Chapter III Allocation of Securities
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Section One Allocation by Competitive Auction
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| Article 33 | When an underwriter conducts public sale to outside parties partly by competitive auction and partly by public subscription, the underwriter shall carry out the following matters after the bid opening date:
- Day One:
- File the underwriting contract for registration with the Taiwan Securities Association.
- Send award notifications, prospectuses, and payment due notices.
- Refund bid deposits for unsuccessful and disqualified bids.
- Day Two:
- Publish underwriting announcement.
- Deadline for successful bidders' payment of the award price and award processing fee to the designated bank.
- Public subscription commencement date.
- Day Three: Date of deduction of successful bidders' award prices and award processing fees. Broker's bank undertakes matters regarding the deduction of the successful bidders' award prices and award processing fees.
- Day Four:
- Date of settlement of award prices, bid processing fees, award processing fees, and confiscated deposit prices.
- Public subscription period closes.
- Deadline for subscriber's payment of subscription processing fees, subscription payments, and postage expenses for lottery winner notification to the designated bank.
- Day Five: Date of deduction of subscription processing fees, subscription payments, and postage expenses. Broker's bank undertakes matters regarding deduction of subscribers' subscription processing fees, subscription payments, and postage for lottery winner notifications.
- Day Six: Date of public drawing of lots. TWSE undertakes the public drawing of lots. TWSE produces and sends a report of winner information to each broker. TWSE compiles and reports the information to the lead underwriter for provision to subscribers for their review.
- Day Seven:
- 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.
- Day Seven: Date of settlement of subscription processing fees, subscription payments, and postage expenses.
- Underwriters shall send lottery winner notifications, prospectuses (or subscription forms), and other relevant materials to lottery winners.
- Issuer applies to the TWSE or the TPEx for a securities listing on a stock exchange or OTC market.
- 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 of the price) or underwriters carry out underwriting on standby commitment basis.
- Day Nine:
- Shareholders' register is completed.
- Issuer delivers certificates of payment to the Taiwan Depository & Clearing Corporation, or company applying for listing on a stock exchange or OTC market delivers shares to the Taiwan Depository & Clearing Corporation.
- Listing of securities on a stock exchange or OTC market is publicly announced.
- Day Ten: Securities are listed on the stock exchange or OTC market.
If any of the dates set forth in any subparagraph of 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 award price referred to in paragraph 1 subparagraphs 2 and 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 successful bidder 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 successful bidder, to the units that were to have been allocated to said successful bidder.
The procedures related to the allocation of securities by competitive auction by securities firms under paragraph 1 shall be separately prescribed by the Taiwan Securities Association.
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| Article 34 | When an underwriter conducts public sale to outside parties entirely by competitive auction, the underwriter shall carry out the following matters after the bid opening date:
- Day One: File the underwriting contract for registration with the Taiwan Securities Association. Begin mailing notifications of award, prospectuses, and payment due notices. Refund bid deposits for unsuccessful and disqualified bidders.
- Day Two:Publish underwriting announcement; deadline for successful bidders' payment of the award price and award processing fee to the designated bank.
- Day Three: Date of deduction of award prices and award processing fees. Broker's bank undertakes matters regarding the deduction of the successful bidders' award prices and award processing fees.
- Day Four: Date of settlement of award prices, bid processing fees, award processing fees, and confiscated deposit prices. Issuer applies to the TWSE or the TPEx for a securities listing on a stock exchange or an OTC market.
- Day Five: Specified parties make payment; underwriter carries out underwriting on standby commitment basis.
- Day Six: Compilation of related registers is completed. Announcement of securities listing on a stock exchange or an OTC market.
- Day Seven: Securities are issued and listed on a stock exchange or an OTC market.
In a secondary distribution, the procedures set forth in subparagraphs 6 and 7 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 award price referred to in paragraph 1, subparagraphs 2 and 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 successful bidder 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 successful bidder, to the units that were to have been allocated to said successful bidder.
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| Article 35 | In the underwriting of securities by competitive auction, the securities underwriter is limited to accepting bids from the following persons:
- ROC nationals at least 20 years of age.
- ROC institutional investors and securities investment trust funds offered by securities investment trust enterprises.
- Overseas Chinese and foreign nationals, as permitted under the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals.
- 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.
- Other parties granted permission by the government.
