Chapter I General Provisions
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| Article 1 | These Regulations are adopted in accordance with the provisions of Article 28 of the Rules Governing Securities Firms. |
| Article 2 | These Regulations are applicable to the underwriting and re-sale of stocks, corporate bonds, financial bonds, depositary receipts, and any other securities specified by the Securities and Futures Commission, Ministry of Finance (hereinafter, "the SFC"). |
| Article 3 | In the underwriting of securities, a securities underwriter (hereinafter, "an underwriter") shall conduct such business in accordance with these Regulations. |
| Article 4 | In the underwriting of securities, an underwriter shall determine the offering price of the securities according to the following methods:
1. By competitive auction;
2. By book building; or
3. As resolved by negotiations between the underwriter and the issuing company, issuing institution, or holder of the securities.
The offering price referred to in the preceding paragraph shall refer to the unit price, coupon rate, conversion (exchange) premium ratio, and yield to put.
"Issuing institution" as used in these Regulations refers to an institution that issues beneficial securities or asset-backed securities under one of the following circumstances:
1. where a trustee institution or a special-purpose company accepts financial assets in trust or in transfer from the originator, and issues beneficial securities or asset-backed securities based on those assets; or
2. where a trustee institution accepts transfer from a principal of real estate or real estate-related rights, and offers real estate asset trust beneficial securities to unspecified persons. |
| Article 4-1 | In the underwriting of securities on a firm commitment basis, except where prescribed by other laws and regulations (for example, the GreTai Securities Market Regulations Governing the Requirement to Engage a Recommending Securities Firm to Carry Out Underwriting and the Ratio of Subscriptions for its Own Account for Applications by Public Companies for OTC Stock Trading), an underwriter shall act as prescribed by the following provisions with respect to the proportion of securities held for its own account; provided, however, that for any shares purchased for its own account that remain unsubscribed at the closure of the underwriting period, these restrictions shall not apply:
1. In the underwriting of an initial public offering (IPO) carried out by a public company on the stock exchange or an over-the-counter (OTC) market, the underwriter shall hold for its own account between 10 percent and 25 percent of the total number of shares underwritten; provided, however, that this provision shall not apply to the underwriting of an IPO carried out by a state-owned enterprise or a technology-based enterprise as set forth under the provisions of the Taiwan Stock Exchange Corporation Criteria for Review of Securities Listings;
2. In the underwriting of cash capital increase, convertible corporate bonds, ordinary corporate bonds not by negotiated sale, financial bonds not by negotiated sales, and Taiwan Depositary Receipts for listed or OTC-traded companies, the underwriter shall hold for its own account from 5 percent to 15 percent of the total number of units underwritten;
3. In the underwriting of cash capital increase for companies that are neither listed nor OTC-traded, the underwriter may hold for its own account a proportion not to exceed 15 percent of the total number of units underwritten; and
4. In the underwriting of preferred shares, preferred shares with warrants, and corporate bonds with warrants for public companies, the underwriter may hold for its own account a proportion not to exceed 15 percent of the total number of units underwritten.
5. Where an offering of beneficial securities by a trustee institution or an offering of asset-backed securities by a special purpose company is not undertaken through negotiated sale, purchases on own account shall not exceed fifteen percent of the total amount underwritten.
6. Where an offering of real estate asset trust beneficial securities by a trustee institution is not undertaken through negotiated sale, purchases on own account shall not exceed fifteen percent of the total amount underwritten.
For issues undertaken entirely by book building, each underwriter shall hold for its own account not more than 10 percent of the total number of units underwritten.
Where a public company carrying out a cash capital increase encounters waiver of subscription rights by an existing shareholder in accordance with the provisions of Article 267, paragraph 3 of the Company Act, and the authority with jurisdiction over such existing shareholder consents to incorporation of [the corresponding units] into the public underwriting, the portion thus incorporated into the public underwriting shall be excluded when calculating the "total number of units underwritten" set out in paragraph 1, subparagraph 2.
In the underwriting of an IPO carried out by a public company on the stock exchange or an over-the-counter OTC market, where the securities underwriter offers the shares through public subscription, it shall first set aside 1,000 common shares from the offering for subscription by the Securities and Futures Investors Protection Center. |
| Article 5 | With the exception of that portion of underwritten units held for its own account in accordance with the preceding article, a securities underwriter carrying out the underwriting of securities (hereinafter, "public sale to outside parties") shall use the following methods to allocate shares:
1. competitive auction;
2. book building;
3. public subscription; or
4. negotiated sale.
The allocation methods described in the above subparagraphs shall be undertaken in accordance with Articles 6, 7, 21, 22, 22-1, 31 and 52 of these Regulations. |
| Article 5-1 | An underwriter [intending to] underwrite securities shall publish an underwriting notice for two consecutive days in daily newspapers, and [in so doing] shall act in accordance with the Chinese Securities Association Guidelines Governing the Particulars to be Recorded by Securities Underwriters in Securities Underwriting Announcements. |
Chapter II Offering Price
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Section 1 Pricing by Competitive Auction
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| Article 6 | In the underwriting of an IPO on the stock exchange or an OTC market (other than the GreTai Securities Market's second board [Tiger Board]) involving issued shares or cash capital increase through a new share issue, and in the underwriting of a cash capital increase by a company already listed on the 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 in the underwriting of an IPO on the stock exchange or an OTC market where the total number of shares is less than 3 million, shares put up for public sale may be allocated entirely through public subscription.
In the underwriting of convertible corporate bonds or corporate bonds with warrants, and in public placement offerings carried out in accordance with the provisions of Article 22 paragraph 3 of the Securities and Exchange Act (hereinafter, "public placement offerings"), the securities may be offered through competitive auction. |
| Article 7 | In the underwriting of securities issued through competitive auction as prescribed in the preceding article, except where the issuer is a government-owned enterprise, underwriting of that portion of the offering put up for public sale shall be handled in accordance with the following provisions:
1. In the underwriting of an IPO on the stock exchange or an OTC market (other than the GreTai Securities Market's second board [Tiger Board]), 50 percent shall be offered through competitive auction, and the remainder shall be offered through public subscription.
2. In the underwriting of an offering of convertible bonds, and in the underwriting of a cash capital increase by a company already listed on the stock exchange or an OTC market in which all shares are put up for underwritten distribution, all units shall be offered through competitive auction.
3. In the underwriting of offering of corporate bonds with warrants and public placements, the units may be offered either entirely through competitive auction, or through a combination of competitive auction and public subscription. |
| Article 8 | In the underwriting of securities offered through competitive auction, the lead underwriter shall first prepare documentation determining the particulars listed in the subparagraphs below. After being signed or sealed by the lead underwriter and co-underwriters and the issuer of the securities, said documentation shall be reported to the Chinese Securities Association:
1. the total number of underwritten units, number of units held by the underwriter for its own account as prescribed by Article 4-1, the number of units offered by competitive auction, and minimum bidding unit;
2. the minimum offering price as resolved by negotiation with the issuer;
3. the firm-commitment fee or best-efforts underwriting fee, as resolved by negotiation with the issuer;
4. the unit size of lots offered through public subscription;
5. the names of the members of the underwriting syndicate, and the amount of securities apportioned to each, as specified by Article 7;
6. the method of allocating among the members of the underwriting syndicate any units that remain unsubscribed after conclusion of competitive auction; and
7. the date(s) of competitive auction and the time(s) for submitting and opening bids, as agreed in consultation with the Chinese Securities Association.
