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Amendments

Title:

Corporate Governance Best-Practice Principles for Securities Firms  CH

Amended Date: 2021.01.06 (Articles 3, 3-1, 5, 6, 7, 10, 11, 22, 23, 24, 26, 28, 28-1, 28-2, 28-3, 31, 35, 37, 37-1, 39, 42, 46, 49, 57 amended,English version coming soon)
Current English version amended on 2019.01.14 
Categories: Corporate Governance

Title: Corporate Governance Best-Practice Principles for Securities Firms(2014.12.24)
Date:
Article 7     A securities firm shall encourage its shareholders to actively participate in its corporate governance and hold shareholders' meetings on the premise of legal, effective and safe proceedings. A securities firm shall seek all ways and means, including fully exploiting technologies for information disclosure and vote casting, so as to enhance the attendance rate of shareholders at the shareholders' meeting and ensure the exercise of shareholders' rights by shareholders at the shareholders' meeting in accordance with laws.
    When adopting electronic voting at its shareholders' meeting, a securities firm is advised to adopt the candidate nomination system to elect its directors and supervisors, and is advised against submitting an extempore motion and a motion to amend the existing proposal at shareholders' meeting.
    A securities firm is advised to assist shareholders in voting on proposals submitted to the shareholders' meeting one after another.
    When a securities firm provides giveaways in respect of a shareholders' meeting to its shareholders, there should be no different treatment or discrimination against shareholders.
Article 8     A securities firm shall record the minutes of the shareholders' meeting the date, month and year of the meeting, venue of the meeting, chairperson's name and how a proposal was resolved, as well as the summary information about how the meeting was proceeded and the result of the meeting in accordance with the Company Act and other applicable laws and regulations. With respect to the election of directors and supervisors, the meeting minutes shall record the method of voting adopted therefore and the total number of votes for the directors or supervisors who were elected.
    The minutes of the shareholders' meeting shall be properly and perpetually kept by the company during its legal existence. It would be advisable for a securities firm to fully disclose such meeting minutes on its website, if any.
Article 12     In entering into material financial and business transactions such as acquisition or disposal of assets, engaging in derivatives products transactions, lending funds of the company to any other person, making endorsements or providing guarantees to any other person, a securities firm shall proceed in accordance with the applicable laws and/or regulations. A securities firm shall further establish the operating procedures in relation to these material financial and business transactions and report the same to the shareholders' meeting for its approval so as to protect the interests of the shareholders.
    In the event of a securities firm's management buyout (MBO), which shall be proceeded with the applicable laws and regulations, it is advisable to form an objective and independent review committee to review the purchase price and the fairness of the MBO plan, and the regulations of information disclosure shall be complied with.
    A securities firm's staff responsible for matters pertaining to what is described in the preceding paragraph shall be careful about issues of conflict of interest and when they should abstain.
    When making investments, a securities firm is advised to consider the corporate governance of the company issuing the underlying investments to set up its rules to be followed when making investments.
Article 20-1     To achieve the goal of corporate governance, the board of directors of a securities firm has the following main job responsibilities:
  1. Establish an effective and appropriate internal control system.
  2. Elect and supervise managers.
  3. Review the company's management policy-making and operation plan, and supervise its execution.
  4. Review the company's financial objectives and supervise how they are accomplished.
  5. Supervise the results of the company's operation.
  6. Standards for performance evaluations and emoluments for managers and salespersons, and the structure and system of directors' emoluments.
  7. Supervise and handle the risks the company is facing.
  8. Ensure the company's compliance of applicable laws.
  9. Plan for the company's future objectives.
  10. Create and maintain the company's image and make the company a responsible member of the society.
  11. Elect accountants, lawyers and other experts.
  12. Protect investors' rights and interests.
Article 21     A securities firm shall incorporate a fair, just, and open procedure for the election of directors and adopt the cumulative voting mechanism in order to fully reflect shareholders' views in accordance with the regulations of the Company Act.
    Unless otherwise authorized by the competent authority, for the majority of the board of directors of a securities firm, no two board members may be relatives within two degrees of consanguinity.
    If the number of directors become less than five after the dismissal of one or more directors for any reason, the company shall reelect new directors at the next shareholders' meeting. If, however, a third of or more seats at the board of directors, based on the number of directors specified in the articles of incorporation, become vacant, the company shall convene a special shareholders' meeting for reelection within 60 days of occurrence of the dismissal.
    The aggregate shareholding percentage of all of the directors of a securities firm shall comply with the laws and regulations. Restrictions on the share transfer of each director and the creation, release, or changes of any pledges over the shares held by each director shall be subject to the relevant laws and regulations, and the relevant information shall be fully disclosed.