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| 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:
- an equity-method investee of the issuing company (issuing institution);
- an investor that has equity-method investments in the issuing company (issuing institution);
- 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;
- a foundation that has received one-third or more of its paid-in endowment from the issuing company (issuing institution);
- the issuing company's (issuing institution's) directors, supervisors, general manager, assistant general manager(s), deputy assistant general managers, or any division officer serving directly under the general manager;
- the spouse of a director, a supervisor, or the general manager of the issuing company (issuing institution);
- a director, supervisor, or employee of the underwriting syndicate, or a spouse thereof;
- 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).
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| Article 37 | Securities underwriters shall send award notifications and prospectuses to successful bidders by express registered mail or by electronic means.
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| Article 38 | Award notifications are nontransferable.
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| Article 39 | Bidding materials for disqualified bids, successful bids, and opened bids shall be retained by the securities firms 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.
The TWSE shall keep its bid opening records on file for five years after the bid opening.
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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:
- Day One: Publish an underwriting announcement and mail prospectuses and notices of payment due.
- Day Two: Payment period commences, and book building bid deposits not corresponding to allocated shares are returned to unsuccessful bidders.
- Day Three: Specified parties make payment; issuer applies to the TWSE or the TPEx to list certificates of payment for shares on a stock exchange or an OTC market.
- Day Four: Underwriter carries out underwriting on standby commitment basis; shareholders' register is completed.
- Day Five: Certificates of payment for shares are listed on a stock exchange or an OTC market.
- 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 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 when collecting book building bid deposits as prescribed by paragraph 6 above shall do so by means of a trust, and shall specify in the trust contract the handling of default by the bidder and the damages for default..
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| 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:
- Day One: Publish an underwriting announcement and begin mailing subscription notices, prospectuses, related subscription notices, and notices of payment due.
- Day Two: Payment date, and date for refund of book building bid deposits not corresponding to allocated securities.
- Day Three: Payment deadline; issuer applies to the TWSE or the TPEx for a securities listing on a stock exchange or an OTC market.
- Day Four: Complete compilation of related registers.
- Day Five: Announcement of securities listing on a stock exchange or an OTC market.
- 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 TPEx 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 when collecting book building bid deposits as prescribed by paragraph 5 shall do so by means of a trust, and shall specify in the trust contract the handling of default by the bidder and the damages for default..
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| 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:
- 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.
- 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 do so by means of a trust, and shall specify in the trust contract the handling of default by the bidder and the damages for default..
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| 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:
- Day One: Publish a book building announcement (together with a public subscription announcement) and begin accepting book building bids.
- Day Two: Public subscription commencement date.
- 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.
- Day Five:
- 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.
- 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.
- Conduct book building allocation.
- Execute underwriting contract.
- Date for deduction of subscription processing fees, subscription payments, and prepaid postage for lottery winner notifications; broker's bank undertakes matters regarding deduction of subscribers' subscription processing fees, subscription payments, and prepaid postage for lottery winner notifications.
- Day Six:
- 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.
- File underwriting contract with the Taiwan Securities Association.
- Mail out allocation notices, prospectuses, and payment notices.
- Day Seven:
- Issue allocation announcement.
- Parties allotted shares through book building make payment.
- Payment date for subscription processing fees, subscription payments (calculated on the basis of the actual offering price), and postage.
- 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.
- 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.
- Underwriters shall send lottery winner notifications, prospectuses (or subscription forms), and other relevant materials to lottery winners by express registered mail or by electronic means.
- Issuer applies to the TWSE or the TPEx for a securities listing on a stock exchange or an OTC market..
- 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.
- Day Nine:
- Shareholders' register is completed.
- 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.
- Listing of securities on a stock exchange or an OTC market is publicly announced.
- 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.
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| 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 43-1, subparagraphs 15 and 17, 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.
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| Article 43-1 | The provisions of Article 35 apply mutatis mutandis to the parties from which a securities underwriter is allowed to accept book building bids. In addition, when conducting an underwriting case involving an initial listing on a stock exchange or an OTC market or an initial offering of Taiwan Depositary Receipts, the underwriter 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:
- An employee of the issuer.
- A director, supervisor, or managerial officer (or a spouse, son, or daughter thereof) of a company that has underwriting business dealings with an underwriter.