The upper limit for the minimum offering price in subparagraph 2 of the preceding paragraph shall, in the case of an IPO on the stock exchange or an OTC market, be the theoretical price established using "pricing formulae commonly employed in the market" as set forth in the Guidelines for the Use of Financial Information in the Pricing of Securities for Underwriting, excepting convertible corporate bonds and corporate bonds with warrants; in the underwriting of a cash capital increase by a company already listed on the stock exchange or an OTC market in which all shares are put up for underwritten distribution, [it] shall not be lower than 90 percent of (1) the closing common share price on the business day prior to the offer through competitive auction, or (2) the simple average of closing common share prices over either the three or five business days prior to the offer through competitive auction, factoring out bonus shares issued as stock dividend (or treasury shares canceled in connection with a
capital reduction).
In the underwriting of convertible corporate bonds and corporate bonds with warrants by competitive auction, the minimum offering price, as negotiated pursuant to paragraph 1 subparagraph 2, shall not exceed the par value of said securities.
In the event that unsubscribed units as specified in paragraph 1 subparagraph 6 are allocated by the underwriting syndicate to a specified party through negotiated sale, only the parties listed in Article 35 shall participate in said placement, and those listed in Article 36 shall not participate. |
| Article 9 | A lead underwriter of securities shall make public announcement for two consecutive days in daily newspapers on the first and second days on which public bids are accepted. The content of said announcement shall be reported to the Chinese Securities Association, and shall include the items in the following subparagraphs:
1. name of the security;
2. name, address, and telephone number of the underwriters;
3. method, time period, and site of the bidding;
4. date, time, and site of the opening of the bids;
5. minimum offering price and minimum bidding unit;
6. total quantity of securities to be put up for underwritten distribution; total number of units retained for their own accounts by the underwriters; the total number of units being offered for competitive auction, and the amount of the tender guarantee (the amount of the tender guarantee shall not be less than 20 percent of the amount of the tender);
7. the maximum quantity of securities that shall be allocated to an individual bidder;
8. any statutory restrictions upon holding percentages as may be set forth in other laws or regulations with respect to the industry to which the issuer belongs (please list these on the bid form); and
9. other supplemental items that must be disclosed in order to safeguard the public interest and investors.
The maximum quantity that each participant shall receive, as referred to in subparagraph 7 of the preceding paragraph, shall not exceed 3 percent of the portion of the offering put up for public sale; provided, however, that where convertible corporate bonds or corporate bonds with warrants are underwritten through competitive auction, this restriction shall not apply to banks, insurance companies, securities investment trust funds managed by securities investment trust enterprises, Qualified Foreign Institutional Investors (QFIIs), or any party listed under Article 35 subparagraph 5, in which cases the allocation shall not exceed ten percent of the portion of the offering put up for public sale. |
| 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 meetings to familiarize investors with the offering. |
| Article 11 | In an underwriting by competitive auction, the underwriter shall administer bidding and auctioning in accordance with the following schedule:
1. Day One: Commencement of the tender;
2. Day Four: Closure of the tender (where day four falls on a weekend, closure of the tender shall be postponed by one day); and
3. Tenders shall be opened on the fourth business day subsequent to the closure of the tender.
Those submitting bids in accordance with the provisions of subparagraphs 1 and 2 of the preceding paragraph shall submit their bids directly at the place of business of the underwriter.
The dates specified under paragraph 1 may be changed if necessary by applying for approval with the Chinese Securities Association. |
| Article 12 | Institutional and individual investors that participate in a public tender shall, following the prescribed format (see Attachment 1), fill in the bid form and retain a member of the underwriting syndicate to process its bid as prescribed by these Regulations. If there is any likelihood that the bid may be in violation of these Regulations, or other relevant laws and regulations, the underwriter may refuse the bid.
Upon receipt of a bid, the underwriter referred to in the preceding paragraph is entitled to collect a bid processing fee from the bidder. In addition, the bidder shall provide at this time the tender guarantee as stated in the public announcement prescribed by Article 9 of these Regulations.
Bidders shall submit sealed bids that, once submitted, shall not be withdrawn or altered. During the period of the tender, the underwriter shall not open the bids, and shall collect and log the bids received, assigning a log entry number to each. Before 9AM on the next business day following the closure of the tender, received bids shall be delivered to the Chinese Securities Association, where all bids shall be opened in a single unified operation. The Chinese Securities Association shall not accept any bids not delivered by this deadline. Any liability resulting from failure to submit bids by said deadline shall be borne by the underwriter.
When a bidder posts tender guarantee in accordance with the provisions of paragraph 2, the underwriter shall, on a trust basis, stipulate the criteria for breach of contract and the method of handling compensation for injury arising therefrom. |
| Article 13 | A bid form to which any of the following circumstances applies is invalid and will be disqualified from the tender without refund of the bid processing fee:
1. The bid price is lower than the minimum offering price as prescribed by Article 8 paragraph 1 subparagraph 2;
2. The quantity of securities bid for is lower than the minimum bidding unit;
3. The bid has been neither signed nor affixed with seal;
4. Either the bid price or the bid quantity has been changed, and the change has not been authenticated by application of a seal, or the data is not legible;
5. Either the tender guarantee has not been paid in full or the bid processing fee has not been paid;
6. The bid form does not indicate a bank account number for the repayment of tender guarantees to those submitting unsuccessful bids;
7. In a previous tender, the bidder has failed to fulfill obligations related to the payment for securities; or
8. The identity of the bidder violates the requirements set forth under Articles 35 and 36.
The per-share (or per-lot) bid price shall be expressed in units no smaller than one cent; decimal figures smaller than one cent shall be rounded up or down.
Bid quantity shall be expressed in units of one thousand shares (or in lots).
In an initial listing on the stock exchange or an OTC market where the underwriting of securities is carried out partly by competitive auction and partly by public subscription, or where a company already listed on the stock market or an OTC carries out a cash capital increase or underwrites convertible corporate bonds or corporate bonds with warrants by competitive auction, the underwriter shall indicate on the bid form that the bidder is to fill in his central depository account number. A bid form that fails to provide said account number is invalid and will be disqualified from the tender without refund of the bid processing fee. |
| Article 14 | An underwriter shall enter the data from bid forms into an electronic data storage media in the format prescribed by the Chinese Securities Association, and by 10AM on the date of the opening of the bids shall send it to the Taiwan Stock Exchange for entry. The results of the bidding will be based entirely on these electronic entries, and underwriters shall refrain from divulging the contents of said media. |
| Article 15 | After closure of the tender period, the Taiwan Stock Exchange shall open the bids on the prescribed opening date.
Except for underwriting through competitive auction of an IPO on the stock exchange or an OTC market involving cash capital increase through a new share issue, or of additional offerings on the stock exchange or an OTC market involving a cash capital increase (such offerings 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 computer, until the entire offering has been awarded.
