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7
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7 Review Process:
(1) After they have been delegated a securities listing case, the case handlers shall complete the following review procedures:
(i) Application Documents: Check all application documents received and complete a "Stock Listing Application Receipt Record." (Attachment 1).
(ii) Prospectus: Examine each item detailed in the content of the prospectus according to the TSEC Regulations Governing the Particulars to be Recorded in Prospectuses for Initial Listing of Securities and other relevant regulations and re-examine a Checklist of Legal Issues to be Examined upon Application by Issuers for Exchange Listings of Stock (Attachment 2) provided by a lawyer.
(iii) Underwriter's Assessment Report:
Review the underwriter's assessment report and its abstract and check whether each item is assessed in accordance with the rules and regulations of the TSEC and whether it draws clear and definitive conclusions. Any matters relating to the requirements of the TSEC's Regulations for Handling Deficiencies in the Assessment Report or Other Relevant Information Submitted by a Securities Underwriter shall be handled, after obtaining signed approval by the TSEC's president, pursuant to the provisions of Article 8 of said Regulations.
The above-mentioned Regulations for Handling Deficiencies in the Assessment Report or Other Relevant Information Submitted by a Securities Underwriter shall be separately issued by the TSEC.
(iv) Internal Control Systems
(a) Gain an understanding of the results and attached assessment opinion from the certified public accountant's internal control system investigation, and of the certified public accountant's recommendations regarding internal control systems as stated in the recommendation report, in compiling the Record of the Internal Control System Documentary Review (Attachment 3).
(b) Carry out the review in accordance with the TSEC's "Procedures for Reviewing Internal Control System Audit Reports Issued by Certified Public Accountants," and complete Attachment 2 of said Procedures, the "Opinion Form for Review of the Internal Control System Audit Reports Issued by Certified Public Accountants."
(v) Comprehensive Analysis of Financial Information:
Review the annexed survey report for related industries, explanations of major changes in accounting items published in the prospectus, analytical data from the certified public accountant's permanent records, and the underwriter's assessment report to ascertain and assess the financial condition and trends of the applicant company and excerpt important items or irregularities to compile the "Comprehensive Analysis of Financial Data" (Attachment 4).
(vi) Certified public accountant auditing procedures and financial report: Review the certified public accountant's permanent files, the working papers for the internal accounting control system for the most recent fiscal year and the audit working papers for the most recent three years preceding the date of application and re-examine the "Certified Public Accountant Auditing Procedure Checklist" (Attachment 5) completed by the certified public accountant to ensure compliance with Statement on Auditing Standards No. 3 ("Audit Working Paper Standards"), Statement on Auditing Standards No. 5 ("Investigation and Assessment of Internal Accounting Control Systems"), the Regulations for Auditing and Attestation of Financial Statements by Certified Public Accountants, and all other applicable regulations. Include excerpts or photocopies of important or irregular items in the report. Examine the audit reports from a certified public accountant for the most recent three fiscal years and the notes and itemized
breakdowns of each accounting item therein to ensure that the content of the applicant company's financial reports is in compliance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, the Regulations Governing the Preparation of Financial Reports by Securities Firms, Generally Accepted Accounting Principles, and all other applicable regulations. [After completion of the above] the case handlers shall note their opinion in the opinion column of the Certified Public Accountant Auditing Procedure Checklist. If the applicant company is found in violation of any of the requirements of the TSEC Regulations Governing the Handling of Errors by Certified Public Accountants in Auditing of Initial Applications for Market Listing, the case handlers shall refer the matter to the Review Committee and execute the resolution passed by the committee. The above-mentioned TSEC Regulations Governing the Handling of Errors by Certified Public Accountants in Auditing of Initial
Applications for Market Listing shall be separately issued by the TSEC.
(vii) Dispersion of Shareholding and Custodial Undertaking: Examine the following items"":
a. Whether the ratio of shares to be publicly offered is in compliance with the regulations of the TSEC.
b. Whether shareholding dispersion after public offering is in compliance with the provisions of the TSEC's Regulations for Review of Securities Listings.
c. Whether the ratio of shares held by directors and supervisors is in compliance with the regulations of the competent authority.
d. Whether the undertaking regarding the ratio of shares in centralized custody to total issued shares complies with regulations.
(viii) Examine whether the applicant company is in compliance with each of the items listed in Article 9, Paragraph 1 of the TSEC's Regulations for Review of Securities Listings and complete the "Regulations for Review of Securities Listings Article 9, Paragraph 1 Itemized Checklist" (Attachment 6).
