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Article 1
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In order to assist securities firms to establish a sound corporate governance system, and to promote the integrity of the securities market, the Taiwan Stock Exchange ("TSE"), the Taipei Exchange ("TPEx") and the Chinese Securities Association ("CSA") hereby jointly adopt the Principles, which have been submitted to the Financial Supervisory Commission ("FSC") for recordation, to be followed by securities firms.
A TSE/TPEx listed securities firm shall, unless otherwise provided for in the Principles, be required to comply with the Corporate Governance Best-Practice Principles For TSE/TPEx Listed Companies.
A foreign securities firm having Taiwan branches may be waived the application of the Principles' regulations from Chapter I to Chapter IV.
A company concurrently operating as securities firm may be waived the application of the Principles' regulations.
Securities firms are advised to promulgate their own corporate governance principles in accordance with the Principles and create an effective corporate governance structure.
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Article 2
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When setting up the corporate governance system, in addition to complying with laws, regulations, and articles of incorporation, a securities firm shall also follow the following principles:
- protect shareholders' rights and interests;
- strengthen the powers of the board of directors;
- fulfill the function of supervisors;
- respect investors' and stakeholders' rights and interests; and
- enhance information transparency.
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Article 3
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A securities firm shall follow the Criteria Governing the Establishment of Internal Control System in Securities and Futures Service Enterprises and the standard guidelines for the internal control system of securities firms as jointly promulgated by TSE and such other securities related institutions and take into consideration the overall operational activities of itself and its subsidiaries in designing and effectively implementing its internal control system, and review it at all times, in order to keep up with the dynamics of environment inside and outside the company and ensure that the design and enforcement of the system remain effective.
Establishment of or amendments to the internal control system shall be submitted to the board of directors for approval by resolution. If a director indicated an opposition which has been recorded or is supported with a written statement, the company shall submit the opposition opinion, together with the internal control system approved by the board of directors, to each supervisor. Where there are independent directors, during the discussions of the internal control system at the board of directors, the opinions of each individual independent director shall be fully considered. Where an independent director has an adverse opinion or qualified opinion, the opinion shall be stated in the board of directors' meeting minutes; provided, however, that if the firm has established an audit committee in accordance with the Securities and Exchange Act, the consent by a majority of all members of the audit committee and the resolution of the board of directors are required.
If the majority consent of the audit committee as described in the preceding paragraph is not obtained, the consent by two thirds of all board directors may be required, and the resolution by the audit committee shall be stated in the minutes of the board meeting.
In addition to faithfully performing voluntary evaluations of the internal control system, the board of directors and the management shall review the result of the voluntary evaluations of each department and audit the report of the internal audit department on a quarterly basis. The audit committee or supervisors shall also pay attention to and exercise oversight on this matter. A securities firm is advised to establish a communication channel and system for its independent directors, audit committee or supervisions and internal audit officers. Responsible persons (directors and supervisors) shall meet with internal auditors to discuss how to correct the defects in the internal control system, which shall be stated in the minutes, on a regular basis. Where an audit committee has been established in accordance with the Securities and Exchange Act, evaluations on the effectiveness of the internal control system require the consent by a majority of all members of the audit committee and the resolution of the board of directors.
The management of a securities firm shall pay special attention to the internal audit department and its personnel, fully empower them and urge them to conduct audits effectively, evaluate problems of the internal audit system and evaluate the efficiency of operations to ensure that such a system can be carried out effectively on a continuous basis and can assist the board of directors and the management to perform their duties effectively so as to ensure a sound corporate governance system.
Where a proposal to correct major defects or violations of laws or rules pertaining to internal control made by the auditors and compliance officer of a securities firm is dismissed by the management and it is expected these defects or violations may cause significant losses to the securities firm, the competent authority shall be immediately notified of the issue.
To successfully implement the internal control system and strengthen the professionalism of agents acting for internal auditors so as to improve and maintain the quality and results of the audit work, a securities firm shall appoint designated agents for its internal auditors.
The requirements pertaining to qualifications of internal auditors under Article 12, paragraph 6 of the Regulations Governing the Establishment of Internal Control Systems by Service Enterprises in Securities and Futures Markets, and the regulations of Articles 17, 18 and 19 of the above regulations shall apply mutatis mutandis to the designated agents in the preceding paragraph.