No individual bidder may be allocated a greater proportion of the tender than as prescribed by Article 9 paragraph 2. If the awarded quantity of securities exceeds said proportion, and the lots are cleared at a uniform price, the surplus lots are removed in random order generated by computer. If the lots are cleared at two or more different prices, lots of equal size are removed from either end of the price spectrum, until the prescribed proportion is reached. In the event that one lot remains after the above process, said lot shall be removed from the upper end of the price spectrum.
In addition to complying with paragraph 3 of this Article, the 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 Taiwan Stock Exchange and the Chinese Securities Association. |
| Article 16 | With the exception of public offerings and cash capital increase by a listed or OTC company, when the underwriting of securities is undertaken entirely by competitive auction and the total number of securities awarded by tender reaches the full amount available for allocation, the price at which the security opens on its first day of listing and the price paid by the underwriter for units retained for its own account shall be computed as the weighted average of the bid price of all successful bids. Decimals beyond cents shall be rounded up or down. |
| Article 17 | With the exception of an IPO on the stock exchange or an OTC market involving cash capital increase through a new share issue, in the underwriting of securities undertaken partly by competitive auction and partly by public subscription, when the total number of securities awarded by competitive auction reaches the full amount available for allocation, the price of those units allocated by public subscription and those retained by the underwriter for its own account shall be determined by one of the following methods:
1. When not all tenders are awarded at a price greater than a specified multiple of the minimum offering price, as prescribed by Article 8 paragraph 1 subparagraph 2, it shall be computed as the weighted average price of all tenders awarded at a price within a specified multiple of the minimum offering price. Decimals beyond cents shall be rounded up or down; and
2. When all tenders are awarded at a price greater than a specified multiple of the minimum offering price, as prescribed by Article 8 paragraph 1 subparagraph 2, it shall be computed as a specified multiple of the minimum offering price. Decimals beyond cents shall be rounded up or down.
The specified multiple of the minimum offering price referred to in the preceding paragraph shall be resolved by negotiations between the underwriting syndicate and the issuing company, but shall not exceed a multiple of 1.3.
Except for a public placement, an IPO on the stock exchange, or an OTC market involving cash capital increase through a new share issue, or where otherwise provided under law, the price at which the security opens on its first day of listing shall be the price underwritten for public subscription as determined in the preceding paragraph. |
| Article 17-1 | Underwriting through competitive auction of an IPO on the stock exchange or an OTC market involving cash capital increase through a new share issue, or of additional offerings by listed or OTC companies involving a cash capital increase, shall be handled through uniform price clearing, whereby the Taiwan Stock Exchange, 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 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 awardees, and in all cases their bids will be cleared at the uniform clearing price.
If the total number of securities bid for in valid bids exceeds the number of securities offered through competitive auction, then those submitting bids at the uniform clearing price shall be awarded securities in random order, generated by computer, until all securities offered through competitive auction have been awarded.
The quantity of securities awarded to any single bidder shall not exceed the proportion set forth under Article 9 paragraph 2. Where an award does exceed this proportion, the quantity in excess shall be select at random by computer and subtracted from the award.
The uniform clearing price shall serve as: the offering price for those units of said security retained by the underwriter for its own account, for units that remain unsubscribed after conclusion of competitive auction; the subscription price for those units allocated through public subscription; and the price at which a security opens on its first day of listing in the case of underwriting through competitive auction of an IPO on the stock exchange or an OTC market involving cash capital increase through a new share issue.
In addition to complying with paragraph 4 of this Article, the 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 Taiwan Stock Exchange and the Chinese Securities Association. |
| 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 and those securities retained by the underwriter for its own account, and as the subscription price for those securities allocated through public subscription. Units that remain unsubscribed after conclusion of competitive auction shall be allocated as prescribed by Article 8 paragraph 1 subparagraph 6.
Except for the underwriting of a public placement or of additional offerings 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. |
| Article 19 | Immediately following the opening of bids, the Taiwan Stock Exchange shall print out a report on the results of the bid opening. Said report shall be examined and signed by representatives of the Taiwan Stock Exchange, the securities issuer, and every member of the underwriting syndicate.
The report on bidding results referred to in the preceding paragraph shall for each bid include award numbers, the award price, the number of units awarded, the total dollar amount of securities allocated, and either personal ID numbers (in the case of individual awardees) or juristic person uniform invoice numbers issued by the tax authorities for the localities where institutional awardees are located (in the case of institutional awardees). |
| Article 20 | Immediately following the opening of bids, members of the underwriting syndicate shall sign the underwriting contract and submit it to the Chinese Securities Association for recordation. |
Section 2: Pricing by Book Building
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| Article 21 | In the underwriting of an IPO on the stock exchange or an OTC market (other than the GreTai Securities Market's second board [Tiger Board]) involving issued shares or cash capital increase through a new share issue, where the shares are not offered through competitive auction, the shares shall be underwritten using the book building method. The underwriting syndicate shall use the book building method to underwrite 50% of the shares put up for public sale, and the members of the underwriting syndicate shall offer the remainder through public subscription; provided, however, that where the total number of shares is less than 3 million, shares put up for public sale may be allocated entirely through public subscription. |
| 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. (deleted);
2. offerings of corporate bonds and financial bonds;
3. offerings of Taiwan Depositary Receipts; and
4. public placements. |
| 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 the stock exchange or an OTC market in which the offering involves a cash capital increase through the issue of new shares and the entire offering is put up for underwritten distribution;
2. underwriting of an offering of beneficial securities by a trustee institution, or underwriting of an offering of asset-backed securities by a special-purpose company; or
3. real estate asset trust beneficial securities. |
| 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 reported to the Chinese Securities Association:
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;
3. estimation of the probable range of the offering price, as determined in consultation with the issuer (issuing institution);
4. determination of the firm-commitment fee or best-efforts underwriting fee, as determined in consultation with the issuer (issuing institution); and
5. determination of the lot size, in the event that the securities will be offered by public subscription. |
| Article 24 | In the underwriting of securities by book building, the underwriter shall make a public book building announcement in daily newspapers for two consecutive days on the first and second days on which book-building bids are accepted. The content of said announcement shall be reported to the Chinese Securities Association, and shall include the items in the following subparagraphs:
1. name of the security;
2. total number of underwritten securities, number of securities retained by the underwriters for their own accounts, the number of securities for public sale, and the number of securities for allocation by book building as a proportion of the total number of securities put up for public sale;
3. where underwriters collect a book-building bid deposit in accordance with the provisions of Article 40 or Article 42: the collection method, who is required to pay it, the amount, and conditions under which the deposit may be confiscated;
4. name, address, and telephone number of the underwriters;
5. the probable range of the offering price;
6. object of subscription, and the method, time period, and site for undertaking subscription; and
7. other supplemental items that must be disclosed in order to safeguard the public interest and investors. |
| Article 25 | After registering (or applying for approval) with the SFC 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), convene public meetings to familiarize investors with the offering, and begin handling book-building bids. The book-building bid procedures shall be completed within eight business days of the day on which the filing takes effect (or the application is approved). |
| Article 26 | Investors bidding in a book building process shall fill in a book-building bid form produced as prescribed by the prescribed format (see Attachment 2) and submit said form to the underwriter for handling.
