preferred shares, preferred shares with warrants, or corporate bonds with warrants for public companies, the underwriter may hold for its own account a proportion not to exceed 15 percent of the total number of units underwritten;
4. If a company already listed on a stock exchange or an OTC market, or an emerging stock company, either issues preferred shares and preferred shares with warrants for which the warrant is detachable (“preferred shares with detachable warrants”), corporate bonds and corporate bonds with warrants for which the warrant is detachable (“corporate bonds with detachable warrants”), the underwriter may set respectively the percentage to hold for its own account, provided that the percentage may not exceed 15 percent of the total number of units underwritten;
5. In an underwriting case involving a secondary distribution of beneficial interest securities by a trustee institution or a secondary distribution of asset-backed securities by a special purpose company that is not undertaken through negotiated sale, purchases on own account shall not exceed fifteen percent of the total amount underwritten;
6. In an underwriting case where an offering of real estate asset trust beneficial interest securities by a trustee institution is not undertaken through negotiated sale, purchases on own account shall not exceed fifteen percent of the total amount underwritten.
In the underwriting cases contemplated under the preceding paragraph, for issues undertaken entirely by book building, each underwriter shall hold for its own account not more than 10 percent of the total number of units underwritten.
Where a public company carrying out a cash capital increase encounters waiver of subscription rights by an existing government-agency shareholder in accordance with the provisions of Article 267, paragraph 3 of the Company Act, the portion thus incorporated into the public underwriting may be excluded when calculating the "total number of units underwritten" set out in paragraph 1, subparagraph 1.
In underwriting case involving an initial listing on a stock exchange (or OTC) market or an initial issuance of Taiwan Depositary Receipts, if the securities underwriter carries out the underwriting through public sale to outside parties, it shall first set aside 1,000 common shares (or 1,000 units of depositary receipts) from the offering for subscription by the Securities and Futures Investors Protection Center.
Except for underwriting cases involving an OTC company transferring its listing to a stock exchange, or for underwriting cases for which there are other acts and regulations that provide otherwise, if an underwriting case involving an initial listing of shares in common stock on a stock exchange (or OTC) market is carried out on a firm commitment basis, the lead underwriter shall stipulate with the issuing company that the issuing company is to coordinate with its shareholders to provide previously issued shares in common stock (the number thereof to be set at a certain percentage of the total volume of shares to be sold publicly to outside parties in the current underwriting case) to the lead underwriter for the purpose of exercising overallotment during the underwriting period. The related procedures shall be carried out in accordance with the Taiwan Securities Association Rules Governing the Underwriting Procedures to be Followed by Underwriters in Conducting an Initial Listing on a Stock Exchange or Over-the-Counter Market. |
| Article 5 | With the exception of that portion of underwritten units held for its own account in accordance with the preceding article, a securities underwriter carrying out the underwriting of securities (hereinafter, "public sale to outside parties") shall use the following methods to allocate units:
1. competitive auction;
2. book building;
3. public subscription; or
4. negotiated sale.
The allocation methods described in the above subparagraphs shall be undertaken in accordance with Articles 6, 7, 21, 21-1, 22, 22-1, 22-3, 31 and 52 of these Rules.
When different placement methods are used in the same underwriting case, the relevant timetable for the procedures from placement with specific parties until the distribution date of the securities shall be consistent between the different placement methods. |
| Article 5-1 | A securities underwriter [intending to] underwrite securities shall publish an underwriting announcement in daily newspapers, and [in so doing] shall act in accordance with the Taiwan Securities Association Rules Governing the Particulars to be Recorded by Securities Underwriters in Securities Underwriting Announcements.
A securities underwriter [intending to] underwrite securities shall publish a prospectus on its website, and shall provide prospectuses upon the request of investors. |
Chapter II Offering Price
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Section One Pricing by Competitive Auction
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| Article 6 | In the underwriting cases prior to an initial listing on a stock exchange or an OTC market involving previously issued shares or cash capital increase through a new share issue (except for cases involving conversion of OTC (or exchange) listed stocks into exchange (or OTC) listed stocks), and in the underwriting of a cash capital increase by a company already listed on a stock exchange or an OTC market in which all shares are put up for underwritten distribution, where underwriting is not carried out using the book building method, the shares shall be offered through competitive auction; provided, however, that this provision does not apply to a public enterprise or to any other party that applies for an initial listing of shares on a stock exchange or an OTC market in accordance with the provisions of Articles 6 and 6-1 of the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings, or in accordance with the provisions of the GreTai Securities Market Supplemental Provisions for Applications by Private Institutions Participating in Public Infrastructure Projects for Over-the-Counter Listing, or in accordance with other acts or regulations.
In the underwriting of convertible corporate bonds or corporate bonds with warrants, and in a secondary distribution carried out in accordance with the provisions of Article 22 paragraph 3 of the Securities and Exchange Act (hereinafter, "secondary distribution"), the securities may be offered through competitive auction. |
| Article 7 | In the underwriting of securities issued through competitive auction as prescribed in the preceding article, except where the issuer is a government-owned enterprise or another party for which there are other acts or regulations that provide otherwise, underwriting of that portion of the offering put up for public sale to outside parties shall be handled in accordance with the following provisions:
1. In an underwriting case involving an initial listing of shares on a stock exchange or an OTC market, the shares may be offered either entirely through competitive auction, or through a combination of competitive auction and public subscription. However, the portion allocated through public subscription shall not exceed 20 percent of the total number of shares underwritten.
2. In the underwriting of an offering of convertible bonds, or of warrants that have been detached from preferred shares with detachable warrants or warrants that have been detached from corporate bonds with detachable warrants, or in the underwriting of a cash capital increase by a company already listed on a stock exchange or an OTC market in which all units are put up for underwritten distribution, all units shall be offered through competitive auction.
3. In an underwriting case involving the offering of corporate bonds with warrants or an underwriting case involving a secondary distribution, the units may be offered either entirely through competitive auction, or through a combination of competitive auction and public subscription. |
| Article 8 | In the underwriting of securities offered through competitive auction, the lead underwriter shall first prepare documentation determining the particulars listed in the subparagraphs below. After being signed or sealed by the lead underwriter and co-underwriters and the issuer of the securities, said documentation shall be reported to the Taiwan Securities Association:
1. the total number of underwritten units, number of units expected to be sold via overallotment, number of units held by the securities underwriter for its own account as prescribed by Article 4-1, the number of units offered by competitive auction, and minimum bidding unit;
2. the minimum offering price as resolved by negotiation with the issuer;
3. the firm-commitment fee or best-efforts underwriting fee, as resolved by negotiation with the issuer;
4. the unit size of lots offered through public subscription;
5. the names of the members of the underwriting syndicate, and the amount of securities apportioned to each, as specified by Article 7;
6. except for the initial listing of shares on a stock exchange or an OTC market, the method of allocating among the members of the underwriting syndicate any units that remain unsubscribed after conclusion of competitive auction; and
7. the date(s) of competitive auction and the time(s) for submitting and opening bids, as agreed in consultation with the Taiwan Securities Association.
The upper limit for the minimum offering price in subparagraph 2 of the preceding paragraph shall, in an underwriting case involving an initial listing on a stock exchange or an OTC market, be the figure obtained by using the method of calculation reported to the Taiwan Stock Exchange Corporation (TWSE) or the GreTai Securities Market (GTSM); in the underwriting of a cash capital increase through an issue of common shares by a company already listed on a stock exchange or an OTC market in which all shares are put up for underwritten distribution, [it] shall not be lower than 90 percent of (1) the closing common share price on the business day prior to the offer through competitive auction, or (2) the simple average of closing common share prices over either the three or five business days prior to the offer through competitive auction, factoring out bonus shares issued as stock dividend (or treasury shares canceled in connection with a capital reduction); in the underwriting of a cash capital increase through an issue of preferred shares, or of warrants that have been detached from preferred shares with detachable warrants or warrants that have been detached from corporate bonds with detachable warrants, by a company already listed on a stock exchange or an OTC market, the upper limit shall be the reference price calculated based on the appropriate pricing model selected at the time the fund-raising plan was reported to the competent authority.
In the underwriting of convertible corporate bonds and corporate bonds with warrants by competitive auction, the minimum offering price, as negotiated pursuant to paragraph 1 subparagraph 2, shall not exceed the par value of said securities.
In the event that unsubscribed units as specified in paragraph 1 subparagraph 6 are placed by the underwriting syndicate with a specific party, only the parties listed in Article 35 shall participate in said placement, and those listed in Article 36 shall not participate. |
| Article 9 | A lead underwriter of securities shall publish a competitive auction announcement in daily newspapers on the first day on which public bids are accepted. The content of said announcement shall be reported in hardcopy and electronic media to the Taiwan Securities Association, and shall include the items in the following subparagraphs:
1. name of the security;
2. names, addresses, and telephone numbers of the underwriters;
3. method, time period, and site of the bidding;
4. date, time, and site of the opening of the bids;
5. minimum offering price and minimum bidding unit;
6. total quantity of securities to be put up for underwritten distribution; number of units expected to be sold via overallotment; total number of units retained for their own accounts by the securities underwriters; the total number of units being offered for competitive auction, and the amount of the bid deposit (the amount of the bid deposit shall not be less than 20 percent of the amount of the bid);
7. the maximum quantity of securities that shall be allocated to an individual bidder;
8. parties from whom competitive auction bids will be accepted;
9. matters relating to the refund of bid deposits (in the event the total number of securities bid for in valid bids is insufficient to cover all the securities offered through competitive auction in an underwriting case involving the initial listing of shares on a stock exchange or an OTC market);
10. matters relating to the collection of bid processing fees by securities underwriters in accordance with Article 12;
11. any statutory restrictions upon holding percentages as may be set forth in other laws or regulations with respect to the industry to which the issuer belongs (please list these on the bid form); and
12. other supplemental items that must be disclosed in order to safeguard the public interest and investors.
The maximum quantity that each participant shall receive, as referred to in subparagraph 7 of the preceding paragraph, shall not exceed 10 percent of the portion of the offering put up for public sale to outside parties.
In the section specifying the parties from whom competitive auction bids will be accepted (as set forth under subparagraph 8 of the preceding paragraph), the announcement shall print the provisions of Articles 35 and 36. |
| Article 10 | In the underwriting of securities through competitive auction, the underwriting syndicate may provide a company prospectus and relevant materials to investors, and may also convene public informational meetings to familiarize investors with the offering. |
| Article 11 | In an underwriting by competitive auction, the securities underwriter shall administer bidding and auctioning in accordance with the following schedule:
1. Day One: Commencement of the tender;
2. Day Three: Closure of the tender (where day four falls on a weekend, closure of the tender shall be postponed by one day); and
3. Tenders shall be opened on the fourth business day subsequent to the closure of the tender.
Those submitting bids in accordance with the provisions of subparagraphs 1 and 2 of the preceding paragraph shall submit their bids directly at the place of business of the securities underwriter.
The dates specified under paragraph 1 may be changed if necessary by applying to the Taiwan Securities Association for approval. |
| Article 12 | Institutional and individual investors that participate in a public tender shall, following the prescribed format (see Attachment 1), fill in the bid form and retain a member of the underwriting syndicate to process its bid as prescribed by these Rules. If there is any likelihood that the bid may be in violation of these Rules, or other relevant laws and regulations, the underwriter may refuse the bid.
Upon receipt of a bid, the securities underwriter referred to in the preceding paragraph is entitled to collect a bid processing fee from the bidder. In addition, the bidder shall provide at this time the bid deposit as stated in the public announcement prescribed by Article 9 of these Rules.