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Article 4
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When implementing the corporate governance system, a securities firm shall protect shareholders' rights and interests and treat all shareholders fairly.
A securities firm shall establish a corporate governance system which ensures shareholders' right of being fully informed of, participating in and making decisions over important matters of the company.
Shareholders' meetings in accordance with the rules for the meetings.
Resolutions adopted by shareholders' meetings of securities firms shall comply with laws, regulations and articles of incorporation.
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Article 5
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A securities firm shall convene shareholders' meetings in accordance with the regulations under the Company Act and other applicable laws, and establish comprehensive meeting procedure rules, and strictly follow the meeting procedure rules in handling matters to be resolved at a shareholders' meeting.
Resolutions made at the shareholders' meeting of a securities firm shall be consistent with the requirements of laws and regulations and the articles of incorporation.
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Article 11
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The shareholders shall be entitled to profit distributions by the company. In order to ensure the shareholders' investment interests, the shareholders' meeting may according to Article 184 of the Company Act, examine the statements and books prepared and submitted by the board of directors and the audit reports submitted by the audit committee or supervisors, and may decide, by resolution, profit distributions and deficit off-setting plans. In order to proceed with the above examination, the shareholders' meeting may appoint an inspector.
The shareholders may, according to Article 245 of the Company Act, apply with the court to select an inspector in examining the accounting records and assets of the company.
The board of directors, audit committee or supervisors and managers of a securities firm shall fully cooperate in the examination conducted by the inspectors in the aforesaid two paragraphs without any obstruction, rejection or circumvention.
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Article 12
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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 that a securities firm is the target of merger or tender offer, which shall be proceeded with the applicable laws and regulations, the securities firm shall pay attention to the fairness and adequacy of the merger or tender offer plan and the transaction, as well as information disclosure and soundness of the company's financial structure after the merger or tender offer.
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.
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Article 13
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In order to protect the interests of the shareholders, it would be advisable for a securities firm to designate responsible personnel dedicated to handling shareholders' proposals, inquiries or disputes.
A securities firm shall properly deal with matters arising from any action instituted by shareholders pursuant to the applicable laws claiming damage to such shareholders' interests caused by the resolution adopted in its shareholders' meetings or the board of directors meetings in violation of the applicable laws, regulations or the company's articles of incorporation, or claiming breach by the company's directors, supervisors or managers of applicable laws, regulations or the company's articles of incorporation in performing their duty.
A securities firm is advised to establish the internal operation procedure to properly handle matters in the preceding two paragraphs and shall maintain written records thereof for recordation, which will be included in the internal control system for control and management.
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Article 13-1
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The board of directors of a securities firm shall have the responsibilities to establish methods to interact with the firm's shareholders to improve their mutual understanding of the development of the company's objectives.
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Article 13-2
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In addition to communications with shareholders at shareholders' meetings and encouragement of shareholders to attend shareholders' meetings, the board of directors of a securities firm shall adopt effective methods to communicate with shareholders, and work with managers and independent directors to understand the opinions of shareholders and issues they concern about, and to clearly explain the company's policies to win the shareholders' support.
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Article 14
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A securities firm shall clearly identify its management objectives and the allocation of authorities and responsibilities over personnel, assets and financial matters of its affiliated enterprises, and shall conduct risk evaluation and establish appropriate firewalls.
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Article 16
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A securities firm shall establish the objectives and system of a sound management for finance, operations and accounting in accordance with the applicable laws and regulations. It shall further, together with its affiliated enterprises, properly conduct an overall risk evaluation of the major banks they are dealing with, their customers and their suppliers, and carry out the necessary control mechanism to reduce credit risks.
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Article 17
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Where a securities firm and its affiliated enterprises enter into inter-company business transactions, a written agreement governing respect of the relevant financial and business operations between each other shall be made in accordance with the principle of fair dealing and reasonableness. Both parties shall definitively stipulate the terms and conditions of the price and payment terms mechanism, and desist from any transactions that are other than at arms' length.
All transactions or contracts made by and between a securities firm and its affiliated persons and shareholders shall follow the principles set forth in the proceeding sub-paragraph and tunneling of profits in strictly prohibited.
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Article 18
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A shareholder having controlling power over a securities firm shall comply with the following provisions:
- It shall bear a duty of good faith to other shareholders and shall not directly or indirectly cause the company to engage in transactions at other than arms' length or involve in management conduct for adverse interest.