The underwriting syndicate may hire a securities broker for handling of bids 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 Regulations, 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. |
| Article 27 | The maximum quantity of securities (with the exception of ordinary corporate bonds, financial bonds, real estate asset trust beneficial securities, beneficial securities offered by a trustee institution, or asset-backed securities offered by a special-purpose company) that each bidder in the book building process may be allocated shall not exceed 10 percent of the portion of the offering that is put up for public sale. |
| Article 28 | By submitting the book-building bid form to a securities underwriter, an investor is merely expressing the desire to subscribe; likewise, by processing the book-building bid form, the underwriter is merely seeking to establish the desire of the investor to subscribe; thus, neither party is bound by the content of the book-building bid form. However, in the event that the securities underwriter collects a book-building bid deposit as prescribed by Article 40 or 42, failure by the bidder or subscriber to fulfill his payment obligation within a required time limit shall be handled as prescribed by Article 40 or 42.
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. A uniform offering price shall be applied to the entire issue. |
| 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 securities, offerings of beneficial 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 Chinese Securities Association for recordation. Allocation of securities by book building shall be undertaken as prescribed by the Chinese Securities Association Regulations Governing Securities Underwriters' Allocation of Securities by Bookbuilding.
After the lead underwriter has informed each member of the underwriting syndicate of the quote based on the actual offering price, the investors shall make payment at that price, and in the agreed amount, before the deadline set by the lead underwriter. |
Section 3: Pricing by Negotiation
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| Article 30 | If the determination of the offering price for underwritten securities is not undertaken as prescribed by Section One or Two, a reference price shall be determined as prescribed by the Guidelines for the Use of Financial Information in the Pricing of Securities for Underwriting announced by the SFC, and other reasonable pricing methods in current use. Thereupon the underwriter shall resolve the offering price by negotiations with the issuing company (issuing institution) or the holder of said securities. |
| Article 31 | The underwriting of ordinary corporate bonds, financial bonds, real estate asset trust beneficial securities, offerings of beneficial securities by trustee institutions, or offerings of asset-backed securities or corporate bonds with warrants by special-purpose companies, 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.
The offering of public-enterprise securities placement may be undertaken entirely or partially by negotiated sale if shares are released to the general public. The method of allocation shall be determined by negotiations between the underwriter and the government agency that regulates the government-owned enterprise in question. |
| Article 32 | Except when permission is granted by the competent authority for the securities industry, an underwriter handling an offer of ordinary corporate bonds or financial bonds by negotiated sale shall not allocate more than 50 percent of the total number of securities to an individual subscriber. Not more than 20 percent of the total number of securities offered may be allocated to an individual subscriber in cases of real estate asset trust beneficial securities, offerings of beneficial securities by trustee institutions or offerings of asset-backed securities by special-purpose companies. An underwriter handling an offer of call (put) warrants, or of corporate bonds with warrants, by negotiated sale shall not allocate not more than 10 percent of the total number of securities 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. |
Chapter III Allocation of Securities
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Section 1: Allocation by Competitive Auction
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| Article 33 | When the portion [of an offering] that is put up for public sale is not entirely underwritten by competitive bidding, after registering the underwriting contract with the Chinese Securities Association, the underwriter shall carry out the following:
1. Day One: Publish an underwriting notice, and begin mailing notifications of award and payment notices (to be formatted per Attachment 3);
2. Day Four: Refund bid deposits (per Article 12 paragraph 2) to unsuccessful and disqualified bidders;
3. Delivery of company prospectuses and matters relevant to payment shall be undertaken simultaneously with the public subscription.
Matters relevant to payment in subparagraph 3 of the preceding paragraph above shall be undertaken by the method designated by the underwriter. The deadline for payment shall be identical to that by which awardees in public subscription, as specified by Article 53 paragraph 1 subparagraph 7, must make payment for subscribed securities to the designated bank.
If either of the dates set forth in paragraph 1 subparagraphs 1 and 2 falls on a weekend, regular holiday, or bank holiday, it shall be moved forward by one day next following the given 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 Chinese Securities Association.
The payment referred to in paragraph 1 subparagraph 3 shall be the purchase price for the securities, less the bid deposit as prescribed in Article 12 paragraph 2. In the event that the awardee fails to fulfill his payment obligation within the specified time period, the underwriter may confiscate the bid deposit, and shall subscribe on its own account, at the price offered to said awardee, to the units that were to have been allocated to said awardee. |
| Article 34 | When the portion [of an offering] that is put up for public sale to outside parties is entirely underwritten by competitive bidding, after registering the underwriting contract with the Chinese Securities Association, the underwriter shall carry out the following:
1. Day One: Publish an underwriting notice and begin mailing notifications of award, prospectuses, and payment due notices;
2. Day Four: Begin refunding bid deposits (per Article 12 paragraph 2) to unsuccessful and disqualified subscribers; payment period commences;
3. Day Seven: Payment deadline;
4. Day Eight: Complete compilation of related registers; issuer applies to Taiwan Stock Exchange or GreTai Securities Market for a securities listing on the stock exchange or an OTC market;
5. Day Nine: Announcement of securities listing on the stock exchange or an OTC market.
6. Day Ten: Securities are issued and listed on the stock exchange or an OTC market.
In the underwriting of securities offered through public placement, the procedures set forth in subparagraphs 4, 5, and 6 under the preceding paragraph, which are connected with application for listing of securities on the 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 moved forward by one day next following the given 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 Chinese Securities Association.
