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Title：

Taiwan Stock Exchange Corporation Regulations for Handling Deficiencies in Evaluation Reports or Other Related Information Submitted by a Securities Underwriter  CH

Amended Date： 2023.07.20 
Categories： Primary Market > Review
Article Content Content Search Article No. Search Amended Article Legislative History Chinese

Title： Taiwan Stock Exchange Corporation Regulations for Handling Deficiencies in Evaluation Reports or Other Related Information Submitted by a Securities Underwriter(2021.03.31)
Date：
1     These Guidelines are established to ensure that securities underwriters play a proper role in their assessment and enable them to provide impartial and professional assessment reports or other relevant information with care in handling cases.
2     The party subject to the imposition of demerit points under these Guidelines is the lead securities underwriter.
3     The assessment reports or other relevant information submitted by securities underwriters shall conform to the Rules Governing the Reporting of Basic Information of Advisory Client Companies by Securities Underwriters, Directions for the Particulars to be Recorded in the Securities Underwriters' Assessment Reports for Initial Stock Listing, and other applicable regulations promulgated by the TWSE.
    The assessment reports or other relevant information submitted by securities underwriters according to the Operating Rules of the TWSE, are governed by the preceding paragraph mutatis mutandis and, in addition, may also be governed by the applicable provisions of these Guidelines.
    When accepting the appointment by a primary listing company, a Taiwan Innovation Board listed company or a Taiwan Innovation Board primary listed company to assist it with compliance with relevant R.O.C. securities laws and regulations, the Articles of Incorporation and the Operating Rules of the TWSE, and regulations for public announcement and listing contract, the lead securities underwriter shall act in accordance with the TWSE Rules Governing Review of Securities Listings (hereinafter the "Review Rules"), the TWSE Rules for Regulating TWSE Primary Listed Companies and Taiwan Innovation Board primary listed Companies After Listing (hereinafter the “Post-Listing Rules”), the TWSE Directions for Lead Securities Underwriters Mandated to Assist Principals in Complying with R.O.C. Laws and Regulations and the Taiwan Stock Exchange Corporation Rules Related to TWSE Listing (hereinafter the "Directions"), and other applicable regulations, and is governed by the requirements of these Guidelines.
4     In the event any of the following deficiencies is found in the assessment reports or relevant information submitted by the securities underwriter, whether or not these reports or information have been withdrawn by the underwriter, the TWSE may impose demerit points depending on the seriousness of the deficiency, according to the following provisions:
  1. In case of false or concealed content, the TWSE will impose ten demerit points and, in addition, may directly submit a report of the offense or submit a description of relevant facts and evidence to the Securities and Futures Investors Protection Center (SFIPC) for further action.
  2. Ten demerit points will be imposed on a securities firm failing to account for the following:
    1. Where an issuer filing an initial application for listing of securities is involved in a circumstance described in Article 9, paragraph 1, Article 20, paragraph 5, Article 20-1, paragraph 2, or violates Article 18 or 19, of the TWSE Review Rules; or where a foreign issuer applying for primary stock listing or a subordinate company of such issuer is involved in the circumstances in Article 28-8 of the Review Rules, the foreign issuer violates Article 28-5 or 28-6; or the domestic issuer and foreign issuer applying for listing their stocks on the Taiwan Innovation Board is involved in a circumstance described in Article 31, paragraph 1 or violates Article 32 or 33 of the Review Rules;
    2. Where a company applying for second listing of securities is involved in the circumstances under Article 27-2 of the Review Rules;
    3. Where a company neither listed on the TWSE nor on the TPEx or a foreign company, that is merged under Article 53-2 or 53-3 of the TWSE Operating Rules (the "Operating Rules"), or a company neither listed on the TWSE nor on the TPEx or a foreign company, that is acquired under Article 53-9 of the Operating Rules, or a company neither listed on the TWSE nor on the TPEx or a foreign company that participates in conversion of shares under Article 53-12 of the Operating Rules, is involved in the circumstances under which listing is advised against under Article 9, paragraph 1, subparagraphs 1, 3, 4, 6, 7, 8 and 12, or Article 28-8, subparagraphs 1, 3, 4, and 5, or Article 31, paragraph 1, subparagraphs 1, 3, 4, 5, 6, 7, and 11 of the Review Rules;
    4. Where a company participating in conversion to a financial holding company that is neither listed on the TWSE nor on the TPEx under Article 53-31, paragraph 2 of the Operating Rules is involved in the circumstances under which listing is advised against under Article 9, paragraph 1, subparagraphs 1, 3, 4, 6, 8, and 12 of the Review Rules;
    5. Where the transferee company of a demerger under Articles 53-21 to 53-23 of the Operating Rules is involved in the circumstances under which listing is advised against under Article 9, paragraph 1, subparagraphs 1, 3, 4, 6, 7, 8, 9, 11 and 12, or Article 18 or 19, of the Review Rules.
  3. Five demerit points will be imposed in case of a major omission or apparent error in the assessment report according to the Criteria Governing Particulars to be Recorded in the Assessment Report of Securities Underwriter for Initial Public Offering or the Guidelines for Information to be Published in Assessments of Securities Underwriters for Offering and Issuance of Securities by Foreign Issuers, established by Taiwan Securities Association.
  4. Five demerit points will be imposed in case of a significant error in financial analysis or apparent improper sampling of companies.
  5. Three to five demerit points will be imposed in case of a mistake in the cited information.
  6. Three to five demerit points will be imposed in case of failure to exercise due care when collecting information, therefore not obtaining objective and reasonable evidence.
  7. Three to five demerit points will be imposed in case of failure to provide an adequate explanation on the failure of the specialists appointed by the underwriter or the opinion issued by the specialists to meet the requirements.
  8. One to three demerit points will be imposed in case of failure to submit consultation related information within the prescribed time frame according to the TWSE Rules Governing the Reporting of Basic Information of Advisory Client Companies by Securities Underwriters, or errors or omission in the information filed, for two or more times without reasonable explanation given.
