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Taiwan Securities Association Rules Governing Underwriting and Resale of Securities by Securities Firms  CH

Amended Date： 2023.11.30 (Articles 4-1, 22-1, 30, 40, 43, 43-1, 44, 54, 73 amended,English version coming soon)
Current English version amended on 2016.04.12 
Article Content Chapter Content Search Article No. Search Legal Basis Amended Article Legislative History Chinese 
   Chapter II Offering Price
      Section One Pricing by Competitive Auction
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 Taipei Exchange 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.
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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.
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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 three business days before the commencement date of the tender:
  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, minimum bidding unit, and maximum bid quantity per bid form;
  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;
  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.
  8. the issuer shall provide the securities underwriter with a list of the persons who are disqualified from participating in the tender and negotiated sale pursuant to Article 36 and Article 73, paragraph 5.
    The minimum offering price in subparagraph 2 of the preceding paragraph shall comply with the following requirements:
  1. In an underwriting case involving an initial listing on a stock exchange or an OTC market, its upper limit shall be 70 percent of the simple arithmetic mean of the average trade prices, after factoring out ex-rights trading in connection with issuance of stock dividends (or ex-rights trading in connection with capital reduction) and ex-dividend trading, of the 30 business days on which trades have been executed before the filing of the competitive auction agreement with the Taiwan Securities Association. If the stock has not been registered and traded as an emerging stock, the underwriter and the issuer shall negotiate and set a reasonable minimum price for the auction.
  2. 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 the simple arithmetic mean of the closing common share price, after factoring out ex-rights trading in connection with issuance of stock dividends (or ex-rights trading in connection with capital reduction) and ex-dividend trading, calculated for either the one, three, or five business days before the filing of the competitive auction agreement with the Taiwan Securities Association.
  3. 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, its 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.
  4. In the underwriting of convertible corporate bonds and corporate bonds with warrants, it 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.
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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 three business days before the commencement date of the tender, 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, minimum bidding unit, and maximum bid quantity per bid form;
  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 and the circumstances under which it may be confiscated;
  7. the maximum quantity of securities that may be allocated to each successful bidder;
  8. parties from whom competitive auction bids will be accepted, and the provisions of Articles 35 and 36 shall be specified;
  9. matters relating to the collection of bid processing fees and award processing fees by securities underwriters;
  10. 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);
  11. if a bidder fills out and submits multiple bid forms for the same competitive auction, or has multiple competitive auction cases for which bidding closes on the same day, when the bidder submits a bid to participate in any one or more of those cases, funds shall be deducted from the bidder's bank deposit for the sum total of the bid deposits and bid processing fees for all of the bid forms submitted by the bidder;
  12. the method of disclosure of the prospectus, also specifying that the prospectus discloses the tentatively set offering price, and specifying the method for querying the subsequently set offering price;
  13. 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, so that price setting cannot be completed, the TWSE will not open the bids, and the brokers shall, on the third business day following the bid closure date, make no-interest refunds to the bidders of the bid deposits and of the bid processing fees less the relevant handling fees;
  14. other supplemental items that must be disclosed in order to safeguard the public interest and investors.
    In an underwriting case involving an initial listing on a stock exchange or an OTC market, the lead underwriter shall submit the timetable for the procedures and a declaration by the issuer that it has already held a roadshow in accordance with TWSE or TPEx rules. If a declaration is not submitted or the TWSE or TPEx notifies the Taiwan Securities Association that the issuing company has failed to hold a roadshow in accordance with regulations, the competitive auction shall be postponed.
     The maximum quantity of securities that may be allocated to each successful bidder referred to in paragraph 1 subparagraph 7 shall be taken as the the maximum bid quantity per bid form referred to in paragraph 1, subparagraph 5. In an underwriting case involving an initial listing on a stock exchange or an OTC market, the minimum bidding unit under paragraph 1, subparagraph 5 shall be capped at 5,000 shares.
     The amount of the bid deposit under paragraph 1, subparagraph 6 shall be limited to an amount from 30 percent to 60 percent of the bid amount.