The payment referred to in paragraph 1 subparagraph 3 shall be the purchase price for the securities, less the bid deposit as prescribed by Article 12 paragraph 2. In the event that the awardee fails to fulfill his payment obligation within the specified time period, the underwriter may confiscate the bid deposit, and shall subscribe on its own account, at the price offered to said awardee, to the units that were to have been allocated to said awardee. |
| Article 35 | In the underwriting of securities by competitive auction, the underwriter is limited to accepting bids from the following persons:
1. ROC nationals at least 20 years of age;
2. ROC institutional investors and securities investment trust funds offered by securities investment trust enterprises;
3. QFIIs;
4. overseas Chinese and foreign nationals, as permitted under the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals;
5. the Development Fund of the Executive Yuan, the Postal Savings System, the Public Employees Pension Fund, the Labor Pension Fund, and the Labor Insurance Fund; and
6. other parties granted permission by the government. |
| Article 36 | Underwriters shall refuse bids from the following parties that respond to an offering by competitive auction:
1. an equity-method investee of the issuing company (issuing institution);
2. an investor that has equity-method investments in the issuing company (issuing institution);
3. a company whose chairman or general manager is the same person as the chairman or general manager of the issuing company (issuing institution), or is the spouse thereof, or is a relative thereof within the second degree of kinship;
4. a foundation that has received one-third or more of its paid-in endowment from the issuing company (issuing institution);
5. the issuing company's (issuing institution's) directors, supervisors, general manager, vice general manager(s), assistant general managers, or any officer serving directly under the general manager;
6. the spouse of a director, a supervisor, or the general manager of the issuing company (issuing institution);
7. a relative within the second degree of kinship of a director, a supervisor, or the general manager of the issuing company (issuing institution);
8. a director, supervisor, or employee of the underwriting syndicate, a spouse thereof, or a relative thereof within the second degree of kinship; or
9. a person who meets the criteria of an interested party as defined in Article 2 of the Securities and Exchange Act Enforcement Rules. |
| Article 37 | An underwriter shall send notifications, company prospectuses, and other relevant materials to awardees by priority registered mail. |
| Article 38 | Award notifications and notice of payment due received by awardees are nontransferable. |
| Article 39 | The underwriter shall keep information relating to ordinary bids for a period of thirty days after the opening of the bids. Bidding materials for disqualified bids and awardees shall be stored for a period of one year after the opening of the bids. However, if the SFC or the Chinese Securities Association deems it necessary, it may request an extension of the storage period. |
Section 2: Allocation by Book Building
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| Article 40 | Where a company listed on the stock exchange or an OTC market carries out a cash capital increase 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 Chinese Securities Association, the following matters shall be carried out:
1. Day One: Publish an underwriting notice and begin mailing subscription notices, prospectuses, and notices of payment due (to be formatted per Attachment 4);
2. Day Four: Payment period commences, and book-building bid deposits not corresponding to allocated shares are returned to unsuccessful bidders;
3. Day Seven: Payment deadline;
4. Day Eight: Shareholders' register is completed; issuer applies to the Taiwan Stock Exchange or the GreTai Securities Market to list certificates of payment for shares on the stock exchange or an OTC market;
5. Day Nine: Issue public announcement concerning listing of certificates of payment for shares on the stock exchange or an OTC market;
6. Day Ten: Certificates of payment for shares are issued and listed on the stock exchange or an OTC market; and
7. (deleted)
If any of the dates set forth in the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be moved forward by one day next following the given day, and the dates that follow shall be moved forward accordingly.
The dates set forth under paragraph 1 may be changed if necessary by applying for approval with the Chinese Securities Association.
Where a company listed on the stock exchange or an OTC market carrying out a cash capital increase 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 36 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 awardees 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.
An underwriter that collects book-building bid deposits as prescribed by paragraph 6 above shall do so as prescribed by Article 12 paragraph 4. |
| Article 41 | Where an underwriting case is handled as prescribed by Article 22 and Article 22-1 subparagraph 2, and all shares are offered using book building, after the price has been set and the underwriting contract has been registered with the Chinese Securities Association, the following matters shall be carried out:
1. Day One: Publish an underwriting notice and begin mailing subscription notices, prospectuses, related subscription notices, and notices of payment due;
2. Day Four: Payment period commences;
3. Day Seven: Payment deadline;
4. Day Eight: Complete compilation of related registers; issuer applies to Taiwan Stock Exchange or GreTai Securities Market for a securities listing on the stock exchange or an OTC market;
5. Day Nine: Announcement of securities listing on the stock exchange or an OTC market.
6. Day Fifteen: Securities are issued and listed on the 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 Taiwan Stock Exchange or the GreTai Securities Exchange for a listing on the 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 moved forward by one day next following the given day, and the dates that follow shall be moved forward accordingly.
The dates set forth under paragraph 1 may be changed if necessary by applying for approval with the Chinese Securities Association. |
| 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 by Articles 21 and Article 22 (excepting underwriting as prescribed by the preceding Article), after the underwriting contract has been registered with the Chinese Securities Association, the following matters shall be carried out:
1. Day One: Publicly release a book-building allocation announcement (an underwriting notice shall be concurrently published at this time) and begin mailing subscription notifies, prospectuses, and notices of payment due (formatted per Attachment 4), or subscription forms and notices of payment due (formatted per Attachments 5, 5-1, 5-2, and 5-3, respectively), or Taiwan Depositary Receipt notices of payment due (formatted per Attachment 6); and
2. Payment period: The payment deadline shall be identical to that applying to public subscription lottery winners with respect to the forwarding of subscription payment to their bank, as set forth under Article 53 paragraph 1 subparagraph 7.
If any of the dates set forth under the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be moved forward by one day next following the given 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 Chinese Securities Association.
Between the time a bidder commits to the purchase of securities and the commencement of the payment period as set forth in paragraph 1 subparagraph 2, the underwriter may request that the subscriber pay a book-building bid deposit of the full amount or part of the amount of the purchase price of said securities. 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.
When the underwriter referred to in the preceding paragraph accepts a book-building bid deposit from a subscriber, it shall follow the requirements as prescribed by Article 12 paragraph 4. |
| Article 43 | The provisions of Articles 35 and 36 shall apply mutatis mutandis with respect to the types of bidders from whom an underwriter is allowed to accept bids in a book building process; provided, however, that for common corporate bonds, financial bonds not involving equity rights, and underwriting undertaken as prescribed by Article 22 subparagraph 3 or 4 or Article 22-1 subparagraph 2, the types of bidders from whom an underwriter is allowed to accept bids shall not be subject to the limitations prescribed under Article 36 subparagraphs 1 through 7.
For securities allocated by an underwriter but not paid for by the subscribers and reallocated to new subscribers by negotiated sales, the provisions in the preceding paragraph shall apply mutatis mutandis to the new subscribers. |
| Article 44 | A bidder participating in the underwriting of securities by book building as prescribed by Article 40, 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 Securities Central Depository Co., Ltd. (hereinafter, referred to as "the Central Depository") as prescribed by the Rules of Business Operation of the Taiwan Securities Central Depository Company. When making payment for securities, the subscriber shall provide the number of said account in order to facilitate the delivery of said securities. |
| Article 45 | The underwriter shall store for a period of thirty days after allocation information relevant to ordinary book-building bids. Information relating to disqualified bids and awardees shall be stored for a period of one year after allocation. However, if the SFC or the Chinese Securities Association deems it necessary, a request may be made for extension of the storage period. |
| Article 46 | An underwriter may sell securities by entering into a securities book building sub-underwriting (hereinafter, "sub-underwriting") contract with a securities broker as prescribed by Article 26 paragraph 2, and may entrust said broker to act on its behalf in other matters related to subscription and sales of securities. |
| Article 47 | For an underwriter entrusting a securities broker to sub-underwrite securities on its behalf, the sub-underwriter's offering price and the underwriter's offering price shall be identical. |
| Article 48 | An underwriter entrusting a securities broker to sub-underwrite securities on its behalf shall draw up a securities sub-underwriting contract. |
| Article 49 | A securities broker sub-underwriting securities on behalf of an underwriter, shall prepare a record of the names of subscribers and the amount of securities subscribed to by each, and submit said record to the underwriter. |
| Article 50 | In sub-underwriting securities on behalf of an underwriter, a securities broker and its associated persons shall abide by the following rules:
1. A prospectus and other relevant material detailing the terms under which securities are to be issued, the operating and financial conditions of the issuer, and other relevant matters shall be provided to subscribers;
2. No guarantees or commitments shall be made to subscribers regarding investment return on the securities;
3. Subscribers who are obviously incapable of effecting payment shall not enter into contracts with an underwriter via [a securities broker or any of its associated persons];
4. No improper subscription solicitations may be made to investors; and
5. [A securities broker and its associated persons shall refrain from] any other activity prohibited by the SFC. |
| Article 51 | A securities dealer's sub-underwriting fee shall be determined by negotiation between the underwriter and the sub-underwriter. |
Section 3: Allocation by Public Subscription
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| Article 52 | The following offerings shall be undertaken by public subscription:
1. in the underwriting of an offering carried out other than as prescribed in Article 6 paragraph 2, Article 22, Article 22-1 subparagraph 2, or Article 31, or in the underwriting of a cash capital increase by a company listed on the stock exchange or an OTC market in which not all shares are put up for underwritten distribution: the portion put up for public sale that must be offered entirely by public subscription;
2. in the underwriting of an offering as prescribed in Article 7, where the portion put up for public sale is offered partly by competitive auction: any remaining portion that must be offered by public subscription;
3. in the underwriting of an offering as prescribed in Articles 21 and 22, where the portion put up for public sale is offered partly by book building: any remaining portion that must be offered by public subscription;
4. in the underwriting of an offering as prescribed in Article 31 paragraph 1, where a part is offered by negotiated sale: any remaining portion that must be undertaken by public subscription; and
5. in the underwriting of an IPO on the stock exchange or an OTC market: any offering in which fewer than 3 million shares are underwritten, and (1) any offering that is not undertaken by competitive auction or (2) any offering where a book building process is employed as prescribed under Article 21.