- Its representative shall follow the rules implemented by the securities firm with respect to the exercise of rights and participation of resolution, so that at a shareholders' meeting, the representative shall exercise his/her voting right for the best interest of all shareholders and in good faith and, when acting as a director or supervisor, he/she will exercise the fiduciary duty of a director or supervisor.
- It shall comply with relevant laws, regulations and the articles of incorporation of the company in nominating directors or supervisors and shall not act beyond the authority granted by the shareholders meeting or board meeting.
- It shall not improperly intervene in corporate policy making or obstruct corporate management activities.
- It shall not restrict or impede the management of the company by methods of unfair competition.
- The corporate representative appointed by it after it was elected as director or supervisor shall have the professional qualifications required by the company, and it shall not replace the representative unless there is a good reason.
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Article 20
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The board of directors of a securities firm shall direct the company's strategies, supervise the management and be responsible to the company and shareholders. Procedures and arrangement relating to corporate governance shall ensure that, in exercising its authority, the board of directors will comply with laws, regulations, articles of incorporation, and the resolutions of shareholders' meetings of the company.
Regarding the structure of the board of directors of a securities firm, an appropriate number of the board members, which shall not be less than five, shall be determined based on the review of the scale of corporate management and operation and the shareholding of the major shareholders and by taking into consideration of the practical needs for operation. If independent directors are to be appointed, reasonable professional qualifications and objective conditions on how these directors may exercise powers independently shall be carefully reviewed.
The board of directors shall have members of diverse backgrounds. No more than one third of the directors may act as the company's managers at the same time. The board of directors shall formulate appropriate and diverse strategies based on how the board works, type of operation, and development needs, for which standards covering at least the following two aspects shall be included:
- Basic qualifications and value: such as gender, age, nationality and culture.
- Professional knowledge and skills: including professional background, such as law, accounting, industry, finance, marketing or technology, professional skills and industrial experience.
The board members shall have the necessary knowledge, skill, and experience for performing their duties. To achieve the ideal goal of corporate governance, the board of directors shall have the following abilities:
- ability to make operational judgment;
- ability to perform accounting and financial analysis;
- ability to conduct management administration;
- ability to conduct crisis management;
- possession of securities and financial derivatives products professional knowledge;
- possession of perspective of international market;
- ability to lead; and
- ability to make decisions.
- possession of knowledge of and ability for risk management.
The board of directors shall be aware of the securities firm's operational risk exposure, such as market risk, credit risk, liquidity risk, operational risk, legal risk, reputation risk, and other types of risk relating to the securities firm's operation, to ensure effectiveness of risk management and shall be ultimately responsible for risk management.
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Article 21
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A securities firm shall follow the principle of protecting shareholders' rights and interests and treating all shareholders equally to incorporate a fair, just, and open procedure for the election of directors, encourage shareholders' participation, 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.
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Article 22
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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, no additional supporting documents for other qualifications be required for no reason, 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.
Before submitting a list of director candidates in accordance with the regulations, the board of directors shall carefully evaluate all matters relating to the qualifications listed in the preceding paragraph and if a candidate, when elected, will be willing to act as director.
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Article 23
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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.
Where a securities firm has set up a functional committee, it shall specify the powers and duties of the committee.
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Article 25
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A securities firm shall, in accordance with the regulations of the Securities and Exchange Act, have the following matters resolved at the board of directors. Adverse opinion or qualified opinion, if any, expressed by independent director shall be stated in the board of directors' meeting minutes:
- Establishment of or modification to the internal control system in accordance with Article 14-1 of the Securities and Exchange Act.
- Establishment of and modification to the procedures of major financial and business activities such as acquisition or disposal of assets, performance of transactions of derivatives, 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.
- Matters involving interests pertaining to directors or supervisors themselves.
- Major transactions of assets or derivatives.
- Major lending of funds, endorsement or provision of guarantee.
- Offering, issuance or private placement of securities of the nature of equity.
- Appointment,dismissal or remuneration of certified public accountant.
- Appointment and dismissal of chief financial, accounting, risk management, compliance and internal audit officers.
- Standards for performance evaluations and emoluments for managers and salespersons.
- Structure and system of directors' emoluments.
- Other major issues specified by the competent authority.
