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Taiwan Stock Exchange Corporation Procedures for Review of Call (Put) Warrant Listings(2004.05.28) |
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When the TSEC receives an application for recognition of qualification to issue call (put) warrants, the applicant company shall pay to TSEC a reviewing fee of NT$200,000, and the TSEC case handler shall undertake a formal review of the application documents and attachments. Procedures, deadlines, and matters to be reviewed shall be as follows:
(1) The case handler shall ascertain that a complete set of required documents has been submitted, and that the Attachments Checklist for Application for Recognition of Qualification to Issue Call (Put) Warrants has been filled out (Attachment 1). If the documents submitted are found to be incomplete, the issuer shall be requested to supplement the required documents within a prescribed period of time; where submission is made after the deadline, the case handler shall issue notice of rejection of the application, with a copy submitted to the competent authority.
(2) Key points of review:
(i) Accountant's auditing report:
Where the issuer is a domestic company, the accounting firm certifying the financial reports for the most recent two years shall be an accounting firm approved by the competent authority. The auditing report shall be prepared in accordance with generally accepted accounting principles and shall state whether the report conforms to the Criteria Governing Preparation of Financial Reports by Securities Issuers or the Criteria Governing Preparation of Financial Reports by Securities Firms. Where the financial report is prepared in accordance with the Budget Law, the Auditing Law or related laws and regulations, the report shall be revised by a certified public accountant to adjust for the areas in which the report diverges from generally accepted accounting principles. The revised financial report shall include an explanation of the areas of divergence and their effect.
Where the issuer is a foreign entity, the financial report may be prepared in accordance with the laws and regulations of the issuer's home country. A Taiwan certified public accountant shall issue an opinion regarding the differences in accounting principles applied in Taiwan and in the issuer's home country and the resulting effects on the financial report. The shareholder equity resulting after the aforementioned adjustments shall conform to Article 4 of the TSEC Criteria Governing Review of Call (Put) Warrant Listings. When an accountant issues an auditing report with anything other than an unqualified opinion, the case handler shall note the relevant factors and reasoning, and assess the degree of influence of those factors on the financial report. If there has been a change in the issuer's certifying CPA within the most recent three years, the case handler shall request the issuer, the original certifying CPA and its successor to submit written explanations regarding the reasons for the change. The
case handler shall gain an understanding of the factors and the reasoning involved.
(ii) Financial reports
The case handler shall review the CPA's auditing or review report, any annotations thereto, and the section headings to determine that the form and content of the issuer's financial report conforms to regulations. The case handler shall become familiar with any unusual aspects of the report, and shall analyze any unusual factors in developing trends regarding the issuer's financial status and profitability, and fill out a Call (Put) Warrant Issuer's Financial Report Checklist (Attachment 2). Where any unusual circumstances are discovered, the CPA shall be requested to submit an additional clarification.
(iii) The Issuer's Risk Management System
The case handler shall assess whether the issuer or its risk management institution has established a risk-management system, with risk-control computer equipment and appropriate risk-management personnel, and shall determine whether internal auditing and control systems have been established. The case handler shall assess whether there are any unusual aspects of the issuer's risk-management capabilities, and fill out a Checklist for the Call (Put) Warrant Issuer's Risk Management System and Strategies for Offsetting Foreseeable Risk (Attachment 3).
(iv) Matters in the Review Criteria Requiring Withholding of Approval
The case handler shall determine, based on the documents submitted by the issuer, whether the issuer's shareholder equity, profitability, and relevant contracts conform to the provisions of the Taiwan Stock Exchange Corporation Criteria Governing Review of Call (Put) Warrant Listings, and determine whether any conditions, as listed under Article 8 of those Criteria, require withholding of approval. The case handler shall fill out an Approval Checklist for Application for Recognition of Qualification to Issue Call (Put) Warrants (Attachment 4).
(v) Lawyer's Legal Opinion
The case handler shall examine the lawyer's opinion and other related forms and documents submitted by the issuer with regard to whether the relevant approval certificates, letters of approval from the competent authorities, documents issued by the credit rating institution, and declarations submitted by the issuer and the issuer's status with respect to the circumstances under Article 8 of the Criteria Governing Review of Call (Put) Warrant Listings have been thoroughly reviewed, the documents have been found to be valid, and the issuer conforms to relevant laws and regulations. The case handler shall then fill out a Checklist for Lawyer's Legal Opinion on Call (Put) Warrant Issuer's Qualification (Attachment 5).
(3) Review Procedures and Schedule
When, after examining the relevant materials and filling out the required checklists, the case handler discovers a failure to submit all required documents or to provide complete information as required in the documents, the case handler shall request the issuer to supplement the required documents or information within a prescribed period of time. Where documents are not supplemented by the deadline, the case handler shall issue a notice of rejection of the application, with a copy submitted to the competent authority.
After receipt of the Application for Approval of Qualification for Issuance of Call (Put) Warrants, the TSEC case handler shall, within ten business days, complete the checklists under Attachments 1-5 and submit them to higher levels for review, except where the issuer is required to submit further clarification or where the documents submitted are incomplete, and provided that under special circumstances, the case handler may, with written approval, extend the review period.
Where document inspection finds the application documents are complete, the issuer meets the requirements for qualification, and further review at higher levels finds the application in order, the TSEC will submit the application to the competent authority for approval along with an application assessment report and required attachments.