In an underwriting where the shares are offered by public subscription, the total number of shares underwritten by any given underwriter for allocation by public subscription may not be less than 500 lots for a best efforts offering and 300 lots for a firm commitment offering; provided, however, that this restriction shall not apply where the total number undertaken by public subscription is less than 1,000 lots for a best efforts offering and 600 lots for a firm commitment offering.
Where the total number of shares in an offering for public subscription is less than 3 million shares, each lot shall be restricted to 1,000 shares. |
| Article 53 | For an offering by public subscription, the underwriter shall, after registering the underwriting contract with the Chinese Securities Association, observe the following schedule in working together with the broker to handle matters relating to subscription, lottery, and the withholding of lottery winner payments:
1. Day One: Publish an underwriting notice and commence subscription;
2. Day Four: Subscription period closes. Deadline for payment of subscription fee to correspondent bank;
3. Day Five: Date of withholding of subscription processing fee. Broker's bank undertakes matters regarding withholding of subscribers' subscription processing fees;
4. Day Six: Date of settlement of subscription processing fee;
5. Day Seven: Date of public lottery drawing. The Taiwan Stock Exchange Corporation (TSEC) undertakes drawing. Lead underwriter announces list of winners. TSEC produces and sends report of winner information to each broker. TSEC compiles and reports the information to the lead underwriter for provision to subscribers for their review;
6. Day Eight: Underwriter shall issue, within two days by registered post, a lottery winner notification slip, prospectus (or subscription form), and subscription waiver declaration (formatted as in Attachment 7) to each lottery winner;
7. Day Fourteen: Deadline for reception of any subscription waivers from lottery winners. Deadline for payment by lottery winner to its bank of the subscription payment and the cost of mailing the lottery winner notification slip and related materials (hereinafter, the "lottery winner notification fee") as set forth under subparagraph 6;
8. Day Fifteen: Subscription payment and lottery winner notification fee deducted [from lottery winners' bank accounts]; and
9. Day Sixteen: Date of settlement of the subscription payment and lottery winner notification fee.
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 8) 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 by fax or 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, 5, 6, 7, 8, and 9 falls on a weekend, regular holiday, or bank holiday, it shall be moved forward by one day next following the given 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 Chinese Securities Association.
The meaning of the document reception deadline for the subscription waiver declaration in paragraph 1 subparagraph 7 is that the lottery winner may, by 14:00 on the day of the deadline, fill in and submit the said declaration to the original recipient broker in person, by mail, fax, or Internet.
A lottery winner who does not have sufficient funds to allow his bank is to deduct the subscription payment and lottery winner notification fee as prescribed in paragraph 1 subparagraph 8 shall be deemed to have waived his subscription, and the processing fee deducted as prescribed by subparagraph 3 of the same paragraph shall not be refunded.
Where a lottery winner does not have sufficient funds in his bank account or waives his subscription, as set forth in the preceding paragraph, deduction of the lottery winner notification fee shall be deducted with precedence.
The Chinese Securities Association shall prescribe the standard for the lottery winner notification fee. 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 Chinese Securities Association. If the number of shares subscribed does not exceed the number of shares to be sold, all qualified subscribers shall be deemed lottery winners, and a public lottery shall be unnecessary.
After the subscriber has commissioned subscription with a broker, the subscription form shall not be withdrawn or changed. |
| Article 54 | Subscribers in a public subscription by a securities firm shall be restricted to ROC nationals. |
| Article 55 | The lead underwriter shall be responsible for publish an underwriting notice. A broker shall make said underwriting notice, subscription forms, and subscription waiver declarations available to investors for free upon request at the business premises of the broker. The underwriting notice shall be provided by the lead underwriter. The subscription form and subscription waiver declaration may be photocopied or printed in equivalent dimensions by investors for undertaking subscription or subscription waiver. |
| 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$30 per subscription. The receiving broker shall notify the subscriber's bank to deduct the fee from the subscriber account on the date prescribed in Article 53. |
| Article 57 | A broker undertaking subscription services shall open a special account at the subscriber's bank to process subscribers' processing fees, lottery winner notification fees, and subscription payments. The funds in said account shall not be used for other purposes. |
| Article 58 | A broker shall not undertake subscription for a subscriber to whom any of the following conditions apply. If a broker has already accepted subscription, the subscription shall be cancelled:
1. Has not opened a trading account, electronic transfer custodial account, or central depository account with the broker undertaking consigned subscription;
2. Has not signed a consignment contract with the bank designated by the broker regarding matters related to the deduction of funds regarding the public subscription;
3. Has not undertaken subscription within the allotted time;
4. Has not filled in fully or truthfully the required items in the subscription consignment contract;
5. Has neither signed nor sealed the subscription consignment contract. This provision shall not apply to those who undertake subscription by telephone or Internet;
6. The balance in the subscriber bank account for payment by wire transfer is less than the sum of the subscription fees and subscription payment; or
7. Has exploitatively or fraudulently used the name of another person.
The broker shall duly verify [whether] the preceding conditions [exist]. |
| Article 59 | After being consigned to undertake subscription, a broker shall, on a daily basis, input data from the subscription forms into the TSEC's computer system by batch file transmission or terminal key-in. Before the drawing, data from subscriptions where the processing fee 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 lottery, a list of qualified and unqualified subscribers as set forth under the preceding paragraph shall be made available by the TSEC for review at the Chinese Securities Association, the TSEC, and the business premises of the lead underwriter and brokers (the list at each broker's place of business shall include only the names of subscribers who have subscribed through that particular broker)..
Where there has been duplicated subscription as set forth under paragraph 1, the subscriber shall be notified by the underwriter by registered letter within one week of the closure of the offering period. |
| Article 60 | Where subscription volume exceeds the number of securities to be sold, the TSEC shall undertake a computerized public lottery among qualified subscriptions. The TSEC shall invite representatives of the Chinese Securities Association, related groups, and the issuer to jointly monitor the lottery.