Bidders shall submit sealed bids that, once submitted, shall not be withdrawn or altered. During the period of the tender, the securities underwriter shall not open the bids, and shall collect and log the bids received, assigning a log entry number to each. Before 9AM on the next business day following the closure of the tender, received bids shall be delivered to the Taiwan Securities Association, where all bids shall be opened in a single unified operation. The Taiwan Securities Association shall not accept any bids not delivered by this deadline. Any liability resulting from failure to submit bids by said deadline shall be borne by the securities underwriter.
When a bidder posts bid deposit in accordance with the provisions of paragraph 2, the securities underwriter shall, on a trust basis, stipulate the criteria for breach of contract and the method of handling compensation for injury arising therefrom. |
| Article 13 | A bid form to which any of the following circumstances applies is invalid and will be disqualified from the tender without refund of the bid processing fee:
1. The bid price is lower than the minimum offering price as prescribed by Article 8 paragraph 1 subparagraph 2;
2. The quantity of securities bid for is lower than the minimum bidding unit;
3. The bid has been neither signed nor affixed with seal;
4. Either the bid price or the bid quantity has been changed, and the change has not been authenticated by application of a seal, or the data is not legible;
5. Either the bid deposit has not been paid in full or the bid processing fee has not been paid;
6. The bid form does not indicate a bank account number for the refund of bid deposits to those submitting unsuccessful bids;
7. In a previous tender, the bidder has failed to fulfill obligations related to the payment for securities; or
8. The identity of the bidder violates the requirements set forth under Articles 35 and 36.
The per-share (or per-lot) bid price shall be expressed in units no smaller than one cent; decimal figures smaller than one cent shall be rounded up or down.
Bid quantity shall be expressed in units of one thousand shares (or in lots).
In an initial listing on a stock exchange or an OTC market, or where a company already listed on a stock market or an OTC carries out a cash capital increase or underwrites convertible corporate bonds or corporate bonds with warrants by competitive auction, the underwriter shall indicate on the bid form that the bidder is to fill in his central depository account number. A bid form that fails to provide said account number is invalid and will be disqualified from the tender without refund of the bid processing fee. |
| Article 14 | A securities underwriter shall enter the data from bid forms into an electronic data storage media in the format prescribed by the Taiwan Securities Association, and by 10AM on the date of the opening of the bids shall send it to the TWSE for entry. The results of the bidding will be based entirely on these electronic entries, and securities underwriters shall refrain from divulging the contents of said media. |
| Article 15 | After closure of the tender period, the TWSE shall open the bids on the prescribed opening date.
Except for an underwriting case involving cash capital increase through a competitive auction of new shares issued for the purpose of carrying out an initial listing on a stock exchange or OTC market, or an underwriting case in which a company already listed on a stock exchange or an OTC market conducts, by means of competitive auction, a cash capital increase through an issue of shares or an issue of warrants that have been detached from preferred shares with detachable warrants or warrants that have been detached from corporate bonds with detachable warrants (the above underwriting cases must be handled in accordance with the provisions of Article 17-1), securities shall be awarded on the basis of bid price in descending order. Identical bids shall be awarded in random order, generated by the Taiwan Securities Association using computer, until the entire offering has been awarded.
No individual bidder may be allocated a greater proportion of the tender than as prescribed by Article 9 paragraph 2. If the awarded quantity of securities exceeds said proportion, and the lots are cleared at a uniform price, the surplus lots are removed in random order generated by computer. If the lots are cleared at two or more different prices, lots of equal size are removed from either end of the price spectrum, until the prescribed proportion is reached. In the event that one lot remains after the above process, said lot shall be removed from the upper end of the price spectrum.
In addition to complying with paragraph 3 of this Article, the securities underwriter shall also handle the results of the opening of bids in compliance with all other relevant laws and regulations, and shall provide all relevant data as prescribed by the TWSE and the Taiwan Securities Association. |
| Article 16 | With the exception of a secondary distribution, a cash capital increase through a new share issue carried out for the purpose of an initial listing on a stock exchange or OTC market, or a cash capital increase through an issue of shares or an issue of warrants that have been detached from preferred shares with detachable warrants or warrants that have been detached from corporate bonds with detachable warrants by a listed or OTC company, when the underwriting of securities is undertaken entirely by competitive auction and the total number of securities awarded by tender reaches the full amount available for allocation, the price at which the security opens on its first day of listing and the price paid by the underwriter for units retained for its own account shall be computed as the weighted average of the bid price of all successful bids. Decimals beyond cents shall be rounded up or down. |
| Article 17 | With the exception of an listing on a stock exchange or an OTC market involving cash capital increase through a new share issue, in the underwriting of securities undertaken partly by competitive auction and partly by public subscription, when the total number of securities awarded by competitive auction reaches the full amount available for allocation, the price of those units allocated by public subscription and those retained by the underwriter for its own account shall be determined by one of the following methods:
1. When not all tenders are awarded at a price greater than a specified multiple of the minimum offering price, as prescribed by Article 8 paragraph 1 subparagraph 2, it shall be computed as the weighted average price of all tenders awarded at a price within a specified multiple of the minimum offering price. Decimals beyond cents shall be rounded up or down; and
2. When all tenders are awarded at a price greater than a specified multiple of the minimum offering price, as prescribed by Article 8 paragraph 1 subparagraph 2, it shall be computed as a specified multiple of the minimum offering price. Decimals beyond cents shall be rounded up or down.
The specified multiple of the minimum offering price referred to in the preceding paragraph shall be resolved by negotiations between the underwriting syndicate and the issuing company, but shall not exceed a multiple of 1.3.
Except for a secondary distribution, an initial listing on a stock exchange or an OTC market involving cash capital increase through a new share issue, or where otherwise provided under law, the price at which the security opens on its first day of listing shall be the price underwritten for public subscription as determined in the preceding paragraph. |
| Article 17-1 | An underwriting case involving cash capital increase through a competitive auction of new shares issued for the purpose of carrying out an initial listing on a stock exchange or OTC market, or an underwriting case in which a company already listed on a stock exchange or an OTC market conducts, by means of competitive auction, a cash capital increase through an issue of shares or an issue of warrants that have been detached from preferred shares with detachable warrants or warrants that have been detached from corporate bonds with detachable warrants, shall be handled through uniform price clearing, whereby the TWSE, in opening the bids, adds up the cumulative total of the bid quantities, starting with the highest-priced bid and working its way down until the entire offering has been cleared, with the lowest price necessary to sell all securities offered through competitive auction taken as the uniform clearing price. In an underwriting case in which a company already listed on a stock exchange or an OTC market conducts, by means of competitive auction, a cash capital increase through an issue of shares or an issue of warrants that have been detached from preferred shares with detachable warrants or warrants that have been detached from corporate bonds with detachable warrants, if the total number of securities bid for in valid bids is insufficient to cover the all the securities offered through competitive auction, then the minimum offering price, as prescribed by Article 8 paragraph 1 subparagraph 2, shall serve as the uniform clearing price.
Those bidding at or above the uniform clearing price are lottery winners, and in all cases their bids will be cleared at the uniform clearing price.
If the total number of securities bid for in valid bids exceeds the number of securities offered through competitive auction, then those submitting bids at the uniform clearing price shall be awarded securities in random order, generated by computer, until all securities offered through competitive auction have been awarded.
The quantity of securities awarded to any single bidder shall not exceed the proportion set forth under Article 9 paragraph 2. Where an award does exceed this proportion, the quantity in excess shall be select at random by computer and subtracted from the award.
The uniform clearing price shall serve as: the offering price for those units of a security retained by the underwriter for its own account in connection with a cash capital increase carried out by a company already listed on a stock exchange or an OTC market, and for units that remain unsubscribed after conclusion of competitive auction; the subscription price for those units allocated through public subscription; the price at which a security opens on its first day of listing in the case of underwriting through competitive auction of an initial listing on a stock exchange or an OTC market involving cash capital increase through a new share issue; the price of securities sold upon the exercise of an overallotment; and the price at which a security opens on its first day of listing in the case of cash capital increase through an issue of preferred shares by a company already listed on a stock exchange or an OTC market.
The uniform clearing price shall serve as: the offering price for those units of a security retained by the underwriter for its own account in connection with an underwriting case of warrants that have been detached from preferred shares with detachable warrants or warrants that have been detached from corporate bonds with detachable warrants, and for units that remain unsubscribed after conclusion of competitive auction; the subscription price for those units placed through public subscription. The uniform clearing price shall serve as the basis for calculating the price at which a security opens on its first day of listing, in accordance with the directions of the TWSE or GTSM.
In addition to complying with paragraph 4 of this Article, the securities underwriter shall also handle the results of the opening of bids in compliance with all other relevant laws and regulations, and shall provide all relevant data as prescribed by the TWSE and the Taiwan Securities Association. |
| Article 18 | Except for cases involving the initial listing of shares on a stock exchange or OTC market, in the underwriting of securities by competitive auction, if the total number of securities bid for is insufficient to cover the number of securities offered through competitive auction, then the minimum offering price, as prescribed by Article 8 paragraph 1 subparagraph 2, shall serve as the offering price for those securities that remain unallocated after competitive auction and those securities retained by the underwriter for its own account, and as the subscription price for those securities allocated through public subscription. Units that remain unsubscribed after conclusion of competitive auction shall be allocated as prescribed by Article 8 paragraph 1 subparagraph 6.
Except for the underwriting of a secondary distribution or of a capital increase by listed or OTC companies involving a cash capital increase, the price at which the security opens on its first day of listing shall be the offering price set forth under the preceding paragraph.
In an underwriting case involving an initial listing of shares on a stock exchange or an OTC market conducted by competitive auction, if the total number of securities bid for in valid bids is insufficient to cover the all the securities put up through the competitive auction in question, then the auction shall be repeated. However, a single auction can only be conducted three times. If a competitive auction is being repeated, this fact must be noted when the auction is reported to the FSC in accordance with Articles 8 and 9. |
| Article 19 | Immediately following the opening of bids, the TWSE shall print out a report on the results of the bid opening. Said report shall be examined and signed by representatives of the TWSE, the securities issuer, and every member of the underwriting syndicate.
The report on bidding results referred to in the preceding paragraph shall for each bid include award numbers, the award price, the number of units awarded, the total dollar amount of securities allocated, and either personal ID numbers (in the case of individual lottery winners) or juristic person uniform invoice numbers issued by the tax authorities for the localities where institutional lottery winners are located (in the case of institutional lottery winners). |
| Article 20 | Immediately following the opening of bids, members of the underwriting syndicate shall sign the underwriting contract and submit it to the Taiwan Securities Association for recordation. |
Section Two Pricing by Book Building
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| Article 21 | In the underwriting of an initial listing on a stock exchange or an OTC market involving previously issued shares or cash capital increase through a new share issue, if the shares are not underwritten through competitive auction, then they shall be underwritten through simultaneous book building and public subscription procedures in compliance with the provisions of Article 21-1. However, the portion offered through public subscription shall not exceed 20 percent of the total number of shares underwritten; provided, that this provision does not apply to a public enterprise, nor does it apply to any other party that applies for an initial listing of shares on a stock exchange or an OTC market in accordance with the provisions of Articles 6 and 6-1 of the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings, or in accordance with the provisions of the GreTai Securities Market Supplemental Provisions for Applications by Private Institutions Participating in Public Infrastructure Projects for Over-the-Counter Listing, or in accordance with other acts or regulations. |
| Article 21-1 | In the underwriting of an initial listing on a stock exchange or an OTC market involving previously issued shares or cash capital increase through a new share issue, if the shares are underwritten through simultaneous book building and public subscription procedures, 10 percent of the number of shares that are required under TWSE or GTSM rules to be publicly sold (less the portion of the shares that are required under applicable laws or regulations to be set aside for subscription by employees of the issuer, and not including any overallotment) shall first be put up for public subscription, and the volume allocated for public subscription shall be adjusted according to the subscription volume.