  9. One to three demerit points will be imposed in case of failure to act in accordance with the TWSE Rules Governing the Reporting of Basic Information of Advisory Client Companies by Securities Underwriters without correction despite of the notice issued by the TWSE.
  10. One to five demerit points will be imposed in case of any other explicit deficiency for which TWSE determines a penalty should be imposed.
    If the securities underwriter has committed a deficiency that falls into more than one circumstance in the first paragraph, the most severe penalty should be imposed. A more severe penalty may be imposed on the securities underwriter that has repeated the same deficiency as described in the first paragraph within the last two years.
    For listed companies, if the securities of a primary listing company or second listing company that is involved in the circumstances under Article 148 of the Securities Exchange Act or Articles 50-1 and 50-3 of the Operating Rules within the first two years after its shares have become listed are delisted from the TWSE according to Article 144 of the Securities Exchange Act, and its securities underwriter is found to have committed the a deficiency as listed in the first paragraph, the TWSE may impose a more severe penalty as follows on the underwriter, depending on the seriousness of the deficiency:
  1. The penalty will be doubled if the delisting occurs within one year;
  2. The penalty will be increased by half if the delisting occurs during the second year of listing.
    One to five demerit points will be imposed on a securities underwriter handling an underwriting case for initial listing on the exchange if the “decline in the average closing price below the underwriting price” of the particular security exceeds the” decline in the TWSE price-weighted index” and “decline in the same type of stock” for the same period by more than 10% within a month of the listing of said security on the TWSE or TPEx for trading, for which no reasonable explanation is available from the underwriter.
5     If, during the existence of the contract under which it is appointed by a primary listing company, a Taiwan Innovation Board listed company or a Taiwan Innovation Board primary listed company to provide assistance with compliance with relevant R.O.C. securities laws and regulations, the Articles of Incorporation and the Operating Rules of the TWSE, and regulations for public announcement and listing contract, the lead securities underwriter violates the TWSE Review Rules, Post-Listing Rules, Directions and other relevant regulations, the TWSE may impose three to ten demerit points on it depending on the seriousness of the violation.
6     An announcement on the deficiencies described in Articles 4 and 5 of these Guidelines found by the TWSE to have been committed by securities underwriters in their underwriting will be published regularly once a month at the stock exchange market.
7     The following actions may be taken based on the accumulated demerit points calculated according to the second paragraph of this article in the event demerit points are imposed on securities underwriters within the past year for deficiencies in the assessment report or other relevant information submitted by them:
  1. If ten or more demerit points have been imposed, the TWSE may decline the assessment report by the underwriter for three months.
  2. If 15 or more demerit points have been imposed, the TWSE may decline the assessment report by the underwriter for six months.
  3. If 20 or more demerit points have been imposed, the TWSE may decline the assessment report by the underwriter for nine months.
  4. If 25 or more demerit points have been imposed, the TWSE may decline the assessment report by the underwriter for 12 months and advise the competent authority to take appropriate action.
    The "demerit points" accumulated in the preceding paragraph shall mean the total count of demerit points imposed by the competent authority, Taiwan Securities Association, TPEx and TWSE during the past year.
    When the accumulated demerit points imposed on a securities underwriter during the past year satisfy the circumstances in the first paragraph, as published by the Taiwan Securities Association, the TWSE shall promptly issue a public notice at the stock exchange market, and the period for which the TWSE will decline submission of assessment reports starts from the first day of the month following the month in which the day of the public notice falls.
8     For securities underwriters that have been given demerit points according to Article 4 above, their handling personnel shall attend and complete, with proof, an advanced underwriting course organized by the Securities Association for at least 15 hours within six months after the public notice of the TWSE, or the TWSE may dismiss cases handled by these personnel.
    The securities underwriter shall send a list of names of the handling personnel of the cases on which demerit points were given according to the preceding paragraph together with a deficiency correction plan approved by their general manager and internal audit officer within seven days after the issue of the public notice, with copies of the aforementioned list to be sent to the Taiwan Securities Association and TPEx. The TWSE may extend the time for review of cases pending review that were handled by these personnel if no substitute personnel have been assigned to the cases after careful consideration and the underwriter has not represented that an adequate assessment has been performed.
    Upon completion, with proof, of the advanced course by the handling personnel of cases on which demerit points were given, as described in the preceding paragraph, the securities underwriter shall send a notice to the TWSE, with a copy to the TPEx.
9     Before imposing demerit points on a securities underwriter according to these Guidelines, the TWSE shall request it to provide written explanation on the circumstances concerned, and submit such explanation, along with information on the relevant deficiencies as well as opinion on actions to be taken, at a penalty meeting to be held by the listing department for approval and then to the President of the TWSE for approval and implementation.
10     After having imposed demerit points according to the preceding article, the TWSE should immediately report the same in writing to the competent authority for its acknowledgment, with a copy to the Taiwan Securities Association and TPEx. In the event that the assessment reports or other relevant information submitted by a securities underwriter are found to have breached the requirements under Article 25 of the Rules Governing Securities Firms, in addition to imposing demerit points on the underwriter pursuant to Articles 4 and 5, the TWSE shall also forward information about the relevant facts and evidence to the competent authority for further action.
11     These Guidelines shall take effect after having been submitted to and approved by the competent authority and publicly announced. Subsequent amendments thereto shall be effected in the same manner.