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After acceptance of an issuer's application for the projected issue of call (put) warrants, the TSEC case handler shall undertake a review of the documents and attachments. Procedures, deadlines, and matters to be reviewed shall be as follows:
(1) The case handler shall determine whether the documents submitted by the issuer are complete, and fill out a Checklist for Applications for Listing of Call (Put) Warrants (Attachment 6). Where the documents submitted are found to be incomplete, the case handler shall request the issuer to supplement the required documents or information within a prescribed period of time. Where documents are not supplemented by the deadline, the case handler shall issue a notice of rejection of the application, with a copy submitted to the competent authority.
(2) Key points to be reviewed:
(i) Call (put) warrants
The case handler shall examine whether the issuance plan for the call (put) warrants and the underlying securities conform to Articles 10 and 11 of the TSEC Criteria Governing Review of Call (Put) Warrant Listings, and shall fill out a Call (Put) Warrant Issuance Plan Checklist (Attachment 7).
(ii) Financial report
The case handler shall ascertain whether the materials submitted by the issuer include the financial report for the most recent period after the issuer obtained qualification, review the financial report in accordance with the provisions of Paragraph 1, Subparagraph 1 of the preceding Article, and ascertain whether it conforms to the requirements of Article 4, paragraph 2, subparagraphs 1 and 2 of the TSEC Criteria Governing Review of Call (Put) Warrant Listings.
(iii) Public sale prospectus
The case handler shall examine whether the form and content of the issuer's prospectus for public sale conforms to the Guidelines for Particulars to be Listed in the Issuer's Public Prospectus for Issuance of Call (Put) Warrants, and shall fill out a Call (Put) Warrant Public Sale Prospectus Checklist (Attachment 8).
(iv) Disclosure of strategy for offsetting risks
The case handler shall examine whether the strategy put forth by the issuer for offsetting risks includes concrete provisions for all possible risks and losses associated with the given issue of call (put) warrants and the associated hedging strategies, and shall fill out a Checklist for Strategies for Offsetting Foreseeable Risks in Issues of Call (Put) Warrants (Attachment 9).
(v) Lawyer's Legal Opinion
The case handler shall examine the lawyer's opinion and other related forms and documents submitted by the issuer with regard to whether the terms of issuance of the call (put) warrant, guaranty agreement, guarantor information, public sale prospectus, the declarations of the issuer, and the issuer's status with respect to the circumstances under Article 12 of the Criteria Governing Review of Call (Put) Warrant Listings have been thoroughly reviewed, the documents have been found to be valid, and whether the issuer conforms to relevant laws and regulations. The case handler shall then fill out a Checklist for the Lawyer's Legal Opinion on Call (Put) Warrants (Attachment 10).
(vi) Distribution of call (put) warrants
the case handler shall determine whether the distribution of call (put) warrant holders after the complete sale of the issue conforms to the standards set forth in Articles 10 and 12 of the Criteria Governing Review of Call (Put) Warrant Listings, and shall fill out a Call (Put) Warrant Holders Distribution Checklist (Attachment 11).
(3) Review Procedures and Schedule
The TSEC case handler shall complete review of the issuance plan by market opening on the first business day after receipt of the application for issuance of call (put) warrants and report the same to the competent authority. The case handler shall also submit the listing agreement executed between the TSEC and the issuer to the competent authority for approval.
Following TSEC issuance of approval documents to the issuer, the TSEC shall undertake a further review of the items of the issuer's application and the related documents, and where circumstances are found during the review period requiring approval to be withheld, the TSEC may cancel the letter of approval and shall report the same to the competent authority.
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The issuer shall submit related materials to the TSEC in accordance with the following provisions:
(1) Following the TSEC's issuance of documents for approval of the issuance plan for call (put) warrants, the issuer shall enter into the TSEC designated website for information disclosure its public announcement of issuance of call (put) warrants, and within two days of the announcement, submit to the TSEC the downloaded announcement materials. After completion of sale of warrants and approval of the listing agreement by the competent authority, the issuer shall, at least three days prior to the projected listing date, submit the warrant holder distribution information (Attachment 11) and a roster of warrant holders, and consult with the TSEC on the projected listing, with a projected listing date that may not be later than ten business days after the date of consultation with the TSEC.
After completion of all necessary arrangements for listing with the TSEC, the issuer shall pay the yearly listing fee and the performance bond to the TSEC.
The amount of the performance bond referred to in the preceding paragraph shall vary with the issuer's credit rating as follows:
(i) Those obtaining a rating of "A" or above from Taiwan Ratings, Moody's Investors Service, Standard & Poor's Corp., or Fitch Inc., or a rating of A (twn) or above from Fitch Ratings Limited, Taiwan Branch, or a rating of A.tw from Moody's Investors Service: NT$10 million per call (put) warrant issue, shall be paid to the TSEC before listing.
(ii) Those obtaining a rating of "BBB" or above from Taiwan Ratings, a rating of BBB- (twn) or above from Fitch Ratings Limited, Taiwan Branch or a rating of Baa1.tw, Baa2.tw, Baa3.tw or above or Baa1, Baa2, or Baa3 from Moody's Investors Service, "BBB" from Standard & Poor's Corp., or "BBB" from Fitch Inc.: NT$20 million per call (put) warrant issue, shall be paid to the TSEC before listing.
(iii) Those receiving a definite rating aside from those listed in the two preceding subparagraphs: NT$40 million per call (put) warrant issue, shall be paid to the TSEC before listing.
Yearly market listing fees shall be determined by the mutatis mutandis application of the provisions for collection of company stock fees under the TSEC Schedule of Securities Listing Fees.
(2) After the issuer has made arrangements for the projected listing date, the TSEC shall undertake matters related to the public announcement for listing, and shall report the same to the competent authority, submitting the company's application form and attachments, along with the aforementioned review materials.
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