If the underwritten subscription volume (defined as the final confirmed total volume of subscriptions that brokers have transmitted to the TWSE by the public subscription deadline) falls short of the volume allocated for public subscription as referred to in the preceding paragraph, the shortfall may be added to the volume to be underwritten through book building, and allocated in that manner. If the subscription volume exceeds by a certain multiple the volume allocated for public subscription, the volume allocated for public subscription shall be adjusted upward in accordance with the following provisions:
1. If the subscription multiple is at least 25 times but less than 50 times, the amount allocated for public subscription shall be adjusted to 15 percent.
2. If the subscription multiple is at least 50 times but less than 75 times, the amount allocated for public subscription shall be adjusted to 20 percent.
3. If the subscription multiple is at least 75 times but less than 100 times, the amount allocated for public subscription shall be adjusted to 25 percent.
4. If the subscription multiple is 100 times or greater, the amount allocated for public subscription shall be adjusted to 30 percent.
Any remainder, or any preliminary overallotment, shall be underwritten through book building.
If the post-adjustment volume allocated for public subscription as calculated per any of the subparagraphs of paragraph 2 is not a whole number, the number shall be rounded up to the nearest whole number. |
| Article 21-2 | When an OTC (or exchange) listed company that is applying to convert to an exchange (or OTC) listing intends to carry out a cash capital increase through a new share issue in order to achieve compliance with standards governing dispersion of equity ownership, the underwriting shall be carried out through public subscription, and the timetable for the procedures shall be subject mutatis mutandis to the provisions of Article 53. |
| Article 22 | In the following types of securities underwriting cases, the part put up for public sale may be undertaken entirely by book building or partly by book building and partly by public subscription:
1. cash capital increase through an issue of preferred shares by a company already listed on a stock exchange or an OTC market;
2. preferred shares with detachable warrants;
3. corporate bonds with detachable warrants;
4. offerings of corporate bonds and financial bonds;
5. offerings of Taiwan depositary receipts; and
6. secondary distributions.
In underwriting cases under subparagraphs 1 through 4 and subparagraph 6 of the preceding paragraph where part of the securities are allocated by book building and part by public subscription, if the book building and public subscription procedures are carried out simultaneously, the timetable for the procedures shall be subject to mutatis mutandis application of Article 42-1. However, if subscription volume exceeds by a specified multiple the number of units earmarked for public subscription, there is no need to upwardly adjust the public subscription volume or to observe the requirements of Article 42-1, paragraph 1, subparagraph 4, item 2. |
| Article 22-1 | Where either of the following types of underwriting cases are undertaken through the use of book building, the part put up for public sale shall be underwritten entirely by book building:
1. underwriting of a public offering by a company already listed on a stock exchange or an OTC market in which the offering involves a cash capital increase through the issue of common shares and the entire offering is put up for underwritten distribution;
2. underwriting of an offering of beneficial interest securities by a trustee institution, or underwriting of an offering of asset-backed securities by a special-purpose company; or
3. real estate asset trust beneficial interest securities. |
| Article 22-2 | The lead underwriter for an initial listing on a stock exchange or over-the-counter market shall establish a pre-marketing mechanism as part of its book building process, whereby prior to the official start of book building it shall first seek to determine the demand of key organizations and qualified institutional investors in terms of prices and volumes. A record of information gathered during the pre-marketing period shall be retained in written form for one year, and on electronic media for three years, for reference purposes. |
| Article 22-3 | In an initial offering of Taiwan Depositary Receipts in which part are placed by book building and part by public subscription, the book building and public subscription procedures shall be carried out simultaneously, and 10 percent of the volume that is to be publicly sold shall first be put up for public subscription, and the volume allocated for public subscription shall be adjusted according to the subscription volume.
If the underwritten subscription volume (defined as the final confirmed total volume of subscriptions that brokers have transmitted to the TWSE by the public subscription deadline) falls short of the volume allocated for public subscription as referred to in the preceding paragraph, the shortfall may be added to the volume to be underwritten through book building, and allocated in that manner. If the subscription volume exceeds by a certain multiple the volume allocated for public subscription, the volume allocated for public subscription shall be adjusted upward in accordance with the following provisions:
(1) If the subscription multiple is at least 15 times but less than 20 times, the amount allocated for public subscription shall be adjusted to 15 percent.
(2) If the subscription multiple is at least 20 times but less than 25 times, the amount allocated for public subscription shall be adjusted to 20 percent.
(3) If the subscription multiple is at least 25 times but less than 30 times, the amount allocated for public subscription shall be adjusted to 25 percent.
(4) If the subscription multiple is at least 30 times but less than 35 times, the amount allocated for public subscription shall be adjusted to 30 percent.
(5) If the subscription ratio is 35 times or more, the amount allocated for public subscription shall be adjusted to 35 percent.
If the post-adjustment volume allocated for public subscription as calculated per any of the subparagraphs of paragraph 2 is not a whole number, the number shall be rounded up to the nearest whole number.
In an initial offering of Taiwan Depositary Receipts in which part are placed by book building and part by public subscription, the book building and public subscription procedures shall be carried out simultaneously. The timetable for the procedures shall be subject mutatis mutandis to the provisions of Article 42-1. |
| Article 23 | A lead underwriter underwriting securities by book building shall first carry out the matters listed in the following subparagraphs. All relevant agreements shall be signed or sealed by the lead underwriter, each co-underwriter, and the issuer (issuing institution), and then reported to the Taiwan Securities Association by the first business day prior to the start of the book building period (or by the second business day in the case of an initial listing on a stock exchange or an OTC market):
1. formation of the underwriting syndicate by solicitation of co-underwriters;
2. determination of the total quantity of securities to be offered by book building, and the number of units expected to be sold via overallotment;
3. estimation of the anticipated offering price range, as determined in consultation with the issuer (issuing institution);
4. determination of the firm-commitment fee or best-efforts underwriting fee, as determined in consultation with the issuer (issuing institution); and
5. determination of the lot size, in the event that the securities will be offered by public subscription. |
| Article 24 | In the underwriting of securities by book building, the lead underwriter shall publish a book building announcement in daily newspapers on the first day on which book building bids are accepted. The content of said announcement shall be reported in hardcopy and electronic media to the Taiwan Securities Association by the first business day prior to the start of the book building period (or by the second business day in the case of an initial listing on a stock exchange or an OTC market), and shall include the items in the following subparagraphs:
1. The name of the security.
2. Total number of underwritten units, number of units expected to be sold via overallotment, number of units retained by the securities underwriters for their own accounts, the number of units for public sale, and the number of units for allocation by book building as a proportion of the total number of securities put up for public sale; in the case of an initial listing on a stock exchange or an OTC market involving simultaneous book building and public subscription procedures, the lead underwriter shall also note that it will adjust book building volume on the basis of the number of subscriptions received during the public subscription procedure.
3. Where securities underwriters collect a book building bid deposit in accordance with the provisions of Article 40, Article 41, Article 42, or Article 42-1, the lead underwriter shall indicate the collection method, who is required to pay it, the amount, and conditions under which the deposit may be confiscated.
4. Matters relating to the securities underwriters' collection from allotees of the entire amount of advance book building payments in accordance with Article 42-1.
5. Matters relating to the collection of book building processing fees by securities underwriters in accordance with Article 26.
6. The names, addresses, and telephone numbers of the underwriters.
7. The anticipated offering price range (within the anticipated offering price range for an initial listing on a stock exchange or an OTC market, the minimum price may not be less than 75% of the maximum).
8. The manner of disclosure of the prospectus, including: (1) a statement clarifying that the anticipated offering price range as disclosed in the prospectus is an estimate based on information gathered during book building; and (2) an explanation of how to inquire about subsequent offering price revisions.
9. The securities on offer, and the method, time period, and site for submission of bids.
10. Parties from whom book building bids will be accepted.
11. The pricing date (in the case of an initial listing on a stock exchange or an OTC market involving simultaneous book building and public subscription procedures).
12. Other supplemental items that must be disclosed in order to safeguard the public interest and investors.
In the section specifying the parties from whom book building bids will be accepted (as set forth under the preceding paragraph), the announcement shall print the provisions of Articles 35 and 36, or (depending on the type of securities on offer) Articles 43 and 43-1.
In an underwriting case involving an initial listing on a stock exchange or an OTC market, when the lead underwriter registers the offering using hardcopy media as required in paragraph 1, it shall also submit a timetable adopted in compliance with the provisions of Article 42-1. |
| Article 25 | After registering with the FSC for a public offering and issuance of securities, the underwriting syndicate may provide investors with prospectuses and other relevant materials of the issuing company (issuing institution), begin handling book building bids, and convene public informational meetings to familiarize investors with the offering.
If a public informational meetings referred to in the preceding paragraph is held prior to a book build, the underwriters shall provide advisory services to the issuing company (or issuing institution) to publicly announce the estimated probable range of the offering price on the Market Observation Post System (MOPS) or by other means in accordance with applicable laws and regulations, and state that the subsequent final estimated probable range of the offering price shall be the range published in the book building announcement. |
| Article 26 | Investors bidding in a book building process shall fill in a book building bid form produced in the prescribed format (see Attachment 2) and submit said form to the securities underwriter for handling.
The underwriting syndicate may hire a securities broker to accept book building bids for processing as referred to in the preceding paragraph.
A securities underwriter handling bids may refuse a bid if there has been a violation of the law or of these Rules, or if there is any suspicion of such violations.
In the underwriting of an offering where the portion put up for public sale is allocated entirely by book building as prescribed by Article 40, or partly by book building and partly by public subscription, the underwriter shall indicate on the book building bid form that the applicant is required to fill in his central depository account number.
When a securities underwriter accepts a book building bid for processing, it may collect a book building processing fee from the bidder, acting in accordance with the Taiwan Securities Association Rules Governing Securities Underwriters' Allocation of Securities by Book Building. |
| Article 27 | The maximum quantity actually allocated to any single bidder in the book building process, with the exception of an initial listing of common shares on a stock exchange or an OTC market (which must be allocated in accordance with the provisions of Article 27-1), shall not exceed 10 percent of the portion of the offering that is put up for public sale; for ordinary corporate bonds, financial bonds not involving stock equity, corporate bonds from which the detachable warrants have been detached, real estate asset trust beneficial interest securities, the secondary distribution of beneficial interest securities by a trustee institution, or the secondary distribution of asset-backed securities by a special-purpose company, the amount may not exceed 20 percent of the total quantity underwritten. |
| Article 27-1 | In a case involving an initial listing of common shares on a stock exchange or an OTC market, regulations governing the volume of securities that may be allocated to any single bidder are as follows:
1. The maximum quantity of securities actually allocated to any qualified institutional investor shall not exceed 10 percent of the quantity underwritten by the allocating underwriter, or 100,000 shares, whichever is higher, provided that the combined quantity of securities actually allocated by all underwriters to any single bidder shall not exceed 10 percent of the portion of the securities put up for public sale to outside parties in the present offering.
2. The maximum quantity of securities actually allocated to any other bidder shall not exceed 5 percent of the quantity underwritten by the allocating underwriter, or 50,000 shares, whichever is higher, provided that the combined quantity of securities actually allocated by all underwriters to any single bidder shall not exceed 5 percent of the portion of the securities put up for public sale to outside parties in the present offering.