When undertaking the public lottery, the TSEC shall ask the monitors to draw the lots. |
| Article 61 | For a firm commitment offering by public subscription, where the sum of the unsubscribed shares and shares not purchased by bid winners does not exceed 10 percent of the total number of shares put up for allocation by public subscription, the underwriting syndicate shall purchase the entirety of the shortfall. Where the shortfall exceeds 10 percent of the total number of shares put up for allocation by public subscription, the underwriting syndicate shall purchase the portion of the shortfall up to 10 percent, and may either place the remainder with a particular party or purchase the remainder on its own account.
Where purchase of shares 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 the stock exchange or an OTC market, the syndicate may be exempted from the provisions in the preceding paragraph relating to purchase of shares on its own account, and such shares 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, and those listed in Article 36 shall not participate. |
| Article 62 | For an IPO on the stock exchange or an OTC market involving cash capital increase through a new share issue, or where a company already listed on the stock exchange or traded on an OTC market either carries out a cash capital increase or issues corporate bonds or Taiwan Depositary Receipts that are allocated through public subscription, after the price of securities and the lottery winner notification fee have been paid by the subscriber as prescribed by Article 53 paragraph 1 subparagraph 8, the securities firms and relevant departments shall undertake listing on the stock exchange or an OTC market, carrying out the following work within the following deadlines:
1. Day Seventeen: Deadline for placement with specific party or purchase on own account;
2. Day Nineteen: Issuer uses share payment certificates to apply with the TSEC or the GreTai Securities Exchange for listing on the stock exchange or an OTC market;
3. Day Twenty: Complete compilation of shareholders' (creditors') register;
4. Day Twenty-one:
(1) Listing of securities on the stock exchange or an OTC market is publicly announced.
(2) Issuer transfers share payment certificates to the Central Depository;
5. Day Twenty-two:
(1) Securities electronically transferred from the Central Depository to the subscriber's central depository account; and
(2) Securities listed on the stock exchange or an OTC market.
If a date set forth in the above subparagraphs or Day Eighteen falls on a weekend, regular holiday, or bank holiday, the deadline shall be moved forward by one day next following the given 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 Chinese Securities Association. |
| Article 63 | In the underwriting of an initial listing on the stock exchange or an OTC market using issued shares, where said shares are allocated through public subscription, after the price of securities and lottery winner notification fee has been paid by the subscriber as prescribed by Article 53 paragraph 1 subparagraph 8, the securities firms and relevant departments shall undertake the following work within the following times regarding listing on the stock exchange or an OTC market:
1. Day Seventeen: Deadline for placement with specific party or purchase on own account;
2. Day Nineteen: Company applying for listing on the stock exchange or an OTC market applies with the TSEC or the GreTai Securities Market for listing on the stock exchange or an OTC trading of the share payment certificates;
3. Day Twenty: Complete compilation of shareholders' register;
4. Day Twenty-one:
(1) Listing of shares on the stock exchange or an OTC market is publicly announced; and
(2) Issuer transfers share payment certificates to the Central Depository.
5. Day Twenty-two;
(1) Securities electronically transferred from the Central Depository to the subscriber's central depository account; and
(2) Shares listed on the stock exchange or an OTC market.
If a date set forth in the preceding paragraph or Day Eighteen falls on a weekend, regular holiday, or bank holiday, it shall be moved forward by one day next following the given 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 Chinese Securities Association. |
| Article 64 | For a public placement by public subscription, after deduction of subscription payment and lottery winner notification fee has been completed as prescribed by Article 53 paragraph 1 subparagraph 8, the securities firms and relevant departments shall undertake the following work:
1. Day Seventeen: Deadline for negotiated sales or purchase for own account;
2. Day Nineteen: Bearer of securities transfers them to Central Depository; and
3. Day Twenty: Securities electronically transferred by Central Depository to purchaser's central depository account. Purchaser may engage in trading of the securities.
If a date set for the preceding paragraph or for Day Eighteen falls on a weekend, regular holiday, or bank holiday, it shall be moved forward by one day next following the given 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 Chinese Securities Association. |
| Article 65 | Where a company not listed on the stock exchange or an OTC market allocates shares through public subscription in an offering that involves cash capital increase, after the subscription payment and lottery winner notification fee has been deducted as prescribed by Article 53 paragraph 1 subparagraph 8, the underwriter shall, on Day Seventeen, undertake negotiated sales or make purchases on its own account, and after the securities have been produced by the issuer, the lead underwriter shall, together with the issuer, send the securities to the Central Depository for deposit into the purchaser's central depository account, or may distribute the securities as prescribed mutatis mutandis in Article 75. |
| Article 66 | Upon completion of the lottery, the TSE shall print the daily underwriting report. Said report shall be signed by the representatives of the TSE, issuer, and underwriter, and then shall be publicly announced. The report shall list the names of the lottery winners and be filed with the competent authority.
The report as prescribed by the preceding paragraph shall include the serial numbers and the national ID numbers of the lottery winners. |
| Article 67 | After the selection of lottery winners, if it is discovered that a winner has not opened or has subsequently closed the trading account, electronic transfer bank account, or central depository account, such that subsequent work cannot be undertaken, the lottery winner shall be disqualified, and the underwriter shall place the securities of such winner with another party or shall purchase such securities on its own account as prescribed by Article 61. |
| Article 68 | The lottery monitors shall monitor the following matters on the day of the drawing:
1. whether the lottery representatives are undertaking the operating procedures as prescribed by regulation; and
2. maintenance of order at the premises of the lottery drawing. |
| Article 69 | When undertaking the computerized public lottery, the TSE may choose to undertake the lottery using several computer terminals in simultaneous operation depending on the number of qualified participants or the quantity of sales. |
| Article 70 | Securities firms shall, after the public announcement of the lottery winners, keep information relating to ordinary subscriptions for 30 days and information regarding unqualified subscribers or lottery winners for 90 days. However, the SFC and Chinese Securities Association may extend these times in consideration of the needs at the time. |
| Article 71 | Articles 37 and 38 shall apply mutatis mutandis to offerings by public subscription. |
Section 4: Allocation by Negotiated Sales
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| Article 72 | For an offering by negotiated sale, the underwriter shall complete the offering within the offering period. |
| Article 73 | For an offering of ordinary corporate bonds, financial bonds, or corporate bonds with warrants, Articles 35 and 36 shall apply mutatis mutandis with respect to the types of persons eligible to make purchase by negotiated sale by the underwriter.
The persons eligible to make purchase by negotiated sale of call (put) warrants shall be as prescribed by the Taiwan Stock Exchange Corporation Criteria Governing Review of Call (Put) Warrant Listings.
