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Taiwan Securities Association Rules Governing Underwriting and Resale of Securities by Securities Firms(2010.07.14) |
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Article 22
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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. cash capital increase through an issue of preferred shares by a company already listed on a stock exchange or an OTC market;
2. preferred shares with detachable warrants;
3. corporate bonds with detachable warrants;
4. offerings of corporate bonds and financial bonds;
5. offerings of Taiwan depositary receipts; and
6. secondary distributions.
In underwriting cases under subparagraphs 1 through 4 and subparagraph 6 of the preceding paragraph where part of the securities are allocated by book building and part by public subscription, if the book building and public subscription procedures are carried out simultaneously, the timetable for the procedures shall be subject to mutatis mutandis application of Article 42-1. However, if subscription volume exceeds by a specified multiple the number of units earmarked for public subscription, there is no need to upwardly adjust the public subscription volume or to observe the requirements of Article 42-1, paragraph 1, subparagraph 4, item 2.
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Article 28
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By submitting a 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, 41, 42, or 42-1, failure by the bidder or subscriber to fulfill his payment obligation within a required time limit shall be handled as prescribed by Article 40, 41, 42, or 42-1.
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, and a uniform offering price shall be applied to the entire issue.
The actual offering price as negotiated pursuant to the preceding paragraph shall not fall outside the estimated probable range of the offering price as set forth under paragraph 23, subparagraph 3.
In an underwriting case involving an initial listing of shares on a stock exchange or an OTC market or an initial issue of Taiwan depositary receipts in which all shares are allocated through book building, if the total number of securities bid for in valid book building bids is insufficient to cover all the securities offered through the book building process in question, then the book building process shall be repeated. However, a single book building process may only be repeated once. If a book building process is being repeated, this fact must be noted when the book building process is reported to the FSC in accordance with Articles 23 and 24.
In the underwriting of an initial listing of shares on a stock exchange or an OTC market or an initial issue of Taiwan depositary receipts that involves simultaneous book building and public subscription procedures, if the total number of securities bid for in valid book building bids is insufficient to cover all the securities offered through the book building process in question, the book building process shall be repeated, and the TWSETWSE and the Taiwan Securities Association shall be notified by the next business day after day on which acceptance of book building bids comes to a close; a public announcement shall also be published in daily newspapers and on the Taiwan Securities Association's website no later than the second business day after the day on which acceptance of book building bids comes to a close, and brokers shall on that same day make no-interest refunds to subscribers of subscription deposits and prepaid postage for lottery winner notifications (but subscription processing fees will not be refunded).
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Article 41
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Where an underwriting case (other than one handled in accordance with the provisions of the preceding paragraph) is handled as prescribed by Article 21, Article 22, and Article 22-1, and all units are offered through a book building process, after the price has been set and the underwriting contract has been registered with the Taiwan Securities Association, the following matters shall be carried out:
1. Day One: Publish an underwriting announcement and begin mailing subscription notices, prospectuses, related subscription notices, and notices of payment due.
2. Day Two: Payment date, and date for refund of book building bid deposits not corresponding to allocated securities.
3. Day Three: Payment deadline; issuer applies to the TWSE or the GTSM for a securities listing on a stock exchange or an OTC market.
4. Day Four: Complete compilation of related registers.
5. Day Five: Announcement of securities listing on a stock exchange or an OTC market.
6. Day Six: Securities are issued and listed on a 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 TWSE or the GTSM for a listing on a 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 postponed by one day, and the dates that follow shall be postponed accordingly.
The dates set forth under paragraph 1 may be changed if necessary by applying for approval with the Taiwan Securities Association.
If a company listed on a stock exchange or an OTC market carrying out a cash capital increase through an issue of preferred shares 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.
In an underwriting case handled in accordance with the provisions of Article 21 or Article 22, paragraph 1, subparagraphs 1 to 3 and subparagraph 5, when a bidder submits a book building bid form, the securities underwriter may collect from the bidder a book building bid deposit equal to all or part of the value of the securities bid for.
The phrase "book building bid deposits not corresponding to allocated securities" in paragraph 1 subparagraph 2 means the book building bid deposits paid by unsuccessful bidders, and bid deposits paid by lottery winners 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 shall be the price of the securities subscribed to less any book building bid deposit to be refunded (or not refunded) to the bidder 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.
A securities underwriter that collects book building bid deposits as prescribed by paragraph 5 shall do so as prescribed by Article 12 paragraph 4.
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Article 42
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If the portion of an offering put up for public sale is underwritten partly by book building and partly by public subscription as prescribed in Article 22 (excepting underwriting as prescribed by the preceding Article), after the underwriting contract has been registered with the Taiwan Securities Association, the following matters shall be carried out:
1. Day One: Publicly release a book building allocation announcement (an underwriting announcement shall be concurrently published at this time) and begin mailing subscription notifies, prospectuses, and notices of payment due.
2. Payment period: The deadline shall be identical to that for payment of the subscription processing fee, the bid deposit, and prepaid postage, as set forth under Article 53 paragraph 1 subparagraph 5.
If any of the dates set forth under the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be postponed accordingly.
The dates specified under paragraph 1 may be changed if necessary by applying to the Taiwan Securities Association for approval.