The term "qualified institutional investors" in subparagraph 2 of the preceding paragraph means domestic and foreign institutional investors and foreign institutional investors, including domestic and foreign banks, insurance companies, bills finance companies, fund management companies, government investment institutions, government funds, mutual funds, unit trusts, investment trust enterprises, and trust enterprises.
The maximum combined quantity of securities allocated by an underwriter in accordance with paragraph 1, subparagraph 2 to any company that has underwriting business dealings with that underwriter shall not exceed 20 percent of the quantity of securities underwritten by that underwriter.
The phrase "any company that has underwriting business dealings with that underwriter" in the preceding paragraph means a company for which that underwriter has lead managed an offering within 12 months before the present offering is to be listed on a stock exchange or OTC market, or a company which that underwriter anticipates doing so within the coming three months.
When an underwriter arranges for specified parties to subscribe to undersubscribed shares or shares that subscribers fail to pay for after allotment, it is exempt from the restrictions of paragraph 1, subparagraph 2, but such subscriptions are still not allowed to exceed 10 percent of the quantity of securities underwritten by that underwriter, or 100,000 shares, whichever is higher, and the combined total of all shares allotted by the underwriter to the aforementioned specified parties shall not exceed 10 percent of the portion of the offering that is put up for public sale to outside parties. |
| Article 28 | By submitting a book building bid form to a securities underwriter, an investor is merely expressing the desire to subscribe; likewise, by processing the book building bid form, the underwriter is merely seeking to establish the desire of the investor to subscribe; thus, neither party is bound by the content of the book building bid form. However, in the event that the securities underwriter collects a book building bid deposit as prescribed by Article 40, 41, 42, or 42-1, failure by the bidder or subscriber to fulfill his payment obligation within a required time limit shall be handled as prescribed by Article 40, 41, 42, or 42-1.
After gauging market demand through the bidding process, the lead underwriter shall negotiate the actual offering price with the issuing company (issuing institution) or holder of the securities in question, and a uniform offering price shall be applied to the entire issue.
The actual offering price as negotiated pursuant to the preceding paragraph shall not fall outside the estimated probable range of the offering price as set forth under paragraph 23, subparagraph 3.
In an underwriting case involving an initial listing of shares on a stock exchange or an OTC market or an initial issue of Taiwan depositary receipts in which all shares are allocated through book building, if the total number of securities bid for in valid book building bids is insufficient to cover all the securities offered through the book building process in question, then the book building process shall be repeated. However, a single book building process may only be repeated once. If a book building process is being repeated, this fact must be noted when the book building process is reported to the FSC in accordance with Articles 23 and 24.
In the underwriting of an initial listing of shares on a stock exchange or an OTC market or an initial issue of Taiwan depositary receipts that involves simultaneous book building and public subscription procedures, if the total number of securities bid for in valid book building bids is insufficient to cover all the securities offered through the book building process in question, the book building process shall be repeated, and the TWSETWSE and the Taiwan Securities Association shall be notified by the next business day after day on which acceptance of book building bids comes to a close; a public announcement shall also be published in daily newspapers and on the Taiwan Securities Association's website no later than the second business day after the day on which acceptance of book building bids comes to a close, and brokers shall on that same day make no-interest refunds to subscribers of subscription deposits and prepaid postage for lottery winner notifications (but subscription processing fees will not be refunded). |
| Article 29 | After negotiating the actual offering price as prescribed by the preceding article, the lead underwriter shall (except when underwriting ordinary corporate bonds, financial bonds, real estate asset trust beneficial interest securities, offerings of beneficial interest securities by trustee institutions, or offerings of asset-backed securities by special-purpose companies) promptly request that each co-underwriter provide detailed information regarding the bidders. After appropriately adjusting the apportionment of securities among co-underwriters, the lead underwriter shall sign underwriting contracts and submit them to the Taiwan Securities Association for recordation. Allocation of securities by book building shall be undertaken as prescribed by the Taiwan Securities Association Rules Governing Securities Underwriters' Allocation of Securities by Book Building.
After the lead underwriter has informed each member of the underwriting syndicate of the quote based on the actual offering price, the investors shall make payment at that price, and in the agreed amount, before the deadline set by the lead underwriter. |
Section Three Pricing by Negotiation
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| Article 30 | Unless the determination of the offering price for underwritten securities is undertaken as prescribed in Section One or Two, a reference price shall be determined in accordance with another reasonable pricing method. Thereupon the underwriter shall resolve the offering price by negotiations with the issuing company (issuing institution) or the holder of said securities.
Prior to an initial listing on a stock exchange (or OTC) market, underwriting shall give adequate consideration to the company's most recent financial status, and in addition to setting the offering price on the basis of information gathered during book building, prices on the Emerging Stock Market over the preceding month, and a research report furnished by the lead and co-underwriters, a reasonable explanation of the offering price shall also be provided. If there is a difference of 50 percent between the offering price and the closing price on the Emerging Stock Market for the business day preceding the pricing date, a concrete explanation of the reasons for the pricing shall be provided.
When an underwriting case handled by a foreign issuer involving a primary listing is a case of application for listing under the guidance of a securities firm, the offering price shall be set on the basis of information gathered during book building, and a research report furnished by the lead and co-underwriters, and a reasonable explanation of the offering price shall be provided
In an underwriting case involving cash capital increase by an emerging stock company, the offering price shall be set not lower than the net value per share as reported in the financial report for the most recent fiscal period, audited and attested or reviewed by a CPA, and shall take into consideration the average price calculated by dividing the sum of the trading value of the common shares of that emerging stock as shown in the Emerging Stock Computerized Price Negotiation and Click System on each day for a period of 30 business days immediately before the submission of the underwriting contract to the Association for recordation, by the sum of the numbers of shares traded on each business day, and a reasonable explanation of the offering price shall be provided. |
| Article 31 | An underwriting case involving the offering of ordinary corporate bonds, financial bonds not involving stock equity, corporate bonds from which the detachable warrants have been detached, real estate asset trust beneficial interest securities; the secondary distribution of beneficial interest securities by a trustee institution; or the secondary distribution of asset-backed securities by a special-purpose company, may be undertaken entirely or partly by negotiated sale. The offering price shall be determined as prescribed by Article 30.
The underwriting of call (put) warrants shall be undertaken entirely by negotiated sale.
An underwriting case involving a secondary distribution by a public enterprise may be undertaken entirely or partially by negotiated sale if units are released to the general public. The method of allocation shall be determined by negotiations between the securities underwriter and the government agency that regulates the government-owned enterprise in question.
In an underwriting case involving an initial listing of shares in common stock on a stock exchange or OTC market through competitive auction, if an overallotment is exercised, those shares allocated via overallotment shall be sold by means of negotiated sale at an offering price determined in accordance with the provisions of Article 16, 17, or 17-1.
In an underwriting case involving a public enterprise (or any other party acting in accordance with the provisions of Articles 6 and 6-1 of the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings, or in accordance with the provisions of the GreTai Securities Market Supplemental Provisions for Applications by Private Institutions Participating in Public Infrastructure Projects for Over-the-Counter Listing) that conducts an initial offering of shares in common stock on a stock exchange or an OTC market and allocates the entire amount of said shares through public subscription, if an overallotment is exercised, the overallotment may be handled by means of negotiated sale. The offering price shall be the same as that applying to shares allocated through public subscription. |
| Article 32 | Except when permission is granted by the competent authority for the securities industry, in an underwriting case involving the negotiated sale of ordinary corporate bonds, financial bonds not involving stock equity, or corporate bonds from which the detachable warrants have been detached, not more than 50 percent of the total number of securities shall be allocated to an individual subscriber. Not more than 20 percent of the total number of securities offered may be allocated to an individual subscriber in cases involving real estate asset trust beneficial interest securities, a secondary distribution of beneficial interest securities by a trustee institution, or a secondary distribution of asset-backed securities by a special-purpose company, provided that this restriction does not apply to a holder that is an independent professional investor. "Independent professional investor" means a juristic person or an institution under Article 13, paragraph 1, subparagraph 1 of the Real Estate Securitization Act, or a fund under Article 13, paragraph 1, subparagraph 2 of the same Act, and one that is neither an originator under the Financial Asset Securitization Act, nor an interested party thereof, nor an affiliated enterprise under the Company Act. In a case involving call (put) warrants or corporate bonds with warrants, not more than 10 percent of the total number of securities shall be allocated to an individual subscriber.
If the securities referred to in the preceding paragraph are divided into different classes for issuance, the total volume of an underwritten offering shall be calculated as the total volume of a given single class of securities after the issue has been separated into different tranches.
In an underwriting case conducted in accordance with the provisions of Article 31, paragraph 4, the number of units actually allocated to any individual subscriber shall not exceed 10 percent of the combined total of the portion of the offering put up for public sale to outside parties plus units allocated via overallotment; for a case conducted in accordance with the provisions of Article 31, paragraph 5, the number of units actually allocated to any individual subscriber shall not exceed 10 percent of the total number of units put up for negotiated sale, and the provisions of Article 27-1 shall be observed. |
Chapter III Allocation of Securities
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Section One Allocation by Competitive Auction
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| Article 33 | When the portion [of an offering] that is put up for public sale is not entirely underwritten by competitive bidding, after registering the underwriting contract with the Taiwan Securities Association, the underwriter shall carry out the following:
1. Day One: Publish an underwriting announcement, and begin mailing notifications of award and payment notices;
2. Day Two: Refund bid deposits (per Article 12 paragraph 2) to unsuccessful and disqualified bidders;
3. Delivery of prospectuses and matters relevant to payment shall be undertaken simultaneously with the public subscription.
Matters relevant to payment in subparagraph 3 of the preceding paragraph above shall be undertaken by the method designated by the underwriter. The deadline for payment shall be identical to that governing when public subscribers are required to forward payment to their bank to cover subscription processing fees, subscription payments, and prepaid postage for lottery winner notification, as set forth under Article 53 paragraph 1 subparagraph 2.
Matters relevant to payment in subparagraph 3 of the preceding paragraph above shall be undertaken by the method designated by the underwriter. The deadline for payment shall be identical to that by which lottery winners in public subscription, as specified by Article 53 paragraph 1 subparagraph 7, must make payment for subscribed securities to the designated bank.
If either of the dates set forth in paragraph 1 subparagraphs 1 and 2 falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be postponed accordingly.
The dates specified under paragraph 1 may be changed if necessary by applying to the Taiwan Securities Association for approval.
The payment referred to in paragraph 1 subparagraph 3 shall be the purchase price for the securities, less the bid deposit as prescribed in Article 12 paragraph 2. In the event that the lottery winner fails to fulfill his payment obligation within the specified time period, the securities underwriter may confiscate the bid deposit, and shall subscribe on its own account, at the price offered to said lottery winner, to the units that were to have been allocated to said lottery winner. |
| Article 34 | When the portion [of an offering] that is put up for public sale to outside parties is entirely underwritten by competitive bidding, after registering the underwriting contract with the Taiwan Securities Association, the underwriter shall carry out the following:
1. Day One: Publish an underwriting announcement and begin mailing notifications of award, prospectuses, and payment due notices.
2. Day Two: Begin refunding bid deposits (per Article 12 paragraph 2) to unsuccessful and disqualified subscribers; payment date.
3. Day Three: Specified parties make payment; issuer applies to the TWSETWSE or the GTSM for a securities listing on a stock exchange or an OTC market.
4. Day Four: Underwriter carries out underwriting on standby commitment basis; compilation of related registers is completed.