    The maximum quantity allocated to each successful bidder, as referred to in subparagraph 7 of paragraph 1, shall not exceed 10 percent of the portion of the offering put up for public sale to outside parties. If it is an underwriting case involving an initial listing on a stock exchange or an OTC market, the lead underwriter may lower the 10 percent cap on the maximum quantity allocated to each successful bidder according to the circumstances in the given case.
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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: Tender closure date (where day four falls on a weekend, the tender closure date shall be postponed by one day). Deadline for bidders to deposit their bid deposit and bid processing fee in the handling bank.
  3. Day Four: Date of deduction of the bid deposits and bid processing fees. Broker's bank undertakes matters regarding the deduction of the bidders' bid deposits and bid processing fees.
  4. Day Five: Bid opening date. Brokers notify successful bidders to carry out the deposit of the award price and the award processing fee.
     When a securities broker notifies the successful bidders to carry out the deposit procedures under paragraph 1, subparagraph 4, it shall keep a record of the notice.
     In a case involving an initial listing of shares on a stock exchange or an OTC market, if, pursuant to Article 18, paragraph 3, the bids are not opened, the lead underwriter shall, on the first business day after the tender closure date, notify the Taiwan Securities Association. The securities brokers shall, on the third business day after the tender closure date, make no-interest refunds to the bidders of the bid deposits and of the bid processing fees less the relevant handling fees; on the same day, the brokers also shall perform the procedures for delivery of the bid processing fees.
    The dates specified under paragraph 1 may be changed if necessary by applying to the Taiwan Securities Association for approval.
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Article 12    Bidders that participate in a public tender shall, following the prescribed format (see Attachment 1), fill in the bid form and transmit it by means of the Internet to the Underwritten Securities Competitive Auction System, or they may do so through the terminals installed at the place of business of the headquarters or a branch of the securities firm where they opened their account.
     For the bid processing fee and bid deposit that a bidder is required to pay under the public announcement provisions of Article 9, the securities broker shall notify the bank to deduct the funds from the bidder's bank account on the date set under Article 33 or 34.
     After the bidder has submitted a bid, the bid form may not be withdrawn or changed.
     The securities underwriter may collect an award processing fee from a successful bidder, and the provisions of paragraph 2 shall apply mutatis mutandis.
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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 or exceeds maximum bid quantity per bid form;
  3. The bid deposit or the bid processing fee has not been paid in full;
  4. The trading account number (11 digits) has not been properly filled in, or the information is not true.
  5. The ID number or uniform invoice number has not been properly filled in, or the information is not true.
  6. If a natural person, the date of birth has not been properly filled in, or the information is not true.
  7. The stock code has not been properly filled in.
  8. The identity of the bidder violates the requirements set forth under Articles 35 and 36.
  9. Failure to open a trading account, a book-entry bank account for remittance of funds, or a book-entry account for securities custody.
  10. Failure to sign a contract with the bank designated by the securities broker for deductions of funds in connection with the competitive auction.
  11. The balance in the bidder's book-entry bank account for remittance of funds is lower than the sum total of the deposit and bid processing fee required for the bid for the securities.
  12. The bidder has submitted the bid in the name of another, or falsely using the name of another.
    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).
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Article 14    After the closure of the tender period, the TWSE shall open the bids on the prescribed opening date, and the provisions of Articles 60, 68, and 69 shall apply mutatis mutandis.
    If a bid form has any of the circumstances in paragraph 1 of Article 13, the TWSE shall disqualify the bid before the opening of bids.
Article 15    With the exception of underwriting cases conducted by means of competitive auction for warrants that have been detached from preferred shares with detachable warrants or warrants that have been detached from corporate bonds with detachable warrants, which 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.
    The quantity awarded to each successful bidder shall not exceed the proportion provided under Article 9, paragraph 5. 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 2 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.
    Each successful bidder shall subscribe the securities at the bidder's own award price.
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Article 16    With the exceptions of secondary distribution cases and underwriting cases conducted by means of competitive auction for 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), and shall be capped at a certain multiple of the minimum offering price set under Article 8, paragraph 1, subparagraph 2.