Article 22     A securities firm is advised to state in its articles of incorporation the adoption of the candidate nomination system for election of its directors in accordance with the regulations of the Company Act and it would be advisable that the qualifications, education and work, background and the existence of any other matters set forth in Article 30 of the Company Act and Article 53 of the Securities and Exchange Act with respect to the candidates recommended by shareholders or directors be reviewed in advance and the review result thereof be provided to shareholders for their reference, so that qualified directors will be elected. Where the shareholders' meeting resolves to set up independent director positions, the requirements and standards for such independent directors shall comply with Article 24.
Article 23     Clear distinctions shall be drawn between the responsibilities and duties of the chairman of the board of a securities firm and those of its general manager.
    The chairperson shall not act as the general manager at the same time, unless otherwise approved by the competent authority in accordance with the Regulations Governing Responsible Persons and Salespersons of Securities Firms. If the chairman also acts as the general manager or they are spouses or relatives within one degree of consanguinity, it would be advisable that the number of independent directors be increased.
Article 26     A securities firm shall stipulate expressly the scope of duties of the independent directors and empower them with manpower and material support related to the exercise of their power. The company or other board members shall not restrict or obstruct the performance of duties by the independent directors.
    A securities firm shall stipulate expressly the emoluments of the directors in its articles of incorporation or pursuant to a resolution of the shareholders' meeting. Different but reasonable emoluments from that of other directors may be set forth for the independent directors.
    Where a securities firm separately sets aside a special reserve as stated in its articles of incorporation, as resolved at a shareholders' meeting or as ordered by the competent authority, the special reserve shall be set aside only after a legal reserve has been set aside and before remunerations of directors and supervisors and employee bonuses are to be allocated. Its articles of incorporation shall also state how earnings shall be appropriated when the special reserve is reversed towards unappropriated earnings.
Article 27     For the purpose of developing monitoring functions and strengthening management mechanisms, the board of directors of a securities firm may, taking into account the basis of the size of the board and the number of the independent directors, set up audit, risk management, nomination, any other functional committees and have them stipulated in the articles of incorporation.
    Functional committees shall be responsible to the board and submit the proposals to the board of directors for approval. The above requirements, however, shall not apply when the audit committee is exercising the powers of supervisors in accordance with the Securities and Exchange Act, the Company Act and other laws.
    Functional committees shall adopt organizational regulations to be resolved and approved by the board of directors. The organizational regulations should cover at least the number of members in the committee, terms of office, duties and authorities, meeting proceedings, and what resources to be provided by the company to support their exercise of duties.
Article 28     It is advisable that a securities firm make it the first priority to set up the risk management committee, and shall either set up the audit committee or appoint supervisors.
    The main functions and duties of the risk management committee are as follows:
  1. Stipulation of risk management policy and framework and designate responsibilities to the relevant corporate departments.
  2. Stipulation of risk assessment criteria.
  3. Setting the overall level of risk of the company and of each corporate department and managing the risk.
    The risk management committee shall have at least one independent director with the expertise in securities and financial derivatives, accounting or finance in the committee who shall act as the convener.
    The audit committee shall be made up of all independent directors and shall have at least three members. One of the members shall act as the convener, and at least one member shall have the expertise in securities and financial derivatives, accounting or finance.
    Where a securities firm has set up an audit committee, the regulations of the Securities and Exchange Act, the Company Act, other laws and regulations and the Principles applicable to supervisors shall apply mutatis mutandis to the audit committee.
    Where a securities firm has set up an audit committee, the following matters shall be subject to approval of the majority of all members of the audit committee and the board of directors' resolution and Article 25 of the Principles shall not apply to these matters:
  1. Establishment of or modification to the internal control system in accordance with Article 14-1 of the Securities and Exchange Act.
  2. Evaluation of effectiveness of the internal control system.
  3. Establishment of and modification to the procedures of major financial and business activities such as acquisition or disposal of assets, performance of transactions of derivative products, lending of funds to third parties, granting of endorsements and provision of guarantees in accordance with Article 36-1 of the Securities and Exchange Act.
  4. Matters involving interests pertaining to directors themselves.
  5. Major transactions of assets or derivative products.
  6. Major lending of funds, endorsement or provision of guarantee.
  7. Offering, issuance or private placement of securities of the nature of equity.
  8. Appointment, dismissal or remuneration of certified public accountant.
  9. Appointment and dismissal of chief financial, accounting or internal audit officers.
  10. Annual financial report and semi-annual financial report.
  11. Establishment of the investor protection policy and evaluation of how the policy is being implemented.
    Exercise of powers by the audit committee and independent directors who are members of the committee and other related matters shall be governed by the Securities and Exchange Act, the Regulations Governing the Exercise of Powers by Audit Committees of Public Companies, and the regulations of Taiwan Stock Exchange or Taipei Exchange.