5. Day Five: Announcement of securities listing on a stock exchange or an OTC market.
6. Day Six: Securities are issued and listed on a stock exchange or an OTC market.
In a secondary distribution, the procedures set forth in subparagraphs 4, 5, and 6 under the preceding paragraph, which are connected with application for listing of securities on a stock exchange or an OTC market, need not be carried out.
Where any of the dates set forth in the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be postponed accordingly.
The dates specified under paragraph 1 may be changed if necessary by applying to the Taiwan Securities Association for approval.
The payment referred to in paragraph 1 subparagraph 3 shall be the purchase price for the securities, less the bid deposit as prescribed by Article 12 paragraph 2. In the event that the lottery winner fails to fulfill his payment obligation within the specified time period, the securities underwriter may confiscate the bid deposit, and shall subscribe on its own account, at the price offered to said lottery winner, to the units that were to have been allocated to said lottery winner. |
| Article 35 | In the underwriting of securities by competitive auction, the securities underwriter is limited to accepting bids from the following persons:
1. ROC nationals at least 20 years of age.
2. ROC institutional investors and securities investment trust funds offered by securities investment trust enterprises.
3. QFIIs.
4. Overseas Chinese and foreign nationals, as permitted under the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals.
5. The Development Fund of the Executive Yuan, the Postal Savings System, the Public Employees Pension Fund, the Labor Pension Fund, and the Labor Insurance Fund.
6. Other parties granted permission by the government. |
| Article 36 | When a securities underwriter accepts competitive auction bids, it shall obtain from each subscriber a declaration that it does not meet any of the descriptions set out in the following subparagraphs, and the underwriter shall refuse a bid if its discovers that the subscriber does meet one of the following descriptions:
1. an equity-method investee of the issuing company (issuing institution);
2. an investor that has equity-method investments in the issuing company (issuing institution);
3. a company whose chairman or general manager is the same person as the chairman or general manager of the issuing company (issuing institution), or is the spouse thereof, or is a relative thereof within the second degree of kinship;
4. a foundation that has received one-third or more of its paid-in endowment from the issuing company (issuing institution);
5. the issuing company's (issuing institution's) directors, supervisors, general manager, vice general manager(s), assistant general managers, or any officer serving directly under the general manager;
6. the spouse of a director, a supervisor, or the general manager of the issuing company (issuing institution);
7. a relative within the second degree of kinship of a director, a supervisor, or the general manager of the issuing company (issuing institution);
8. a director, supervisor, or employee of the underwriting syndicate, a spouse thereof, or a relative thereof within the second degree of kinship; or
9. any person as set out in the preceding subparagraphs who participates in the offering under the name of another person (i.e. a person who meets the criteria of a de facto related party as defined in Article 2 of the Securities and Exchange Act Enforcement Rules). |
| Article 37 | Securities underwriters shall send notifications, prospectuses, and other relevant materials to lottery winners by express registered mail. |
| Article 38 | Award notifications are nontransferable. |
| Article 39 | Securities underwriters shall keep information relating to ordinary bids for a period of thirty days after the opening of the bids. Bidding materials for disqualified bids and lottery winners shall be retained for a period of one year after the opening of the bids. However, if the FSC or the Taiwan Securities Association deems it necessary, it may request an extension of the storage period.
A securities underwriter shall require the collecting bank to provide itemized records evidencing payment by subscribers for their securities, and shall keep them on file for five years.
The TWSETWSE shall keep its bid opening records on file for five years after the bid opening. |
Section Two Allocation by Book Building
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| Article 40 | Where a company listed on a stock exchange or an OTC market carries out a cash capital increase through an issue of ordinary shares in which all shares are put up for underwritten distribution, and all shares put up for public sale are allocated through the book building method, after the price has been set and the underwriting contract has been registered with the Taiwan Securities Association, the following matters shall be carried out:
1. Day One: Publish an underwriting announcement and mail prospectuses and notices of payment due.
2. Day Two: Payment period commences, and book building bid deposits not corresponding to allocated shares are returned to unsuccessful bidders.
3. Day Three: Specified parties make payment; issuer applies to the TWSE or the GTSM to list certificates of payment for shares on a stock exchange or an OTC market.
4. Day Four: Underwriter carries out underwriting on standby commitment basis; shareholders' register is completed.
5. Day Five: Certificates of payment for shares are listed on a stock exchange or an OTC market.
6. Day Six: Certificates of payment for shares are issued and listed on a stock exchange or an OTC market.
If any of the dates set forth in the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be postponed accordingly.
The dates set forth under paragraph 1 may be changed if necessary by applying for approval with the Taiwan Securities Association.
Where a company listed on a stock exchange or an OTC market carrying out a cash capital increase through an issue of ordinary shares uses the book building method to allocate all shares (other than those securities set aside for subscription by the company's employees) that are put up for underwritten distribution and public sale, those shares allocated to the company's employees may be handled in accordance with the provisions of paragraph 1, provided that said employees can comply with the payment period specified in paragraph 1.
Where matters are undertaken in the manner set forth under paragraph 1, shares may be allocated on a priority basis to existing shareholders; provided, however, that the restrictions listed in Articles 27, 36, and 43-1 paragraph 2 shall still apply.
When a bidder submits a book building bid form, the securities underwriter may collect a bid deposit from the bidder of not more than 20 percent of the value of the securities bid for.
The book building bid deposits not corresponding to allocated shares as referred to in the above paragraph 1 subparagraph 2 means the book building bid deposits paid by unsuccessful bidders, and bid deposits paid by lottery winners in excess of the amount required for securities actually allocated to them.
The payment to be made by the bidder as referred to in paragraph 1 subparagraph 2 above shall be the price of the securities subscribed less any book building bid deposit remaining after the bidder has received (or not received) a refund in accordance with the provisions of the preceding paragraph. In the event a bidder does not fulfill his payment obligation within the allotted time, the securities underwriter may confiscate the book building bid deposit and shall retain for its own account said securities at the price offered to the bidder.
A securities underwriter that collects book building bid deposits as prescribed by paragraph 6 above shall do so as prescribed by Article 12 paragraph 4. |
| Article 41 | Where an underwriting case (other than one handled in accordance with the provisions of the preceding paragraph) is handled as prescribed by Article 21, Article 22, and Article 22-1, and all units are offered through a book building process, after the price has been set and the underwriting contract has been registered with the Taiwan Securities Association, the following matters shall be carried out:
1. Day One: Publish an underwriting announcement and begin mailing subscription notices, prospectuses, related subscription notices, and notices of payment due.
2. Day Two: Payment date, and date for refund of book building bid deposits not corresponding to allocated securities.
3. Day Three: Payment deadline; issuer applies to the TWSE or the GTSM for a securities listing on a stock exchange or an OTC market.
4. Day Four: Complete compilation of related registers.
5. Day Five: Announcement of securities listing on a stock exchange or an OTC market.
6. Day Six: Securities are issued and listed on a stock exchange or an OTC market.
In an underwriting carried out as set forth under Article 22 subparagraph 4, the requirements set forth in subparagraphs 4, 5, and 6 above (concerning application to the TWSE or the GTSM for a listing on a stock exchange or an OTC market) shall not apply.
If a date set forth in any of the subparagraphs under paragraph 1 falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be postponed accordingly.
The dates set forth under paragraph 1 may be changed if necessary by applying for approval with the Taiwan Securities Association.
If a company listed on a stock exchange or an OTC market carrying out a cash capital increase through an issue of preferred shares uses the book building method to allocate all shares (other than those securities set aside for subscription by the company's employees) that are put up for underwritten distribution and public sale, those shares allocated to the company's employees may be handled in accordance with the provisions of paragraph 1, provided that said employees can comply with the payment period specified in paragraph 1.
In an underwriting case handled in accordance with the provisions of Article 21 or Article 22, paragraph 1, subparagraphs 1 to 3 and subparagraph 5, when a bidder submits a book building bid form, the securities underwriter may collect from the bidder a book building bid deposit equal to all or part of the value of the securities bid for.
The phrase "book building bid deposits not corresponding to allocated securities" in paragraph 1 subparagraph 2 means the book building bid deposits paid by unsuccessful bidders, and bid deposits paid by lottery winners in excess of the amount required for securities actually allocated to them.
The payment to be made by the bidder as referred to in paragraph 1 subparagraph 2 shall be the price of the securities subscribed to less any book building bid deposit to be refunded (or not refunded) to the bidder in accordance with the provisions of the preceding paragraph. In the event a bidder does not fulfill his payment obligation within the allotted time, the securities underwriter may confiscate the book building bid deposit and shall retain for its own account said securities at the price offered to the bidder.
A securities underwriter that collects book building bid deposits as prescribed by paragraph 5 shall do so as prescribed by Article 12 paragraph 4. |
| Article 42 | If the portion of an offering put up for public sale is underwritten partly by book building and partly by public subscription as prescribed in Article 22 (excepting underwriting as prescribed by the preceding Article), after the underwriting contract has been registered with the Taiwan Securities Association, the following matters shall be carried out:
1. Day One: Publicly release a book building allocation announcement (an underwriting announcement shall be concurrently published at this time) and begin mailing subscription notifies, prospectuses, and notices of payment due.
2. Payment period: The deadline shall be identical to that for payment of the subscription processing fee, the bid deposit, and prepaid postage, as set forth under Article 53 paragraph 1 subparagraph 5.
If any of the dates set forth under the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be postponed accordingly.
The dates specified under paragraph 1 may be changed if necessary by applying to the Taiwan Securities Association for approval.
Where a company listed on a stock exchange or an OTC market carrying out a cash capital increase through an issue of preferred shares uses the book building method for a portion of the shares and public subscription method for another portion of the shares to allocate the shares (other than those securities set aside for subscription by the company's employees) that are put up for underwritten distribution and public sale, those shares allocated to the company's employees may be handled in accordance with the provisions of paragraph 1, provided that said employees can comply with the payment period specified in paragraph 1.
When a bidder submits a book building bid form, the securities underwriter may collect from the bidder a book building bid deposit equal to all or part of the value of the securities bid for. The payment to be made by the bidder, as referred to in paragraph 1 subparagraph 2 above, shall be the price of the securities subscribed less the book building bid deposit. In the event a bidder does not fulfill his payment obligation within the allotted time, the securities underwriter may confiscate the book building bid deposit, and shall itself subscribe to the securities on the basis of the subscriber's payment.
When the securities underwriter referred to in the preceding paragraph accepts a book building bid deposit from a subscriber, it shall follow the requirements as prescribed by Article 12 paragraph 4. |
| Article 42-1 | In an underwriting case where an initial listing on a stock exchange or an OTC market involves simultaneous book building and public subscription procedures conducted in accordance with Articles 21 and 21-1, the following matters shall be carried out beginning from the second business day after the book building agreement has been registered with the Taiwan Securities Association:
1. Day One: Publish a book building announcement (together with a public subscription announcement) and begin accepting book building bids.
2. Day Two: Public subscription commencement date.
3. Day Four: Deadline for submission of book building bids and public subscriptions, and deadline for bidders to forward payment to their bank to cover subscription processing fees, subscription payments (calculated on the basis of the ceiling for the anticipated book building price range), and prepaid postage for lottery winner notification.
4. Day Five:
(1) Set the offering price; the lead underwriter shall notify the TWSE and the Taiwan Securities Association of the actual offering price by 12:30 p.m. on that same day, and after 1:30 p.m. on that same day the TWSE shall disclose the information on its website and transmit it to brokers.
(2) Calculate the over-subscription ratio on the basis of the figure for public subscription volume as provided by the TWSE, and adjust the book building volume and public subscription volume accordingly.