(ix) The case handlers shall consolidate all the above review data and relevant documentation (Attachments 1 through 9) into a binder.
(x) To ascertain the actual status of the financial and business operations of the applicant company or gross irregularities left unresolved by the relevant review data, the case handlers may conduct the following procedures:
a. Seek briefings to ascertain the following:
The past business achievement and philosophy of the applicant company's responsible person.
Changes in the shareholdings of directors, supervisors, and shareholders with a greater than 10 percent share of the company's total issued equity during the most recent three fiscal years and random checks of actual shareholdings when necessary.
Management and operational objectives of the company.
Financial structure and management policies.
Production processes.
Production status.
Analysis of sales income and costs and the state of competition in the industry.
The system for taking stock of and valuating inventory, and warehousing management.
Dealings among affiliates.
Salary and benefit regime.
b. Inspect factories, paying particular attention to the operational status of machinery and equipment.
c. Where on-site inspections are necessary to understand other significant irregularities discovered in the documentary review, the case handlers may draft an inspection plan and then conduct an on-site inspection of the irregularities.
d. Findings of on-site inspections shall be recorded in detail in the "On-Site Inspection Record" (Attachment 7).
(xi.) In order to clarify other major issues in relation to the current status and future development of the industry to which the company belongs, as well as financial accounting, taxes, legal issues, and other material issues arising from operations in that industry, the case handler may duly engage an expert as an external Review Committee member, and in addition to obtaining the opinion of that expert, may also seek the opinions of other experts on related questions with approval by the president of the TSEC of a written request for permission.
(2) Compilation of working papers: The case handlers shall consolidate and record in detail all review items and findings of the review, together with all relevant information and number them in order for cross-referencing. Upon completion of the review, the case handlers shall compile all review information (Attachments 1 through 7) and supporting documentation into a binder to serve as the working papers and file it together with other public issuance approval information and keep it in the custody of the Listing Department (for a minimum of five years) for future reference and case management.
(3) After completion of the working papers, the case handlers shall set forth the key findings, and may as necessary solicit the opinions of relevant experts and examine other relevant information. The case handler shall then compile this information into a"" proposal for reference during the review and deliberation of the case.
(4) Review Period: Applications for initial stock listing shall be submitted for deliberation by the Review Committee within six weeks after their receipt. Under extraordinary circumstances, however, the Listing Department may, based upon review requirements or at the request of the applicant company and no less than 10 days prior to the Review Committee meeting, extend the deadline for submission to the Review Committee, subject to the signed approval of the president of the TSEC. Extensions granted at the request of the applicant company shall be limited to a maximum period of one month and shall not extend into to the following year.
(5) Force of the Securities Listing Review: The findings of the review of an application for securities listing reflect the financial and business condition of the applicant company during a specified period of time only, and should not be taken as a reflection of the overall or future performance of the applicant company. The results also depend largely on whether the applicant company has made full disclosure of information relating to its financial and business condition. The review results do not provide a guarantee of the quality of the applicant company and shall not be taken as a substitute for the functions and status of [reports of] securities underwriters and certified public accountants. Therefore, case handlers reviewing applications filed by first-time applicants shall:
(i) Carry out the review work with a positive service attitude and full rely on all information and opinions provided by the applicant company, certified public accountants, and securities underwriters, unless any nondisclosure, fraud, falsehood, or error is discovered.
(ii) Where information or statements of opinion provided by the applicant company, securities underwriter, or certified public accountant is found to contain any nondisclosure, fraud, error, falsehood, or otherwise seriously violate applicable laws or the rules and regulations of the TSEC, those responsible shall be held fully liable under the law, and the matter shall be duly reported to the competent authority after handling by the TSEC pursuant to relevant regulations. The TSEC undertakes only the review and deliberation of applications. Case handlers shall, at the time of processing applications, act in accordance with the provisions of the TSEC's Disciplinary Standards for Securities Listing Review Personnel and Matters for Mutual Compliance by Securities Listing Review Committee Members, and remain detached, impartial, and objective to ensure compliance with all the procedural requirements of these Procedures and other applicable regulations. In the event of any violation or negligence, where
verified through investigation, personnel shall be responsible for matters that fall within the scope of their duties.
(iii) Where any concerns arise during the review period, the case handlers shall contact the applicant company, securities underwriter, and certified public accountant and request that they take the initiative to collect relevant information in timely fashion and provide explanations.
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