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Article 26
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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, in accordance with the applicable laws and regulations, 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 compensations 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.
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Article 27
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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 company, nature of business and the number of board directors, set up audit, compensation and remuneration, risk management, nomination, any other functional committees, and may set up environmental protection, corporate social responsibility or other committees based on the philosophy of corporate social responsibility and sustainable operation, 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.
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Article 28
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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:
- Stipulation of risk management policy and framework and designate responsibilities to the relevant corporate departments.
- Stipulation of risk assessment criteria.
- 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:
- Establishment of or modification to the internal control system in accordance with Article 14-1 of the Securities and Exchange Act.
- Evaluation of effectiveness of the internal control system.
- 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.
- Matters involving interests pertaining to directors themselves.
- Major transactions of assets or derivative products.
- Major lending of funds, endorsement or provision of guarantee.
- Offering, issuance or private placement of securities of the nature of equity.
- Appointment, dismissal or remuneration of certified public accountant.
- Appointment and dismissal of chief financial, accounting or internal audit officers.
- Annual financial report and semi-annual financial report.
- 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.
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Article 28-1
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A securities firm is advised to set up a remuneration committee or other committees with equivalent functions, with the major responsibilities of establishing the performance evaluation standards and emolument standards for managers and salespersons, and the structure and system of directors' emoluments. These committees shall have independent director(s) as their member(s) and are advised to have an independent director as the convener.
The performance evaluation standards and emolument standards for managers and salespersons, and the structure and system of directors' emoluments shall be created based on the following principles:
- A securities firm shall establish the standards for, or the structure or system of, performance evaluations and emoluments based on the performance after taking into consideration future risks, and with reference to the its overall long-term profits and shareholders' interest.
- The emolument and incentive system is not designed to encourage directors, managers and salespersons to attempt to perform an act that falls outside of its risk appetite suitable for a securities firm. The securities firm shall regularly review the emolument and incentive system and performance to ensure they are within its risk appetite.
- How long a securities firm pays emoluments shall be subject to its profits after future risks have been taken into consideration to prevent the securities firm from suffering losses after paying emoluments and other adverse circumstances. A significant part of emoluments paid as incentives shall be in a deferred manner or in the form of equities.
- When evaluating contribution of a director, manager and salesperson to the securities firm's profits on a personal level, a securities firm shall perform an overall analysis of the securities industry to figure out if their profits were generated because they have used the securities firm's overall advantages so that it will be able to have a meaningful evaluation of their individual contribution.
- A securities firm's agreement on severance pay with its director, manager and salesperson shall be made based on the performance that has been achieved to prevent the occurrence of a circumstance where an individual receives a large amount of severance pay after a short-term employment, and other inappropriate circumstances.
- A securities firm shall fully disclose to its shareholders the principles, methods and goals based on which it has established the standards for, or structure and system of, performance evaluations and emoluments as described above.
For purpose of the Principles, salespersons are individuals whose emoluments or performance evaluations are based on their sales of various financial products and/or services.
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Article 28-2
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A securities firm is advised to establish and announce whistleblowing methods for internal staff and external individuals, and create a whistleblower protection system. This system shall have related internal operation procedures and be included in the internal control system for control and management.
With regard to the above, at least the following shall be covered:
- Create and announce the mailbox and telephone number for internal whistleblowing, or appoint a third-party independent organization to provide the mailbox and telephone number for internal and external whistleblowing.
- Appoint staff or department responsible for accepting whistleblowing cases.
- Records of acceptance of whistleblowing cases, how the cases were processed, results, and production of related documents and archival of documents.
- Confidentiality of whistleblower's identity and details of the whistleblowing case.
- Measures for protection of rights and interests of whistleblower, who will not be subject to inappropriate treatment because of the whistleblowing.
Anonymous whistleblowing cases without identifying the real name and address of the whistleblower, or without providing specific information, may be rejected.
The regulations under subparagraph 5 of the second paragraph shall not apply to a whistleblowing case that, based on the findings of investigations, contains false claims and malicious accusations against securities firms or their staff.
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Article 29
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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. The securities firm is also advised to establish a communication channel or system for its independent directors, supervisors or audit committee and certified public accountants, and establish the internal operation procedures that shall be included in the internal control system for control and management.