(3) Conduct book building allocation.
(4) Execute underwriting contract.
(5) Date for withholding of subscription processing fees, subscription payments, and prepaid postage for lottery winner notifications; broker's bank undertakes matters regarding withholding of subscribers' subscription processing fees, subscription payments, and prepaid postage for lottery winner notifications.
5. Day Six:
(1) Date for public drawing of lots. The TWSE undertakes the drawing, then produces and sends report of winner information to each broker, and compiles and reports the information to the lead underwriter for provision to subscribers for their review.
(2) File underwriting contract with the Taiwan Securities Association.
(3) Mail out allocation notices, prospectuses, and payment notices.
6. Day Seven:
(1) Issue allocation announcement.
(2) Parties allotted shares through book building make payment.
(3) Payment date for subscription processing fees, subscription payments (calculated on the basis of the actual offering price), and postage.
(4) Brokers make no-interest refunds to non-lottery winners of bid deposits and prepaid postage; the subscription processing fees of non-lottery winners are not returned.
(5) If the offering price as set by the lead underwriter is lower than the bid deposit, brokers will make no-interest refunds to lottery winners of the difference between the bid deposit and the actual offering price.
(6) Underwriters shall send lottery winner notifications, prospectuses (or subscription forms), and other relevant materials to lottery winners by express registered mail.
(7) Issuer applies to the TWSE or the GTSM for a securities listing on a stock exchange or an OTC market.7. Day Eight: Specified parties make payment (the lead underwriter shall ascertain prior to 12 o'clock noon on that day whether the specified parties have made payment) or underwriters take up shares on their own accounts.
8. Day Nine:
(1) Shareholders' register is completed.
(2) An issuer delivers certificates of payment to the Taiwan Depository & Clearing Corporation; a company applying for listing on a stock exchange or an OTC market delivers shares to the Taiwan Depository & Clearing Corporation.
(3) Listing of securities on a stock exchange or an OTC market is publicly announced.
9. Day Ten:
Securities are listed on a stock exchange or an OTC market.
If a date set forth in any of the subparagraphs under the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be postponed accordingly.
The dates specified under paragraph 1 may be changed if necessary by applying to the Taiwan Securities Association for approval.
When a bidder submits a book building bid form, the securities underwriter may collect from the bidder a book building bid deposit equal to all or part of the value of the securities bid for. The payment to be made by the bidder, as referred to in paragraph 1 subparagraph 6, item 2 above, shall be the price of the securities subscribed less the book building bid deposit. In the event a bidder does not fulfill his payment obligation within the allotted time, the securities underwriter may confiscate the book building bid deposit.
When the securities underwriter referred to in the preceding paragraph accepts a book building bid deposit from a subscriber, it shall follow the requirements as prescribed by Article 12 paragraph 4.
When an underwriter finalizes its book building allocation list, it may request that allotees pay the subscription price in full, and may cancel the eligibility for allocation of any bidder that fails to act as required.
An underwriter may not reveal the actual offering price to any outside party before the TWSE discloses it on its website in accordance with paragraph 1, subparagraph 4, item 1.
If the bids submitted during the book building are too few for the setting of a price, the lead underwriter shall notify the TWSE and the Taiwan Securities Association by the point in time set out in paragraph 1, subparagraph 4. The TWSE will not carry out a public drawing of lots, and brokers shall make no-interest refunds to bidders of bid deposits and prepaid postage for lottery winner notifications on the following business day, but subscription processing fees will not be refunded. Brokers shall also process the payment of subscription processing fees on that same day. |
| Article 43 | For common corporate bonds, corporate bonds from which the detachable warrants have been detached, financial bonds not involving stock equity, and the types of underwriting cases set out in Article 22 subparagraph 6 and Article 22-1 subparagraphs 2 and 3, the types of bidders from whom a securities underwriter is allowed to accept bids shall be restricted by the mutatis mutandis application of Article 35 and Article 36 subparagraphs 8 and 9, and the securities underwriter shall also obtain declarations from bidders affirming that they meet the eligibility requirements for purchasers.
For securities allocated by an underwriter but not paid for by the subscribers and placed with a specified party, the provisions in the preceding paragraph shall apply mutatis mutandis to the specified party. |
| Article 43-1 | When a securities firm conducts an underwriting case involving an initial listing on a stock exchange or an OTC market or an initial offering of Taiwan Depositary Receipts, the parties from whom it is allowed to accept book building bids shall be restricted by the mutatis mutandis application of Articles 35 and 36; in addition, the firm shall refuse bids involving the participation of any of the parties listed in the following subparagraphs, and shall also obtain declarations from bidders affirming that they meet the eligibility requirements for purchasers:
1. An employee of the issuer.
2. A director, supervisor, or managerial officer (or a spouse, son, or daughter thereof) of a company that has underwriting business dealings with an underwriter.
3. A financial holding company to which an underwriter itself belongs, or another subsidiary of such a financial holding company; however, this restriction does not apply to a securities investment trust fund offered by a securities investment trust company belonging to such a financial holding company.
4. A director, supervisor, or managerial officer (or a spouse, son, or daughter thereof) of a financial holding company to which an underwriter itself belongs, or of another subsidiary of such a financial holding company.
5. A de facto related party of the issuer or an underwriter.
6. A party listed in any of the preceding subparagraphs that uses the name of another party to participate in subscription (i.e. a de facto related party that engages in any of the acts set out under Article 2 of the Securities and Exchange Act Enforcement Rules).
When a securities firm, acting on behalf of a company already listed on a stock exchange or an OTC market, conducts an underwriting case involving a cash capital increase or an offering of corporate or financial bonds with equity characteristics, or warrants detached from preferred shares with detachable warrants or detached from corporate bonds with detachable warrants, or a secondary offering of Taiwan Depositary Receipts, the parties from whom it is allowed to accept book building bids shall be restricted by the mutatis mutandis application of the preceding paragraph, provided that it need not be restricted by subparagraphs 1 to 3 of the preceding paragraph.
When a securities firm conducts an underwriting of Taiwan Depositary Receipts, the parties from whom it is allowed to accept book building bids shall comply with the provisions of paragraphs 1 and 2; in addition, the firm shall refuse book building bids involving any participation of the depositary institution, or any director, supervisor, manager, or employee of the depositary institution, or any spouse or child thereof.
For securities allocated by an underwriter but not paid for by the subscribers and subsequently placed with a specified party, the provisions of paragraphs 1 to 3 shall apply mutatis mutandis to the specified party. |
| Article 44 | A bidder participating in the underwriting of securities by book building as prescribed by Article 40 and Article 22, paragraph 1, subparagraphs 1 to 5, or in the underwriting of call (put) warrants undertaken entirely by negotiated sales as prescribed by Article 31 paragraph 2, shall first apply to open an electronic transfer custodial account with the Taiwan Depository & Clearing Corporation (TDCC) as prescribed by the Operating Rules for the Taiwan Securities Central Depository Company. When making payment for securities, the subscriber shall provide the number of said account in order to facilitate the delivery of said securities. |
| Article 45 | The underwriter shall store for a period of thirty days after allocation information relevant to ordinary book building bids. Information relating to disqualified bids and lottery winners shall be stored for a period of one year after allocation. However, if the FSC or the Taiwan Securities Association deems it necessary, a request may be made for extension of the storage period.
A securities underwriter shall require the collecting bank to provide itemized records evidencing payment by subscribers for their securities, and shall keep them on file for five years. |
| Article 46 | An underwriter may sell securities by entering into a securities book building sub-underwriting (hereinafter, "sub-underwriting") contract with a securities broker as prescribed by Article 26 paragraph 2, and may entrust said broker to act on its behalf in other matters related to subscription and sales of securities. |
| Article 47 | For an underwriter entrusting a securities broker to sub-underwrite securities on its behalf, the sub-underwriter's offering price and the underwriter's offering price shall be identical. |
| Article 48 | An underwriter entrusting a securities broker to sub-underwrite securities on its behalf shall draw up a securities sub-underwriting contract. |
| Article 49 | A securities broker sub-underwriting securities on behalf of an underwriter, shall prepare a record of the names of subscribers and the amount of securities subscribed to by each, and submit said record to the underwriter. |
| Article 50 | In sub-underwriting securities on behalf of an underwriter, a securities broker and its associated persons shall abide by the following rules:
1. A prospectus and other relevant material detailing the terms under which securities are to be issued, the operating and financial conditions of the issuer, and other relevant matters shall be provided to subscribers;
2. No guarantees or commitments shall be made to subscribers regarding investment return on the securities;
3. Subscribers who are obviously incapable of effecting payment shall not enter into contracts with an underwriter via [a securities broker or any of its associated persons];
4. No improper subscription solicitations may be made to investors; and
5. [A securities broker and its associated persons shall refrain from] any other activity prohibited by the FSC. |
| Article 51 | A securities dealer's sub-underwriting fee shall be determined by negotiation between the underwriter and the sub-underwriter. |
Section Three Allocation by Public Subscription
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| Article 52 | The following offerings shall be undertaken by public subscription:
1. in the underwriting of an offering carried out other than as prescribed in Article 6 paragraph 2, Article 22, Article 22-1 subparagraph 2 or 3, or Article 31, or in the underwriting of a cash capital increase by a company listed on a stock exchange or an OTC market in which not all shares are put up for underwritten distribution: the portion put up for public sale that must be offered entirely by public subscription;
2. in the underwriting of an offering as prescribed in Article 7, where the portion put up for public sale is offered partly by competitive auction: any remaining portion that must be offered by public subscription;
3. in the underwriting of an offering as prescribed in Articles 21 and 22, where the portion put up for public sale is offered partly by book building: any remaining portion that must be offered by public subscription;
4. in the underwriting of an offering as prescribed in Article 31 paragraph 1, where a part is offered by negotiated sale: any remaining portion that must be undertaken by public subscription; and
5. an initial offering on a stock exchange or an OTC market (conducted by a public enterprise, or by any other party acting in accordance with other acts or regulations), in which: (1) a public sale to outside parties conducted in connection therewith as required under Article 6 is not undertaken by competitive auction; or (2) a book building process is employed as prescribed under Article 21.
6. in an underwriting case involving a public enterprise (or any other party acting in accordance with the provisions of Articles 6 and 6-1 of the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings, or in accordance with the provisions of the GreTai Securities Market Supplemental Provisions for Applications by Private Institutions Participating in Public Infrastructure Projects for Over-the-Counter Listing) that conducts an initial offering of shares on a stock exchange or an OTC market, where the entire amount of said shares are allocated through public subscription: those shares allocated via overallotment, if not allocated by means of negotiated sale, must be allocated through public subscription. |
| Article 52-1 | In an underwriting case where an initial listing on a stock exchange or an OTC market or an initial issue of Taiwan depositary receipts involves simultaneous book building and public subscription procedures, the lead underwriter shall publish a public subscription announcement in daily newspapers on the business day immediately preceding the day on which it begins accepting subscriptions, and shall concurrently publish a book building announcement (prepared in accordance with the provisions of Article 24) in daily newspapers on the three business days before it begins accepting subscriptions. The content of the announcements shall be reported in hardcopy and electronic media to the Taiwan Securities Association, and shall include the items in the following subparagraphs:
1. Public subscription period.
2. Matters requiring attention regarding the rights and obligations of subscribers, as follows:
(1) Subscribers need to have a trading account, a central depository account, and a bank account.
(2) Subscribers need to enter into a contract with a transfer bank.
