Section 3 Functional Committees |
| Article 27 | For the purpose of developing monitoring functions and strengthening management mechanisms, the board of directors of a securities firm may, taking into account the basis of the size of the company, nature of business and the number of board directors, set up audit, compensation and remuneration, risk management, nomination, any other functional committees, and may set up environmental protection, corporate social responsibility or other committees based on the philosophy of corporate social responsibility and sustainable operation, and have them stipulated in the articles of incorporation.
Functional committees shall be responsible to the board and submit the proposals to the board of directors for approval. The above requirements, however, shall not apply when the audit committee is exercising the powers of supervisors in accordance with the Securities and Exchange Act, the Company Act and other laws.
Functional committees shall adopt organizational regulations to be resolved and approved by the board of directors. The organizational regulations should cover at least the number of members in the committee, terms of office, duties and authorities, meeting proceedings, and what resources to be provided by the company to support their exercise of duties.
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| Article 28 | It is advisable that a securities firm make it the first priority to set up the risk management committee, and shall either set up the audit committee or appoint supervisors.
The main functions and duties of the risk management committee are as follows:
- Stipulation of risk management policy and framework and designate responsibilities to the relevant corporate departments.
- Stipulation of risk assessment criteria.
- Setting the overall level of risk of the company and of each corporate department and managing the risk.
The risk management committee shall have at least one independent director with the expertise in securities and financial derivatives, accounting or finance in the committee who shall act as the convener.
The audit committee shall be made up of all independent directors and shall have at least three members. One of the members shall act as the convener, and at least one member shall have the expertise in securities and financial derivatives, accounting or finance.
Exercise of powers by the audit committee and independent directors who are members of the committee and other related matters shall be governed by the Securities and Exchange Act, the Regulations Governing the Exercise of Powers by Audit Committees of Public Companies, and the regulations of Taiwan Stock Exchange or Taipei Exchange.
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| Article 28-1 | A securities firm is advised to set up a remuneration committee or other committees with equivalent functions, with the major responsibilities of establishing the performance evaluation standards and emolument standards for managers and salespersons, and the structure and system of directors' emoluments. It is advisable for these committees to consist of a majority of members who are advised independent directors.
The performance evaluation standards and emolument standards for managers and salespersons, and the structure and system of directors' emoluments shall be created based on the following principles:
- A securities firm shall establish the standards for, or the structure or system of, performance evaluations and emoluments based on the performance after taking into consideration future risks, and with reference to the its overall long-term profits and shareholders' interest.
- The emolument and incentive system is not designed to encourage directors, managers and salespersons to attempt to perform an act that falls outside of its risk appetite suitable for a securities firm. The securities firm shall regularly review the emolument and incentive system and performance to ensure they are within its risk appetite.
- How long a securities firm pays emoluments shall be subject to its profits after future risks have been taken into consideration to prevent the securities firm from suffering losses after paying emoluments and other adverse circumstances. A significant part of emoluments paid as incentives shall be in a deferred manner or in the form of equities.
- When evaluating contribution of a director, manager and salesperson to the securities firm's profits on a personal level, a securities firm shall perform an overall analysis of the securities industry to figure out if their profits were generated because they have used the securities firm's overall advantages so that it will be able to have a meaningful evaluation of their individual contribution.
- A securities firm's agreement on severance pay with its director, manager and salesperson shall be made based on the performance that has been achieved to prevent the occurrence of a circumstance where an individual receives a large amount of severance pay after a short-term employment, and other inappropriate circumstances.
- A securities firm shall fully disclose to its shareholders the principles, methods and goals based on which it has established the standards for, or structure and system of, performance evaluations and emoluments as described above.
For purpose of the Principles, salespersons are individuals whose emoluments or performance evaluations are based on their sales of various financial products and/or services.
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| Article 28-2 | A securities firm is advised to establish a nomination committee and adopt organizational regulations. It is advisable for such committee to consist of a majority of its members who are independent directors and be chaired by an independent director.
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| Article 28-3 | A securities firm is advised to establish and announce whistleblowing methods for internal staff and external individuals, and create a whistleblower protection system. This system shall have related internal operation procedures and be included in the internal control system for control and management.
With regard to the above, at least the following shall be covered:
- Create and announce the mailbox and telephone number for internal whistleblowing, or appoint a third-party independent organization to provide the mailbox and telephone number for internal and external whistleblowing.
- Appoint staff or department responsible for accepting whistleblowing cases.
- Records of acceptance of whistleblowing cases, how the cases were processed, results, and production of related documents and archival of documents.
- Confidentiality of whistleblower's identity and details of the whistleblowing case.
- Measures for protection of rights and interests of whistleblower, who will not be subject to inappropriate treatment because of the whistleblowing.
Anonymous whistleblowing cases without identifying the real name and address of the whistleblower, or without providing specific information, may be rejected.
The regulations under subparagraph 5 of the second paragraph shall not apply to a whistleblowing case that, based on the findings of investigations, contains false claims and malicious accusations against securities firms or their staff.
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| Article 29 | A securities firm shall select a professional, responsible and independent CPA to be its external auditor, who shall perform regular reviews of the financial conditions and internal control measures of the company. With regard to the irregularity or deficiency timely discovered and disclosed by the auditor during the review, and the concrete measures of improvement or prevention suggested by the auditor, the company shall faithfully implement improvement actions. The securities firm is also advised to establish a communication channel or system for its independent directors, supervisors or audit committee and certified public accountants, and establish the internal operation procedures that shall be included in the internal control system for control and management.
A securities firm shall evaluate the independence and adequacy of the auditor engaged by the company regularly and no less frequently than once annually. In the event that the company engages the same auditor without replacement for seven years consecutively, or if the auditor is subject to disciplinary actions or other circumstances prejudicial to the independence of the auditor, the company shall evaluate the necessity of replacing the auditor, and shall submit to the board the conclusion of such evaluation.
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| Article 30 | A securities firm shall engage professional and competent legal counsel to provide adequate legal consultation services to the company, or to assist in the endeavor by the directors, the supervisors and the management to improve their knowledge of the law, for the purposes of preventing any infraction by the company or its staff of laws or regulations, and ensuring the corporate governance matters will proceed pursuant to the relevant legal framework and the prescribed procedures.
In the event that the directors, supervisors or the management are involved in litigation as result of performing his or her duties as provided by the law or arising from shareholders disputes, depending on the circumstances the company shall retain legal counsel to provide assistance.
The audit committee or its members who are independent directors may act on behalf of the company to appoint a lawyer, accountant or other professional to perform necessary reviews or provide consultations on matters relating to exercise of powers, with the costs to be borne by the company.
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