- 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.
- 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.
- A de facto related party of the issuer or an underwriter.
- An attesting CPA of the issuer, any other CPA of that CPA’s office, or a spouse thereof.
- A lawyer who has issued a legal opinion in connection with the underwriting case, or the spouse thereof.
- An equity-method investee of the issuing company (issuing institution).
- An investor that has equity-method investments in the issuing company (issuing institution).
- 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.
- A foundation that has received one-third or more of its paid-in endowment from the issuing company (issuing institution).
- The issuing company's (issuing institution's) directors, supervisors, general manager, assistant general manager(s), deputy assistant general managers, or any division officer serving directly under the general manager.
- The spouse of a director, a supervisor, or the general manager of the issuing company (issuing institution).
- A relative within the second degree of kinship of a director, a supervisor, or the general manager of the issuing company (issuing institution).
- A director, supervisor, or employee of the underwriting syndicate, or a spouse thereof, or a relative thereof within the second degree of kinship.
- A depositary institution of Taiwan depositary receipts and any director, supervisor, or managerial officer, employee (or a spouse, son, or daughter thereof) of the depositary institution.
- 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, the parties from whom it is allowed to accept book building bids shall be restricted by the mutatis mutandis application of subparagraphs 3 to 15 and 17 of the preceding paragraph.
In a case of a secondary offering of Taiwan Depositary Receipts, the parties from whom book building bids are accepted shall be restricted by the mutatis mutandis application of subparagraphs 3 to 17 of paragraph 1.
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.
When a securities firm conducts an underwriting case involving an initial listing on a stock exchange or an OTC market, or involving an initial issue of Taiwan depositary receipts, it furthermore shall obtain declarations from the bidders affirming their consent for the provision of the book building information (including the remittance bank and account number) to the TWSE and the TPEx for the establishment of files, provided that the information will not be externally disclosed for any purpose other than provision to the TWSE, TPEx, and the competent authority for securities for supervision and auditing purposes.
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| 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.
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| 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.
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| 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.
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| 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.
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| Article 48 | An underwriter entrusting a securities broker to sub-underwrite securities on its behalf shall draw up a securities sub-underwriting contract.
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| 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.
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| Article 50 | In sub-underwriting securities on behalf of an underwriter, a securities broker and its associated persons shall abide by the following rules:
- 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;
- No guarantees or commitments shall be made to subscribers regarding investment return on the securities;
- 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];
- No improper subscription solicitations may be made to investors;
- [A securities broker and its associated persons shall refrain from] any other activity prohibited by the FSC.
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| Article 51 | A securities dealer's sub-underwriting fee shall be determined by negotiation between the underwriter and the sub-underwriter.
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Section Three Allocation by Public Subscription
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| Article 52 | The following offerings shall be undertaken by public subscription:
- 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;
- 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;
- 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;
- 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;
- 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.
- 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 Taipei Exchange 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.
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| 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:
- Public subscription period.
- Matters requiring attention regarding the rights and obligations of subscribers, as follows:
- Subscribers need to have a trading account, a central depository account, and a bank account.
- Subscribers need to enter into a contract with a transfer bank.
- 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).
- 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.
- 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.
- A subscriber may not submit duplicated subscriptions.
- 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.
- 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.
- How to direct inquiries regarding subscriptions and lottery winner lists.
- The deadline for payment of subscription processing fees, postage for lottery winner notifications, and subscription payments.
- 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.
- The date on which the offering price will be set.
- The date on which the securities are scheduled for listing on a stock exchange or an OTC market.
- 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.
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| Article 53 | With the exceptions of cases of the underwriting of initial listing on a stock exchange or OTC market or initial issue of Taiwan Depositary Receipts that are conducted by simultaneous book building and public subscription procedures, and of cases of public sale to outside parties that are conducted partly by competitive auction and partly by public subscription, 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:
- Day One: Publish an underwriting announcement and commence subscription.
- 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.
- Day Four: Date of deduction of subscription processing fees, subscription payments, and postage for lottery winner notifications. Broker's bank undertakes matters regarding deduction of subscribers' subscription processing fees, subscription payments, and postage for lottery winner notifications.
- 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.
- 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 by express registered mail or by electronic means.
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.
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| Article 54 | Subscribers in a public subscription by a securities firm shall be restricted to ROC nationals.