A securities firm shall evaluate the independence and adequacy 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 evaluate the necessity of replacing the auditor, and shall submit to the board the conclusion of such evaluation.
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Article 32
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A director shall exercise a high degree of self-discipline and if a director himself or herself, or the juristic person the director is acting on its behalf, has an interest in a proposal submitted to the board of directors, he or she shall describe the important information about such interest, and if the risks may be detrimental to the interest of the company, the director shall not participate in discussion and voting of the proposal and shall voluntarily abstain from voting for himself or herself or as proxy for another director. The directors shall practice self-discipline as to their internal relationship and must not support each other in an inappropriate manner.
The matters with regard to which a director shall voluntarily abstain from voting shall be clearly set forth in the rules for the proceedings of board meetings. A securities firm shall set forth the matters which shareholders, directors, supervisors and other stakeholders apply for director abstaining on a particular proposal in the rules. The rules shall include qualification of applicants, procedure of applying and reviewing and deadline and formula of responding. The proposal that the director being applied for abstaining from voting shall abstain or not shall be submitted to the board for approval. Before resolution, the director shall not participate in or be proxy for voting on this proposal.
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Article 33
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Independent directors of a securities firm shall attend a meeting in person, and not to have their proxy who are not independent directors to act on their behalf, to submit a proposal for matters to be submitted to the board of director under Article 14-3 of the Securities and Exchange Act. If an independent director expresses an adverse or qualified opinion, his or her opinion shall be stated in the minutes of the board meeting. If an independent director is unable to attend a board meeting in person to express an adverse or qualified opinion, he or she shall submit a written opinion prior to the meeting, unless with a legitimate reason, and his or her opinion shall be stated in the minutes of the board meeting.
When the board of directors resolves a matter relating to one of the following circumstances, the matter and resolution shall be stated in the meeting minutes and shall also be declared at the information reporting website designated by the competent authority within two days of the date of the board meeting:
- An independent director has expressed an adverse or qualified opinion, which has been stated in the meeting minutes or described in a written statement.
- Where a securities firm has set up an audit committee, a matter not passed at the audit committee but approved by more than two thirds of all directors.
During the proceeding of the board meetings, depending on the information in the proposal, managers from the relevant departments who are not directors may be notified to sit in at the meetings, make report on the current business conditions of the company and respond to inquiries raised by the directors. Where necessary, accountants, lawyers or other professionals may be invited to sit in at the meetings so as to assist the directors in understanding the conditions of the company for the purpose of adopting an appropriate resolution, provided they shall recuse themselves from the meeting during discussion and voting.
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Article 35
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A securities firm shall submit the following matters to the board of directors for discussion.
- The company's operation plan.
- Annual financial report and semi-annual financial report.
- Establishment of or modification to the internal control system in accordance with Article 14-1 of the Securities and Exchange Act.
- Establishment of and modification to the procedures of major financial and business activities such as acquisition or disposal of assets, performance of transactions of derivatives, 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.
- Offering, issuance or private placement of securities of the nature of equity.
- Standards for performance evaluations and emoluments for managers and salespersons.
- Structure and system of directors' emoluments.
- Appointment and dismissal of chief financial, accounting risk management, compliance and internal audit officers.
- Donations to related parties or major donations to non-related parties, provided emergency pro bono donations in response to major natural disasters may be submitted to the board of directors' next meeting for retrospective approval.
- Matters to be submitted to the shareholders' meeting or board of directors for resolution in accordance with Article 14-3 of the Securities and Exchange Act, other laws and regulations or articles of incorporation, or important matters specified by the competent authority.
Except the matters required to be submitted to the board of directors for discussion as provided in the preceding paragraph, during the recess of the board of directors, the board of directors may authorize other persons to exercise the powers of the board in accordance with laws or the company's articles of incorporation. When such an authorization is made, information about level of authorization, what is covered in the authorization or particulars of the authorization shall be clear and specific. No general authorization shall be made.
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Article 37
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Members of the board shall faithfully conduct corporate affairs and discharge this duty of care as a good administrator. In conducting the affairs of the company, they shall exercise their power with a heightened level of self-discipline and prudential attitude. Unless matters are reserved for resolutions in shareholders' meetings by law or in the articles of incorporation of the company, they shall ensure that all matters will faithfully adhere to the board's resolutions.