Where a company listed on a stock exchange or an OTC market carrying out a cash capital increase through an issue of preferred shares uses the book building method for a portion of the shares and public subscription method for another portion of the shares to allocate the 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.
When a bidder submits a book building bid form, the securities underwriter may collect from the bidder a book building bid deposit equal to all or part of the value of the securities bid for. 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, and shall itself subscribe to the securities on the basis of the subscriber's payment.
When the securities 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.
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Article 44
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A bidder participating in the underwriting of securities by book building as prescribed by Article 40 and Article 22, paragraph 1, subparagraphs 1 to 5, 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 Depository & Clearing Corporation (TDCC) as prescribed by the Operating Rules for 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.
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Article 52-1
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In an underwriting case where an initial listing on a stock exchange or an OTC market or an initial issue of Taiwan depositary receipts involves simultaneous book building and public subscription procedures, the lead underwriter shall publish a public subscription announcement in daily newspapers on the business day immediately preceding the day on which it begins accepting subscriptions, and shall concurrently publish a book building announcement (prepared in accordance with the provisions of Article 24) in daily newspapers on the three business days before it begins accepting subscriptions. The content of the announcements shall be reported in hardcopy and electronic media to the Taiwan Securities Association, and shall include the items in the following subparagraphs:
1. Public subscription period.
2. Matters requiring attention regarding the rights and obligations of subscribers, as follows:
(1) Subscribers need to have a trading account, a central depository account, and a bank account.
(2) Subscribers need to enter into a contract with a transfer bank.
(3) When submitting a bid, a subscriber must have a sufficient bank balance to cover the subscription processing fee, postage for lottery winner notification, and the subscription payment (calculated on the basis of the ceiling for the anticipated book building price range).
(4) The manner of disclosure of the prospectus, including: (1) a statement clarifying that the anticipated offering price range as disclosed in the prospectus is an estimate based on information gathered during book building; and (2) an explanation of how to inquire about subsequent offering price revisions.
(5) If the subscription deadlines for multiple securities underwriting cases fall on the same day and a subscriber has submitted bids for more than one of them, funds shall be withdrawn from the subscriber's bank account in an amount equal to the sum of the subscription processing fees, postage for lottery winner notifications, and subscription payments for all securities that have been subscribed for.
3. A subscriber may not submit duplicated subscriptions.
4. Subscribers shall be advised to make a careful evaluation prior to subscribing, for once they are selected as lottery winners they may not abandon a subscription and request a refund.
5. The procedure for payment of refunds to non-lottery winners, and to lottery winners when the actual offering price is lower than the maximum anticipated book building price.
6. How to direct inquiries regarding subscriptions and lottery winner lists.
7. The deadline for payment of subscription processing fees, postage for lottery winner notifications, and subscription payments.
8. How the volume allocated for public subscription will be adjusted when subscriptions (defined as the final confirmed total volume of subscriptions that brokers have transmitted to the TWSE by the public subscription deadline) exceed the volume allocated for public subscription by a specified multiple.
9. The date on which the offering price will be set.
10. The date on which the securities are scheduled for listing on a stock exchange or an OTC market.
11. If the bids submitted during the book building are too few for the setting of a price, the book building process shall be repeated. The TWSE will not carry out a public drawing of lots, and brokers shall make no-interest refunds to bidders of prepaid postage for lottery winner notifications and securities subscription payments on the second business day following the subscription deadline, but subscription processing fees will not be refunded.
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Article 53
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Except for the underwriting of an initial listing on a stock exchange or an OTC market or an initial issue of Taiwan Depositary Receipts that involves simultaneous book building and public subscription procedures, an underwriter handling an offering by public subscription shall, after registering the underwriting contract with the Taiwan Securities Association, observe the following schedule in handling matters relating to subscriptions, bid deposits, and postage for lottery winner notifications:
1. Day One: Publish an underwriting announcement and commence subscription.
2. Day Three: Subscription period closes. Deadline for subscriber's payment of subscription processing fee, subscription payment, and postage expense for lottery winner notification to the designated bank.
3. Day Four: Date of withholding of subscription processing fees, subscription payments, and postage for lottery winner notifications. Broker's bank undertakes matters regarding withholding of subscribers' subscription processing fees, subscription payments, and postage for lottery winner notifications.
4. Day Five: Date of public drawing of lots. The TWSE undertakes drawing. TWSE produces and sends report of winner information to each broker. TWSE compiles and reports the information to the lead underwriter for provision to subscribers for their review.
5. Day Six:
Date of settlement of subscription processing fees, subscription payments, and postage expense for lottery winner notifications.
Brokers make no-interest refunds to non-lottery winners of bid deposits and prepaid postage for lottery winner notifications; the subscription processing fees of non-lottery winners are not returned.
Underwriter shall send lottery winner notifications and prospectuses (or subscription forms) to lottery winners via express registered mail.
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 7) 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 via the 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, and 5 falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one 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 Taiwan Securities Association.
The Taiwan Securities Association shall prescribe the standard for the postage expense for lottery winner notification. 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 Taiwan Securities Association. If the number of units subscribed does not exceed the number of units to be sold, all qualified subscribers shall be deemed lottery winners, and a public drawing of lots shall be unnecessary.
After the subscriber has commissioned subscription with a broker, the subscription form shall not be withdrawn or changed.
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