In cases of real estate asset trust beneficial securities, offerings of beneficial securities by trustee institutions, or offerings of asset-backed securities by special-purpose companies, the counterparts in negotiated sales undertaken by a securities firm shall be governed by the mutatis mutandis application of Articles 35 and 36, provided they shall not be subject to the limitations under subparagraphs 1-7 of Article 36. |
| Article 74 | For an offering by negotiated sale, the underwriter shall deliver prospectuses before subscription by the subscribers. |
Chapter IV: Issue of Securities
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Section 1: Allocation by Competitive Auction
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| Article 75 | When an underwriter undertakes an offering by competitive auction, except for issues undertaken partly by competitive auction and partly by public subscription, distribution shall be undertaken within one month of the offering commencement date. The underwriter shall affix the seals of the responsible personnel and managers to the securities collection notification slip. Securities that remain uncollected after the deadline has passed shall be transferred to the issuer or its agent for handling. Distribution shall be undertaken as follows:
1. If it is found that the name (or name of juristic person) or national ID number (or in the case of a juristic person, the tax address uniform number) is incorrectly recorded in the bid winner's bid form, subscription form, or payment letter, or that the information recorded on the original copy of national ID certificate (or photocopy of company registration certificate of juristic person) is incorrect, the bidder shall be disqualified.
2. When collecting the shares in person or by post, the subscriber shall furnish a document of proof of payment for securities, registered seal impression, and the original copy of his/her own national ID certificate (or company registration certificate in the case of a juristic person). If another person is entrusted to collect the securities, an original copy of the authorization letter and the national ID certificate of the authorized collector shall be furnished.
3. If the subscriber dies after subscription but before issue, when collecting the securities, the subscriber's inheritor shall furnish the subscriber's death certificate, original copy of the inheritor's national ID certificate (when collection is made by a minor under 14 years of age, it is permissible to submit an original copy of the minor's current list of household members together with the original copy of the national ID certificate of the minor's statutory agent), order-of-inheritance chart, duplicate copy of household registration certificate (for both full and partial households), the inheritor's registered seal impression (in the case of a minor, the registered seal impression of the minor's statutory agent shall also be furnished), and certificate of proof of settlement of inheritance tax. If an inheritor waives inheritance, a securities inheritance waiver consent letter filed with the court and other relevant documents shall be furnished.
If the offering as prescribed by the preceding paragraph is undertaken partly by competitive auction and partly by public subscription, distribution shall be undertaken simultaneously and in the same manner as that for an offering by public subscription.
For an offering of convertible corporate bonds by competitive auction, distribution shall be undertaken by book-entry transfer as prescribed by the Rules of Business Operation of the Taiwan Securities Central Depository Company. |
Section 2: Allocation by Book Building
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| Article 76 | For an offering by book building as prescribed by Article 40, distribution of such securities shall be undertaken by book-entry transfer using certificates of payment for shares as prescribed by the Rules of Business Operation of the Taiwan Securities Central Depository Company. |
| Article 77 | For an offering of securities by book building as prescribed by Articles 41 and 42, Articles 75 and 76 shall be applied mutatis mutandis to the distribution thereof. |
Section 3: Allocation by Public Subscription
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| Article 78 | For securities offered by public subscription, Article 76 shall be applied mutatis mutandis to the distribution thereof. |
Section 4: Allocation by Negotiated Sales
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| Article 79 | For an offering through negotiated sales of ordinary corporate bonds, corporate bonds with warrants, and financial bonds in accordance with the provisions of Article 31, when the securities are distributed, subscribers shall collect their securities from the underwriter in person, or have them collected by an authorized person, by furnishing proof of payment for securities, registered seal impression, original copy of the subscriber's own national ID certificate, or photocopy of company registration certificate. Where collection is entrusted to another party, authorization letter and national ID certificate of authorized person shall also be furnished.
For issue of call (put) warrants entirely by negotiated sale, distribution shall be undertaken as prescribed by the Rules of Business Operation of the Taiwan Securities Central Depository Company.
In cases of real estate asset trust beneficial securities, offerings of beneficial securities by trustee institutions, or offerings of asset-backed securities by special-purpose companies, their distribution of securities shall be governed by the mutatis mutandis application of paragraph 1 or paragraph 2 above. |
Chapter V: Supplementary Provisions |
| Article 80 | The transfer of securities underwritten by an underwriter shall be undertaken as prescribed by the Criteria Governing Handling of Stock Affairs by Public Stock Companies. |
| Article 81 | In processing a subscription from a QFII, a securities firm shall act as prescribed by the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals |
| Article 82 | Persons participating in the subscription to an underwritten offering as prescribed by these Regulations shall not do so by exploitatively or fraudulently using another person's name or by falsifying a national ID certificate. Where a securities firm discovers that a subscription participant has exploitatively or fraudulently use another person's name or falsified a national ID certificate, the firm shall disqualify the subscriber, and shall not refund the processing fee. Where such a person has already subscribed to securities, he/she shall be disqualified, and subscription payments and lottery winner notification fee shall not be refunded. |
| Article 83 | If the conditions set forth in Article 58 paragraph 1 or Article 75 paragraph 1 subparagraph 1 apply to a person participating in the subscription to an offering as prescribed by these Regulations, after the person has been disqualified, subscription payments already deducted/paid shall be refunded; provided, however, that any handling fee and lottery winner notification fee already deducted/paid shall not be refunded.
If a subscriber disqualified pursuant to the preceding paragraph, or a disqualified inheritor, wishes to request a refund of payments already made, the subscriber or inheritor shall furnish an original copy of the subscriber's or inheritor's national ID certificate (a juristic person shall furnish its company registration certificate; a minor less than 14 years of age may instead furnish an original list of current household members and along with the original of his/her statutory agent's national ID certificate), receipt slip from the notice of payment due (subscription form and notices of payment due, however, those allocated shares in the public subscription have no receipt slips from the notice of payment due) and the registered seal impression for the seal used to stamp the notice of payment due (subscription form and notice of payment due) (those allocated shares in the public subscription shall use the registered seal impression for the seal that they used to open their trading account), and
request the original underwriter (in case of those shares in the public subscription, the original broker) to undertake a refund. |
| Article 84 | The Chinese Securities Association and relevant agencies may charge a fee to securities firms for administering competitive auctions and public subscriptions. Such fee shall be formulated by the Chinese Securities Association in consultation with the relevant agencies, and prior to implementation shall be reported to the competent authority for approval. |
| Article 85 | For an offering by competitive auction as prescribed by Article 6, failure by the awardee to make payment within the allotted time will be a breach of contract, and the Chinese Securities Association shall not further process such person's participation in the tendering. During the tendering period, underwriters shall report any occurrences of breach of contract to the Chinese Securities Association, and shall notify the person who is in breach of contract.
On the basis of the letter of report of an underwriter as prescribed by the preceding paragraph, the Chinese Securities Association shall notify all underwriters who shall then refuse to accept tenders from the person who is in breach of contract. Where a tender has already been submitted, it shall be disqualified.
On the basis of a breach of contract reported by an underwriter as prescribed by the preceding paragraph, after the Chinese Securities Association has notified all underwriters, if the rights and interests of a principal have been injured or any other dispute has arisen, the underwriter reporting the breach of contract shall be held liable. |
| Article 85-1 | (Deleted) |
| Article 86 | The Chinese Securities Association shall report to a disciplinary committee any violations of laws and regulations or of these Regulations by securities firms. |
| Article 87 | These Regulations and any amendments hereto shall take force after passage by a meeting of the board of directors, and subsequent reporting to and approval by the SFC. |