(3) When submitting a bid, a subscriber must have a sufficient bank balance to cover the subscription processing fee, postage for lottery winner notification, and the subscription payment (calculated on the basis of the ceiling for the anticipated book building price range).
(4) The manner of disclosure of the prospectus, including: (1) a statement clarifying that the anticipated offering price range as disclosed in the prospectus is an estimate based on information gathered during book building; and (2) an explanation of how to inquire about subsequent offering price revisions.
(5) If the subscription deadlines for multiple securities underwriting cases fall on the same day and a subscriber has submitted bids for more than one of them, funds shall be withdrawn from the subscriber's bank account in an amount equal to the sum of the subscription processing fees, postage for lottery winner notifications, and subscription payments for all securities that have been subscribed for.
3. A subscriber may not submit duplicated subscriptions.
4. Subscribers shall be advised to make a careful evaluation prior to subscribing, for once they are selected as lottery winners they may not abandon a subscription and request a refund.
5. The procedure for payment of refunds to non-lottery winners, and to lottery winners when the actual offering price is lower than the maximum anticipated book building price.
6. How to direct inquiries regarding subscriptions and lottery winner lists.
7. The deadline for payment of subscription processing fees, postage for lottery winner notifications, and subscription payments.
8. How the volume allocated for public subscription will be adjusted when subscriptions (defined as the final confirmed total volume of subscriptions that brokers have transmitted to the TWSE by the public subscription deadline) exceed the volume allocated for public subscription by a specified multiple.
9. The date on which the offering price will be set.
10. The date on which the securities are scheduled for listing on a stock exchange or an OTC market.
11. If the bids submitted during the book building are too few for the setting of a price, the book building process shall be repeated. The TWSE will not carry out a public drawing of lots, and brokers shall make no-interest refunds to bidders of prepaid postage for lottery winner notifications and securities subscription payments on the second business day following the subscription deadline, but subscription processing fees will not be refunded. |
| Article 53 | Except for the underwriting of an initial listing on a stock exchange or an OTC market or an initial issue of Taiwan Depositary Receipts that involves simultaneous book building and public subscription procedures, an underwriter handling an offering by public subscription shall, after registering the underwriting contract with the Taiwan Securities Association, observe the following schedule in handling matters relating to subscriptions, bid deposits, and postage for lottery winner notifications:
1. Day One: Publish an underwriting announcement and commence subscription.
2. Day Three: Subscription period closes. Deadline for subscriber's payment of subscription processing fee, subscription payment, and postage expense for lottery winner notification to the designated bank.
3. Day Four: Date of withholding of subscription processing fees, subscription payments, and postage for lottery winner notifications. Broker's bank undertakes matters regarding withholding of subscribers' subscription processing fees, subscription payments, and postage for lottery winner notifications.
4. Day Five: Date of public drawing of lots. The TWSE undertakes drawing. TWSE produces and sends report of winner information to each broker. TWSE compiles and reports the information to the lead underwriter for provision to subscribers for their review.
5. Day Six:
Date of settlement of subscription processing fees, subscription payments, and postage expense for lottery winner notifications.
Brokers make no-interest refunds to non-lottery winners of bid deposits and prepaid postage for lottery winner notifications; the subscription processing fees of non-lottery winners are not returned.
Underwriter shall send lottery winner notifications and prospectuses (or subscription forms) to lottery winners via express registered mail.
The subscriber shall, on any given day during the subscription period between 09:00 and 14:00, fill-in a subscription form (formatted as in Attachment 7) at the business premises of the broker or entrust the broker by phone to fill in such a form, or shall, during the subscription period before 14:00 on the day of the deadline, fill in and submit a subscription form via the Internet.
Every day during the subscription period until the deadline, the broker shall compile up until the previous day and place the subscription information in the trading room as a reference for subscribers or for voice or computer query.
If any of the dates set forth in paragraph 1 subparagraphs 2, 3, 4, and 5 falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be moved forward accordingly.
The dates specified under paragraph 1 may be changed if necessary by applying for approval with the Taiwan Securities Association.
The Taiwan Securities Association shall prescribe the standard for the postage expense for lottery winner notification. A securities firm shall be responsible for compensation for any loss to the lottery winner resulting from problems in service of the lottery winner announcement; provided, however, that this provision shall not apply where the securities firm was not negligent.
The procedures related to the allocation of securities by public subscription by securities firms as prescribed by paragraph 1 shall be separately prescribed by the Taiwan Securities Association. If the number of units subscribed does not exceed the number of units to be sold, all qualified subscribers shall be deemed lottery winners, and a public drawing of lots shall be unnecessary.
After the subscriber has commissioned subscription with a broker, the subscription form shall not be withdrawn or changed. |
| Article 54 | Subscribers in a public subscription by a securities firm shall be restricted to ROC nationals. |
| Article 55 | The lead underwriter shall be responsible for publishing an underwriting announcement. A broker shall make said underwriting announcement and subscription forms available to investors for free upon request at it business premises, and may download the underwriting announcement from the Taiwan Securities Association website or photocopy it from a newspaper. The subscription form declaration may be photocopied or printed in equivalent dimensions by investors for the purpose of undertaking subscription. |
| Article 56 | A subscriber may use only one broker to subscribe to any given security offered through public subscription, and shall not undertake duplicated subscription [via multiple brokers]. Each subscriber is restricted to subscribing to one lot. The processing fee is NT$20 per subscription. The receiving broker shall notify the subscriber's bank to deduct the fee from the subscriber account on the dates prescribed in Articles 42-1 and 53. |
| Article 57 | A broker undertaking subscription services shall open a special account at the subscriber's bank to process subscribers' processing fees, postage expense for lottery winner notification, and subscription payments. The funds in said account shall not be used for other purposes. |
| Article 58 | A broker shall not undertake subscription for a subscriber to whom any of the following conditions apply. If a broker has already accepted subscription, the subscription shall be cancelled:
1. Has not opened a trading account, electronic transfer custodial account, or central depository account with the broker undertaking consigned subscription;
2. Has not signed a consignment contract with the bank designated by the broker regarding matters related to the deduction of funds regarding the public subscription;
3. Has not undertaken subscription within the allotted time;
4. Has not filled in fully or truthfully the required items in the subscription consignment contract;
5. Has neither signed nor sealed the subscription consignment contract. This provision shall not apply to those who undertake subscription by telephone or Internet;
6. The balance in the subscriber bank account for payment by wire transfer is less than the sum of the subscription processing fees, subscription payment, and postage expense for lottery winner notification; or
7. Has exploitatively or fraudulently used the name of another person.
The broker shall duly verify [whether] the preceding conditions [exist]. |
| Article 59 | After being consigned to undertake subscription, a broker shall, on a daily basis, input data from the subscription forms into the TWSE's computer system by batch file transmission or terminal key-in. Before the drawing, data from subscriptions where the processing fee, subscription payment, or postage expense for lottery winner notification cannot be deducted on schedule due to insufficient bank funds and data from duplicated subscriptions shall be excluded, and fees already deducted shall not be returned.
On the date of the public drawing of lots, a list of qualified and unqualified subscribers as set forth under the preceding paragraph shall be made available by the TWSE for review at the TWSE and the business premises of the lead underwriter and brokers (the list at each broker's place of business shall include only the names of subscribers who have subscribed through that particular broker).
Where there has been duplicated subscription as set forth under paragraph 1, the subscriber shall be notified by the underwriter by registered letter within one week of the closure of the offering period. |
| Article 60 | Where subscription volume exceeds the number of securities to be sold, the TWSE shall undertake a computerized public drawing of lots among qualified subscriptions. The TWSE shall invite representatives of the Taiwan Securities Association, related groups, and the issuer to jointly monitor the lottery.
When undertaking the public drawing of lots, the TWSE shall ask the monitors to draw the lots. |
| Article 61 | For a firm commitment offering by public subscription, where subscriptions fall short of the number of units put up for sale, the underwriting syndicate may either place the remainder with a specific party or purchase the remainder on its own account.
Where purchase of units by the underwriting syndicate on its own account as referred to in the preceding paragraph is prohibited by other laws or regulations, or is in connection with an offering by a company that is not listed on a stock exchange or an OTC market, the syndicate may be exempted from the provisions in the preceding paragraph relating to purchase of units on its own account, and such units may be placed by the underwriting syndicate with a specific party.
Where the underwriting syndicate places securities with a specific party, as referred to in the preceding paragraphs 1 and 2, only the parties listed in Article 35 shall participate in said placement. |
| Article 62 | Where a company already listed on a stock exchange or an OTC market, or an emerging stock company, either carries out a cash capital increase or issues corporate bonds or Taiwan Depositary Receipts that are allocated through public subscription, after subscription, payment of bid deposits, and lottery winner notification have been completed as prescribed by Article 53 paragraph 1, the securities firms and relevant departments shall undertake listing on a stock exchange or an OTC market, carrying out the following related work within the following deadlines:
1. Day Seven: Deadline for placement with specific party;
2. Day Eight:
(1) Underwriter carries out underwriting on standby commitment basis.
(2) Issuer uses share payment certificates to apply with the TWSE or the GTSM for listing on a stock exchange or an OTC market, or registration as an emerging stock.
3. Day Nine:
(1) Complete compilation of shareholders' (creditors') register.
(2) Issuer transfers share payment certificates to the TDCC.
4. Day Ten: Listing of securities on a stock exchange or an OTC market, or registration as an emerging stock, is publicly announced.
5. Day Eleven:
(1) Securities electronically transferred from the TDCC to the subscriber's central depository account.
(2) Securities listed on a stock exchange or an OTC market, or registered as an emerging stock.
If a date set forth in the above subparagraphs falls on a weekend, regular holiday, or bank holiday, the deadline shall be postponed by one day, and the dates that follow shall be moved forward accordingly.
The dates specified under paragraph 1 may be changed if necessary by applying for approval with the Taiwan Securities Association. |
| Article 63 | In the underwriting of an initial listing on a stock exchange or an OTC market using previously issued shares, where said shares are allocated through public subscription, after subscription, payment of bid deposits, and lottery winner notification have been completed as prescribed by Article 53 paragraph 1, the securities firms and relevant departments shall undertake the following work within the following times regarding listing on a stock exchange or an OTC market:
1. Day Seven: Deadline for placement with specific party;
2. Day Eight:
(1) Underwriter carries out underwriting on standby commitment basis.
(2) Company applying for listing on a stock exchange or an OTC market applies with the TWSE or the GTSM for listing on a stock exchange or an OTC market;
3. Day Nine:
(1) Complete compilation of shareholders' register;
(2) Company applying for listing on a stock exchange or an OTC market transfers share payment certificates to the TDCC.
4. Day Ten: Listing of shares on a stock exchange or an OTC market is publicly announced.
5. Day Eleven;
(1) Securities electronically transferred from the TDCC to the subscriber's central depository account; and
(2) Shares listed on a stock exchange or an OTC market.
If a date set forth in the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be moved forward accordingly.
The dates specified under paragraph 1 may be changed if necessary by applying for approval with the Taiwan Securities Association. |
| Article 64 | For a secondary distribution by public subscription, after subscription, payment of bid deposits, and lottery winner notification have been completed as prescribed by Article 53 paragraph 1, the securities firms and relevant departments shall undertake the following work:
1. Day Seven: Deadline for placing with a specific party;
2. Day Eight: Underwriter carries out underwriting on standby commitment basis.
3. Day Nine: Bearer of securities transfers them to TDCC; and
4. Day Ten: Securities electronically transferred by TDCC to purchaser's central depository account. Purchaser may engage in trading of the securities.