    A securities firm is advised to set up a remuneration committee, mainly responsible to establish the standards for performance evaluations and emoluments for managers and salespersons, and the structure and system of directors' emoluments. The remuneration committee shall have independent director(s) as its member(s), and it is advisable that an independent director act as the convener.
Article 29     A securities firm shall select a professional, responsible and independent CPA to be its external auditor, who shall perform regular reviews of the financial conditions and internal control measures of the company. With regard to the irregularity or deficiency timely discovered and disclosed by the auditor during the review, and the concrete measures of improvement or prevention suggested by the auditor, the company shall faithfully implement improvement actions.
    A securities firm shall evaluate the independence of the auditor engaged by the company regularly and no less frequently than once annually. In the event that the company engages the same auditor without replacement for seven years consecutively, or if the auditor is subject to disciplinary actions or other circumstances prejudicial to the independence of the auditor, the company shall review the necessity of replacing the auditor, and shall submit to the board the conclusion of such review.
Article 40     Members of the board are advised to participate in training courses of finance, risk management, business, commerce, accounting, law or corporation's social responsibilities which cover subjects relating to corporate governance upon becoming directors and throughout their term of office. They shall also ensure that company employees at all levels will enhance their professionalism and knowledge of the law.
    The training of directors shall be fully disclosed, and such information along with their performance during the current term shall be provided to shareholders for their consideration to elect the next term of directors.
Article 41     A securities firm shall stipulate a fair, impartial, and open procedure for the election of supervisors and shall adopt the cumulative voting mechanism to fully reflect the opinions of the shareholders in accordance with the regulations of the Company Act.
    The aggregate shareholding percentage of all of the supervisors of a securities firm shall comply with the laws and regulations. Restrictions on the share transfer of each supervisor and the creation, release, or other changes of any pledges over the shares held by each supervisor shall comply with the relevant laws and regulations, and the relevant information shall be fully disclosed.
Article 42     A securities firm is advised to state in its articles of incorporation the adoption of the candidate nomination system for election of its supervisors in accordance with the regulations of the Company Act and it would be advisable that the qualifications, education and work background and the existence of any other matters set forth in Article 30 of the Company Act and Article 53 of the Securities and Exchange Act with respect to the candidates recommended by shareholders or directors be reviewed in advance and the review result thereof be provided to shareholders for their reference, so that qualified supervisors will be elected.
Article 51     Supervisor(s) are advised to participate in training courses of finance, risk management, business, commerce, accounting, law or corporation's social responsibilities which cover subjects relating to corporate governance when he/she assumes the position and shall do the same or during his/her term of office.
Article 53     A securities firm shall maintain communications with its banks, other creditors, employees, investors or other companies with whom the company has business relationship and shall respect and protect their legal rights.
    In the event of a securities firm's management buyout (MOB), the company's financial structure shall be monitored continuously to ensure a healthy structure.
    In the event that the legal rights of a stakeholder are harmed, the company shall handle such matter in a proper manner and in good faith.
Article 61     A securities firm shall disclose the following relevant information regarding corporate governance for the fiscal year in accordance with laws and regulations and the regulations of the TSE, GTSM or Chinese Securities Associations:
  1. corporate governance framework structure and rules;
  2. ownership structure and shareholders' equity;
  3. structure and independence of board of directors;
  4. responsibility of the board of directors and managerial personnel;
  5. composition, duties and independence of the audit committee or supervisors;
  6. composition, duties and operation of the remuneration committee;
  7. emoluments paid to directors, supervisors, general manager, and vice general manager in the most recent year, analysis of ratio of the sum of emoluments paid to after-tax net profits, emolument payment policy, standards and makeups, procedures to determine emoluments, and the relevance to operational performance and future risks. In a special individual circumstance, emoluments of an individual director and supervisor shall be disclosed;
  8. the progress of training of directors and supervisors;
  9. risk management information;
  10. shareholders' rights and relationship;
  11. details of the events subject to information disclosure required by law and regulations;
  12. the enforcement of corporate governance, deficiency between the corporate governance principles implemented by the company and the Principles, and the reason for the deficiency;
  13. information about transactions with related parties;
  14. disclosure of capital adequacy; and
  15. other information regarding corporate governance.
    The Taiwan branches of foreign securities firms may choose not to disclose the matters set forth in items 2 to 8 in the preceding paragraph.
    A securities firm is advised, according to the actual performance of the corporate governance system, to disclose the plans and measures to improve its corporate governance system through appropriate mechanisms.