    The certain multiple referred to in the preceding paragraph shall be determined by negotiation between the underwriting syndicate and the issuing company, but may not exceed a multiple of 1.3.
Article 17     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 offering price of those units allocated by public subscription and those retained by the underwriter 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), and shall be capped at a certain multiple of the minimum offering price set under Article 8, paragraph 1, subparagraph 2.
    The certain multiple referred to in the preceding paragraph shall be determined by negotiation between the underwriting syndicate and the issuing company, but may not exceed a multiple of 1.3.
    With the exception of secondary distribution cases 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.
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Article 17-1    An underwriting case conducted by means of competitive auctionfor 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. If the total number of the 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 successful bidders, 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 each successful bidder shall not exceed the proportion set forth under Article 9, paragraph 5. 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 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 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 TPEx.
    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.
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Article 18     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, those securities retained by the underwriter for its own account, and 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, the TWSE will not conduct the opening of bids.
     In an underwriting case under the preceding paragraph, if there is to be newly conducted any competitive auction or book building or public subscription, this fact must be stated when making the respective filing with the Taiwan Securities Association in accordance with Articles 8 and 9, 23, 24, or 53.
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Article 19    Immediately following the opening of bids, the TWSE shall provide a report on the results of the bid opening, which 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 successful bidders) or juristic person uniform invoice numbers issued by the tax authorities for the localities where institutional successful bidders are located (in the case of institutional successful bidders).
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
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 Taipei Exchange 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.
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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 TPEx 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 10 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 30 times, the amount allocated for public subscription shall be adjusted to 20 percent.
  3. If the subscription multiple is at least 30 times but less than 40 times, the amount allocated for public subscription shall be adjusted to 25 percent.
  4. If the subscription multiple is 40 times but less than 50 times, the amount allocated for public subscription shall be adjusted to 30 percent.
  5. If the subscription multiple is at least 50 times but less than 60 times, the amount allocated for public subscription shall be adjusted to 35 percent.
  6. If the subscription multiple is at least 60 times but less than 70 times, the amount allocated for public subscription shall be adjusted to 40 percent.
  7. If the subscription multiple is at least 70 times but less than 80 times, the amount allocated for public subscription shall be adjusted to 45 percent.
  8. If the subscription multiple is at least 80 times but less than 90 times, the amount allocated for public subscription shall be adjusted to 50 percent.
  9. If the subscription multiple is at least 90 times but less than 100 times, the amount allocated for public subscription shall be adjusted to 55 percent.10. If the subscription multiple is 100 times or greater, the amount allocated for public subscription shall be adjusted to 60 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.
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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.
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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;
  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.
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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;
  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, or for an initial offering of Taiwan Depositary Receipts, may 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 at least 35 times but less than 40 times, the amount allocated for public subscription shall be adjusted to 35 percent.
  6. If the subscription multiple is at least 40 times but less than 45 times, the amount allocated for public subscription shall be adjusted to 40 percent.
  7. If the subscription multiple is at least 45 times but less than 50 times, the amount allocated for public subscription shall be adjusted to 45 percent.
  8. If the subscription multiple is 50 times or more, the amount allocated for public subscription shall be adjusted to 50 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 relevant 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);
  5. determination of the lot size, in the event that the securities will be offered by public subscription.
  6. the issuer shall provide the securities underwriter with a list of the persons who are disqualified from participating in book building under these Rules.
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. (If a case of an offering prior to an initial listing on a stock exchange or an OTC market involves emerging stock trading, the lower limit of the anticipated offering price range may not be less than 70 percent of the simple arithmetic mean trade price for the 10 business days in which trades have been executed in Emerging Stock trading before the book building agreement has been registered with the Taiwan Securities Association, and relevant explanations shall be attached.)
  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 relevant provisions of Articles 35, 43, and 43-1, according to the type of securities on offer.
    In an underwriting case involving an initial listing on a stock exchange or an OTC market, when the lead underwriter registers with the Taiwan Securities Association 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 and a declaration by the issuing company that it has already held a roadshow in accordance with TWSE or TPEx rules.