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| 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.
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| 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.
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| Article 57 | (Deleted)
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| 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:
- Has not opened a trading account, electronic transfer custodial account, or central depository account with the broker undertaking consigned subscription;
- 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;
- Has not undertaken subscription within the allotted time;
- Has not filled in fully or truthfully the required items in the subscription consignment contract;
- Has neither signed nor sealed the subscription consignment contract. This provision shall not apply to those who undertake subscription by telephone or Internet;
- 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;
- Has used, or fraudulently used, the name of another person.
The broker shall duly verify [whether] the preceding conditions [exist].
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| 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 or by electronic means within one week of the closure of the offering period.
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| 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.
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| 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.
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| 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:
- Day Seven: Deadline for placement with specific party;
- Day Eight:
Underwriter carries out underwriting on standby commitment basis.
Issuer uses share payment certificates to apply with the TWSE or the TPEx for listing on a stock exchange or an OTC market, or registration as an emerging stock.
- Day Nine:
Complete compilation of shareholders' (creditors') register.
Issuer transfers share payment certificates to the TDCC.
- Day Ten: Listing of securities on a stock exchange or an OTC market, or registration as an emerging stock, is publicly announced.
- Day Eleven:
Securities electronically transferred from the TDCC to the subscriber's central depository account.
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.
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| 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:
- Day Seven: Deadline for placement with specific party;
- Day Eight:
- Underwriter carries out underwriting on standby commitment basis.
- Company applying for listing on a stock exchange or an OTC market applies with the TWSE or the TPEx for listing on a stock exchange or an OTC market;
- Day Nine:
- Complete compilation of shareholders' register;
- Company applying for listing on a stock exchange or an OTC market transfers share payment certificates to the TDCC.
- Day Ten: Listing of shares on a stock exchange or an OTC market is publicly announced.
- Day Eleven;
- Securities electronically transferred from the TDCC to the subscriber's central depository account;
- 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.
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| 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:
- Day Seven: Deadline for placing with a specific party;
- Day Eight: Underwriter carries out underwriting on standby commitment basis.
- Day Nine: Bearer of securities transfers them to TDCC;
- 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.
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| 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.
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| 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.
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| 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.
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| Article 68 | The lottery monitors shall monitor the following matters on the day of the drawing:
- whether the lottery representatives are undertaking the operating procedures as prescribed by regulation;
- maintenance of order at the premises of the lottery drawing.
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| 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.
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| 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.
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| Article 71 | Articles 37 and 38 shall apply mutatis mutandis to offerings by public subscription.
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Section Four Allocation by Negotiated Sale |
| Article 72 | Where a securities underwriter allocates securities by negotiated sale, the process shall be completed within the underwriting period.
In a case of underwriting of an initial listing on a stock exchange or an OTC market by means of competitive auction, if an award processing fee is collected from the successful bidders pursuant to Article 12, a processing fee of the same percentage shall be collected from the parties with which the underwriter negotiates the sale of the overallotment portion.
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.
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| 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 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 7 and 8.The list set out in subparagraph 7 thereunder shall be limited to the underwriting syndicate's juristic-person directors, juristic-person supervisors, and juristic-person shareholders owning more than 10 percent of the company's shares. If the prospective buyers are limited only to professional investors as defined in the Taipei Exchange Rules Governing Management of Foreign Currency Denominated International Bonds, it is allowable for the prospective buyers to be the underwriting syndicate's juristic-person directors, juristic-person supervisors, and juristic-person shareholders holding more than 10 percent of the company's shares. However, the terms of issuance accorded to them may not be more more favorable than those accorded to other prospective investors of the same category.
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 7 and 8; provided, however, that the list set out in subparagraph 7 thereunder shall be limited to the underwriting syndicate's juristic-person directors, juristic-person supervisors, and juristic-person shareholders owning more than 10 percent 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 Article 35 and Article 43-1, paragraph 1, subparagraphs 15 and 17.
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 Taipei Exchange 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 Article 43-1, paragraph 1, subparagraphs 8 to 15 and 17 shall apply mutatis mutandis with respect to the parties that a securities underwriter is allowed to engage in the negotiated sale process.
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| Article 74 | For an offering by negotiated sale, the underwriter shall deliver prospectuses before subscription by the subscribers.
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