If a date set for the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be moved forward accordingly. |
| Article 65 | Where a company not listed on a stock exchange or an OTC market allocates shares through public subscription in an offering that involves cash capital increase, after subscription, payment of bid deposits, and lottery winner notification have been completed as prescribed by Article 53 paragraph 1, the underwriter shall either make placement with a specific party on Day Eight or underwrite on standby commitment basis on Day Nine, and after the securities have been produced by the issuer, the lead underwriter shall, together with the issuer, send the securities to the TDCC for deposit into the purchaser's central depository account, or may distribute the securities as prescribed mutatis mutandis in Article 75. |
| Article 66 | Upon completion of the lottery, the TWSE shall print out the daily underwriting report, publicly announce it, and transmit it in the form of an electronic file to securities underwriters. |
| Article 67 | After the selection of lottery winners, if it is discovered that a winner has not opened or has subsequently closed the trading account, electronic transfer bank account, or central depository account, such that subsequent work cannot be undertaken, the lottery winner shall be disqualified, and the underwriter shall place the securities of such winner with another party or shall purchase such securities on its own account as prescribed by Article 61. |
| Article 68 | The lottery monitors shall monitor the following matters on the day of the drawing:
1. whether the lottery representatives are undertaking the operating procedures as prescribed by regulation; and
2. maintenance of order at the premises of the lottery drawing. |
| Article 69 | When undertaking the computerized public drawing of lots, the TWSE may choose to undertake the lottery using several computer terminals in simultaneous operation depending on the number of qualified participants or the quantity of sales. |
| Article 70 | Securities firms shall, after the public announcement of the lottery winners, keep records relating to ordinary subscriptions for 30 days and records regarding unqualified subscribers or lottery winners for 90 days. However, the FSC and Taiwan Securities Association may extend these times in consideration of the needs at the time.
The TWSE shall keep subscription records on file for five years after the bid opening. |
| Article 71 | Articles 37 and 38 shall apply mutatis mutandis to offerings by public subscription. |
Section Four Allocation by Negotiated Sale
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| Article 72 | Where a securities underwriter allocates securities by negotiated sale, the process shall be completed within the underwriting period.
A securities underwriter shall require the collecting bank to provide itemized records evidencing payment by subscribers for their securities, and shall keep them on file for five years.
A securities underwriter shall keep allocation records on file for five years. However, the FSC and the Taiwan Securities Association may, as necessary, extend the time period during which such records are required to be kept on file. |
| Article 73 | In an underwriting case involving ordinary corporate bonds, financial bonds not involving stock equity, or corporate bonds from which the warrants have been detached, the types of investors that a securities underwriter is allowed to contact to make a negotiated sale shall be limited to citizens of the Republic of China and parties meeting one of the conditions set out in Article 35, subparagraphs 2 through 6, subject mutatis mutandis to the provisions of Article 36, subparagraphs 8 and9; provided, however, that the list set out in subparagraph 8 thereunder shall be limited to the underwriter's juristic-person directors, juristic-person supervisors, and juristic-person shareholders owning 10 percent or more of the company's shares.
In an underwriting case involving an offering of beneficial interest securities by a trustee institution or a public offering of asset-backed securities by a special purpose company, the types of investors that a securities underwriter is allowed to contact to make a negotiated sale shall be limited to citizens of the Republic of China and parties meeting one of the conditions set out in Article 35, subparagraphs 2 through 6, subject mutatis mutandis to the provisions of Article 36, subparagraphs 8 and 9; provided, however, that the list set out in subparagraph 8 thereunder shall be limited to the underwriter's juristic-person directors, juristic-person supervisors, and juristic-person shareholders owning 10 percent or more of the company's shares.
In an underwriting case involving the beneficial interest securities of a real estate investment trust, the types of investors that a securities underwriter is allowed to contact to make a negotiated sale shall be subject mutatis mutandis to the provisions of Articles 35 and 36; provided, however, that the restrictions set out in subparagraphs 1 through 7 of Article 36 do not apply.
In an underwriting case involving call (put) warrants, the types of investors that the warrants may be sold to shall be subject to the provisions of the Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings as well as the GreTai Securities Market Rules Governing Review of Call (Put) Warrants Traded on Over-the-Counter Markets.
In an underwriting case involving an initial listing on a stock exchange or OTC market of either shares in common stock where the overallotment is handled by means of negotiated sale, the provisions of Articles 35 and 36 shall apply mutatis mutandis with respect to the parties that a securities underwriter is allowed to engage in the negotiated sale process. |
| Article 74 | For an offering by negotiated sale, the underwriter shall deliver prospectuses before subscription by the subscribers. |
Chapter IV Issue of Securities
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Section One Allocation by Competitive Auction
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| Article 75 | When an underwriter undertakes an offering by competitive auction, except for issues undertaken partly by competitive auction and partly by public subscription, distribution shall be undertaken within one month of the offering commencement date. The underwriter shall affix the seals of the responsible personnel and managers to the securities collection notification slip. Securities that remain uncollected after the deadline has passed shall be transferred to the issuer or its agent for handling. Distribution shall be undertaken as follows:
1. If it is found that the name (or name of juristic person) or national ID number (or in the case of a juristic person, the tax address uniform number) is incorrectly recorded in the bid winner's bid form, subscription form, or payment letter, or that the information recorded on the original copy of national ID certificate (or photocopy of company registration certificate of juristic person) is incorrect, the bidder shall be disqualified.
2. When collecting the units in person or by post, the subscriber shall furnish a document of proof of payment for securities, registered seal impression, and the original copy of his/her own national ID certificate (or company registration certificate in the case of a juristic person). If another person is entrusted to collect the securities, an original copy of the authorization letter and the national ID certificate of the authorized collector shall be furnished.
3. If the subscriber dies after subscription but before issue, when collecting the securities, the subscriber's inheritor shall furnish the subscriber's death certificate, original copy of the inheritor's national ID certificate (when collection is made by a minor under 14 years of age, it is permissible to submit an original copy of the minor's current list of household members together with the original copy of the national ID certificate of the minor's statutory agent), order-of-inheritance chart, duplicate copy of household registration certificate (for both full and partial households), the inheritor's registered seal impression (in the case of a minor, the registered seal impression of the minor's statutory agent shall also be furnished), and certificate of proof of settlement of inheritance tax. If an inheritor waives inheritance, a securities inheritance waiver consent letter filed with the court and other relevant documents shall be furnished.
If the offering as prescribed by the preceding paragraph is undertaken partly by competitive auction and partly by public subscription, distribution shall be undertaken simultaneously and in the same manner as that for an offering by public subscription.
For an offering of convertible corporate bonds by competitive auction, distribution shall be undertaken by book-entry transfer as prescribed by the Operating Rules for the TDCC. |
Section Two Allocation by Book Building
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| Article 76 | For an offering by book building as prescribed by Article 40, distribution of such securities shall be undertaken by book-entry transfer using certificates of payment for shares as prescribed by the Operating Rules for the TDCC. |
| Article 77 | For an offering of securities by book building as prescribed by Articles 41 and 42, Articles 75 and 76 shall be applied mutatis mutandis to the distribution thereof. |
Section Three Allocation by Public Subscription
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| Article 78 | For securities offered by public subscription, Article 76 shall be applied mutatis mutandis to the distribution thereof. |
Section Four Allocation by Negotiated Sales
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| Article 79 | For underwriting cases involving the issue of call (put) warrants entirely by negotiated sale, and for underwriting cases involving negotiated sales conducted in accordance with Article 31, distribution shall be undertaken as prescribed by the Operating Rules for the TDCC.
In an underwriting case involving real estate asset trust beneficial interest securities, a secondary distribution of beneficial interest securities by a trustee institution, or a secondary distribution of asset-backed securities by a special-purpose company, the distribution of securities shall be governed by the mutatis mutandis application of the preceding paragraph. |
Chapter V Supplementary Provisions |
| Article 80 | The transfer of securities underwritten by an underwriter shall be undertaken as prescribed by the Regulations Governing the Administration of Shareholder Services of Public Companies. |
| Article 81 | In processing a subscription from a QFII, a securities firm shall act as prescribed by the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals. |
| Article 82 | Persons participating in the subscription to an underwritten offering as prescribed by these Rules shall not do so by exploitatively or fraudulently using another person's name or by falsifying a national ID certificate. Where a securities firm discovers that a subscription participant has exploitatively or fraudulently use another person's name or falsified a national ID certificate, the firm shall disqualify the subscriber, and shall not refund the processing fee. Where such a person has already subscribed to securities, he/she shall be disqualified, and subscription payments and postage expense for lottery winner notification shall not be refunded. |
| Article 83 | If the conditions set forth in Article 58 paragraph 1 subparagraphs 1 through 6 or Article 75 paragraph 1 subparagraph 1 apply to a person participating in the subscription to an offering as prescribed by these Rules, after the person has been disqualified, subscription payments already deducted/paid shall be refunded; provided, however, that any handling fee and postage expense for lottery winner notification already deducted/paid shall not be refunded.
If a subscriber disqualified pursuant to the preceding paragraph, or a disqualified inheritor, wishes to request a refund of payments already made, the subscriber or inheritor shall furnish an original copy of the subscriber's or inheritor's national ID certificate (a juristic person shall furnish its company registration certificate; a minor less than 14 years of age may instead furnish an original list of current household members and along with the original of his/her statutory agent's national ID certificate), receipt slip from the notice of payment due (subscription form and notices of payment due, however, those allocated units in the public subscription have no receipt slips from the notice of payment due) and the registered seal impression for the seal used to stamp the notice of payment due (subscription form and notice of payment due) (those allocated units in the public subscription shall use the registered seal impression for the seal that they used to open their trading account), and request the original underwriter (in case of those units in the public subscription, the original broker) to undertake a refund. |
| Article 84 | The Taiwan Securities Association and relevant agencies may charge a fee to securities firms for administering competitive auctions and public subscriptions. Such fee shall be formulated by the Taiwan Securities Association in consultation with the relevant agencies, and prior to implementation shall be reported to the competent authority for approval. |
| Article 85 | For an offering by competitive auction as prescribed by Article 6, failure by the lottery winner to make payment within the allotted time will be a breach of contract, and the Taiwan Securities Association shall not further process such person's participation in the tendering. During the tendering period, underwriters shall report any occurrences of breach of contract to the Taiwan Securities Association, and shall notify the person who is in breach of contract.
On the basis of the letter of report of an underwriter as prescribed by the preceding paragraph, the Taiwan Securities Association shall notify all underwriters who shall then refuse to accept tenders from the person who is in breach of contract. Where a tender has already been submitted, it shall be disqualified.
On the basis of a breach of contract reported by an underwriter as prescribed by the preceding paragraph, after the Taiwan Securities Association has notified all underwriters, if the rights and interests of a principal have been injured or any other dispute has arisen, the underwriter reporting the breach of contract shall be held liable. |
| Article 85-1 | (Deleted) |
| Article 85-2 | After the conclusion of the underwriting period, the securities underwriter that conducted the underwriting of securities shall store data relating to subscriptions, allocations, payments, and specific persons in an electronic medium, to be maintained in custody for at least five years for reference purposes. |
| Article 86 | The Taiwan Securities Association shall report to a disciplinary committee any violations of acts or regulations or of these Rules by securities firms. Where the violation is especially serious, the matter may, upon a resolution by the Board of Directors of the Taiwan Securities Association, be reported to the FSC. |
| Article 87 | These Rules and any amendments hereto shall take force after passage by a meeting of the board of directors, and subsequent reporting to and approval by the FSC. The adoption, elimination, or amendment of any attachments to these Rules shall take force after passage by a meeting of the board of directors. |