Where resolutions of the board involve major policy directions of the corporate management, the board shall make careful consideration and may not affect the implementation and effectiveness of corporate governance.
A securities firm is advised to create the rules and procedures for evaluation of performance of the board of directors, and conduct performance evaluations on the board of directors, functional committees and individual directors based on self-evaluation, peer-to-peer evaluation, evaluation by contracted external professional organization or other appropriate method regularly on an annual basis. It is advisable that the performance evaluations of the board of directors, including functional committees, include the following aspects, and that appropriate evaluation indicators be developed in consideration of the company's needs:
- The degree of participation in the company's operations.
- Improvement in the quality of decision making by the board of directors.
- The composition and structure of the board of directors.
- The election of the directors and their continuing professional education.
- Internal control.
It is advisable that performance evaluations of board members (self-evaluations or peer-to-peer evaluations) include the following aspects, with appropriate adjustments made on the basis of the company's needs:
- Their understanding of the company's goals and missions.
- Their recognition of director's duties.
- Their degree of participation in the company's operations.
- Their management of internal relationships and communication.
- Their professionalism and continuing professional education.
- Internal control.
The board of directors of a securities firm shall consider the results of the performance evaluations to adjust the composition of the board members.
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Article 39
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According to the articles of incorporation or resolution adopted in a shareholders' meeting, a securities firm may take out liability insurance for directors with respect to their liabilities resulting from exercising their duties during their terms of occupancy so as to reduce and spread the risk of material harm caused by directors due to wrongful or negligent acts to the company and shareholders.
After procuring liability insurance for directors or upon renewal of insurance policy, the securities firm is advised to report key information about the insurance such as insured amount, coverage and insurance premiums of the liability insurance to the next board of directors' meeting.
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Article 42
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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, no additional supporting documents for other qualifications be required for no reason, and the review result thereof be provided to shareholders for their reference, so that qualified supervisors will be elected.
Before submitting the list of supervisor candidates in accordance with the regulations, the board of directors shall carefully evaluate all matters relating to the qualifications listed in the preceding paragraph and if a candidate, when elected, will be willing to act as supervisor.
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Article 49
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According to the articles of incorporation or resolution adopted in a shareholders' meeting, a securities firm may purchase liability insurance for its supervisor(s) with respect to their liabilities resulting from exercising their duties during their terms of occupancy so as to reduce and spread the material harm caused by supervisors due to wrongful or negligent acts to the company and shareholders.
After procuring liability insurance for supervisors or upon renewal of insurance policy, the securities firm is advised to report key information about the insurance such as insured amount, coverage and insurance premiums of the liability insurance to the next board of directors' meeting.
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Article 53
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A securities firm shall maintain communications with its banks, other creditors, employees, consumers, suppliers, community or the company's other interested parties and shall respect and protect their legal rights. It is advisable a designated area for interested parties be included in the company's website.
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.
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Article 60
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In order to keep shareholders and stakeholders fully informed, it is advisable for a securities firm to take advantage of the convenience of the Internet and to set up a web site containing the information regarding the company's finance, operation and corporate governance. It is also advisable to contain the finance, corporate governance or other related information in English as well.
To avoid misleading information, the aforesaid web site shall be maintained by specified personnel, and the recorded information shall be accurate, in detail and updated timely.
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Article 61
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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, TPEx or Chinese Securities Associations, and shall continue to update the information, provided no disclosure of information about supervisors is required in the case of an audit committee:
- corporate governance framework structure and rules;
- ownership structure and shareholders' equity, including specific and clear dividend policy;
- structure of board of directors and professionalism and independence of board members;
- responsibility of the board of directors and managerial personnel;
- composition, duties and independence of the audit committee or supervisors;
- composition, duties and operation of the remuneration committee and other functional committees;
- emoluments paid to directors, supervisors, general manager, and vice general manager in the most recent two years, analysis of ratio of the sum of emoluments paid to after-tax net profits in separate or individual financial report, 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;
- the progress of training of directors and supervisors;
- risk management information;
- interested parties' rights, channels for submitting complaints, issues of concern, and appropriate response method;
- details of the events subject to information disclosure required by law and regulations;
- the enforcement of corporate governance, deficiency between the corporate governance principles implemented by the company and the Principles, and the reason for the deficiency;
- information about transactions with related parties;
- disclosure of capital adequacy; and
- 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.
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