    If a declaration is not submitted in accordance with the preceding paragraph or the TWSE or TPEx notifies the Taiwan Securities Association that the issuing company has failed to hold a roadshow in accordance with regulations, the book building shall be postponed.
    In an underwriting case involving an initial issue of Taiwan depositary receipts, when the lead underwriter registers the issue with the Taiwan Securities Association using hardcopy media as required in paragraph 1, it shall also submit an evaluation of whether during the 3 months before the date of registration there has been any unusual movement in the price of the stock represented by the Taiwan depositary receipts.
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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 may 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.
    A public informational meeting held by underwriters for an underwriting case involving an initial listing on a stock exchange or OTC market may be held jointly with a roadshow held by the issuing company.
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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.
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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.
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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. In a case in which the amount allocated for public subscription is adjusted to 30 percent or less under Article 21-1, the quantity of securities actually allocated to any qualified institutional investor or mainland area institutional investor shall not exceed 10 percent of the quantity underwritten by the allocating underwriters, or 100,000 shares, whichever is higher, provided that the combined quantity of securities actually allocated by the 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. In a case in which the amount allocated for public subscription exceeds 30 percent, the quantity of securities actually allocated to any qualified institutional investor or mainland area institutional investor shall not exceed 5 percent of the quantity underwritten by the allocating underwriters, or 50,000 shares, whichever is higher, provided that the combined quantity of securities actually allocated by the 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.
  2. In a case in which the amount allocated for public subscription is adjusted to 30 percent or less under Article 21-1, the quantity of securities actually allocated to any bidder other than a qualified institutional investor shall not exceed 5 percent of the quantity underwritten by the allocating underwriters, or 50,000 shares, whichever is higher, provided that the combined quantity of securities actually allocated by the 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. In a case in which the amount allocated for public subscription exceeds 30 percent, the quantity of securities actually allocated to any bidder other than a qualified institutional investor shall not exceed 2 percent of the quantity underwritten by the allocating underwriters, or 20,000 shares, whichever is higher, provided that the combined quantity of securities actually allocated by the underwriters to any single bidder shall not exceed 2 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, 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.
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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, with the exception of the content of the declarations issued under Article 43-1.
    An underwriter may impose on a bidder who submits any false statement a penalty of 30 percent or more of the total price subscribed, but the amount and method of the penalty shall be specified in the book building announcement.
    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 TWSE 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).
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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.
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      Section Three Pricing by Negotiation
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. In the case of underwriting employing book building, the offering price may not be less than 70 percent of the simple arithmetic mean trade price for the 10 business days in which trades have been executed in Emerging Stock trading after the book building agreement has been registered with the Taiwan Securities Association. 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 on a stock exchange or OTC market is a case of application for listing on the stock exchange or OTC market 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 partly 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 18.
    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 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.
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Article 32    Except when permission is granted by the competent authority for the securities industry, in an underwriting case conducted by means of negotiated sale, the quantity allocated to an individual subscriber shall be regulated as follows:
  1. In a case of underwriting of ordinary corporate bonds and financial bonds not involving stock equity, the quantity allocated to an individual subscriber may not exceed 50 percent of the total quantity of securities in that underwriting case. This restriction does not apply, however, if the subscriber is an insurance company and the subscription will serve as an investment instrument of an investment-linked insurance product. If the subscribers are limited only to professional investors as defined in the Taipei Exchange Rules Governing Management of Foreign Currency Denominated International Bonds, the quantity allocated to an individual subscriber may not exceed 80 percent of the total quantity of securities in that underwriting case. This restriction does not apply, however, if the subscriber is a government fund.
  2. In a case of underwriting of corporate bonds from which the detachable warrants have been detached, the quantity allocated to an individual investor may not exceed 50 percent of the total quantity of the securities in that underwriting case.
  3. Not more than 20 percent of the total quantity 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.
  4. In a case involving call (put) warrants or corporate bonds with warrants, not more than 10 percent of the total quantity 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.
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