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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.
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 on a yearly basis 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. 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. A securities firm is advised to establish a communication channel and system for its independent directors, audit committee or supervisions and internal audit officers. The convener or supervisor of the audit committee shall report at a shareholders’ meeting his/her communications with the independent directors and internal audit officers.
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.
It is advisable that the appointment, dismissal, assessment, salary and remuneration of internal audit personnel of a securities firm be proposed to the board of directors directly or through an audit officer for approval.
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Article 3-1
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A securities firm is advised to have an adequate number of corporate governance personnel with appropriate qualifications based on the size of the company, business situation and management needs, and may appoint a chief corporate governance officer as the most senior officer to be in charge of corporate governance affairs. Said officer shall be a qualified, practice-eligible lawyer or accountant or have been in a managerial position for at least three years in a securities, financial, or futures related institution or a public company in handling legal affairs, legal compliance, internal audit, financial affairs, stock affairs, or corporate governance affairs.
It is required that the corporate governance affairs mentioned in the preceding paragraph include at least the following items:
- Handling matters relating to board meetings and shareholders meetings according to laws
- Producing minutes of board meetings and shareholders meetings
- Assisting in onboarding and continuous development of directors and supervisors
- Furnishing information required for business execution by directors and supervisors
- Assisting directors and supervisors with legal compliance
- Other matters set out in the articles or corporation or contracts
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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.
When a securities firm whose shares are not publicly offered convenes a shareholders’ meeting, it is not advised to directly hold a teleconference in accordance with Article 172-2, paragraphs 1 and 2 of the Company Act or to hold the meeting in accordance with Article 175-1, paragraphs 1 and 2 of the Company Act, which govern shareholders’ voting rights, without the approval of the competent authority.
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 6
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The board of directors of a securities firm shall properly arrange the proposals and agenda of shareholders' meetings, and formulate the principles and procedures for shareholder nominations of directors and supervisors and submissions of shareholder proposals. The board shall also properly handle proposals duly submitted by shareholders. Arrangements shall be made to hold shareholders meetings at a convenient location, with sufficient time allowed and sufficient numbers of suitable personnel assigned to handle attendance registrations. No arbitrary requirements shall be imposed on shareholders to provide additional evidentiary documents beyond those showing eligibility to attend. Shareholders shall be granted reasonable time to deliberate each proposal and afforded an appropriate opportunity to make statements.
It would be advisable for shareholders' meetings convened by the board of directors to be chaired by the chairman of the board of directors and attended by a majority of the directors.
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Article 7
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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 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.
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Article 10
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A securities firm shall respect the shareholders' right to know. With respect to the information of the financial conditions, operations, the insiders' shareholdings, and corporate governance status in the company, a securities firm shall faithfully comply with the applicable regulations regarding the information disclosure. If an official website is set up, a securities firm is advised to provide information to the shareholders regularly and promptly.
The information mentioned in the preceding paragraph shall be disclosed in English upon release, to ensure fair treatment to all shareholders.
To protect shareholders’ rights and interests and ensure fair treatment to shareholders, a securities firm shall lay down bylaws to forbid its internal personnel to make use of information not released on the market to trade securities.
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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, assets, special matters, and special transaction documents and records 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 22
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A securities firm is advised to state in its articles of incorporation in accordance with the Company Act that the candidate nomination system shall be adopted for election of its directors, to assess carefully the qualifications of the nominees, and to ascertain whether any of the circumstances set forth in Article 30 of the Company Act and Article 53 of the Securities and Exchange Act applies with respect to the nominees, so that qualified directors will be elected. Said firm shall also abide by Article 192-1 of the Company Act.
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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.
It is not advisable for the offices of chairperson and general manager or other comparable post to be assumed by the same person, 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 24
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A securities firm that has appointed two or more independent directors in accordance with the articles of incorporation shall keep the number of its independent directors not less than one-fifth of number of seats at the board of directors.
Independent directors shall have expertise and required knowledge, and are subject to restrictions on shareholding. In addition to abiding by the applicable laws and regulations, they are also advised not to act as a director (including independent director) or supervisor of more than five companies concurrently. They shall maintain their independence when performing duties, and shall not have any direct or indirect interest in the company.
No independent directors of a securities firm may hold the position for more than three consecutive terms.
During their incumbency, no independent directors or non-independent directors may switch roles with each other.
Professional qualifications, restrictions on shareholding and outside employment, determination of independence, method of nomination and other regulations for compliance with regard to independent director shall be governed by the Securities and Exchange Act, the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies, and the regulations of Taiwan Stock Exchange or Taipei Exchange.
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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, obstruct, reject, or evade 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 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.
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.
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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. It is advisable for these committees to consist of a majority of members who are advised independent directors.
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 a nomination committee and adopt organizational regulations. It is advisable for such committee to consist of a majority of its members who are independent directors and be chaired by an independent director.
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Article 28-3
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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 31
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A securities firm shall hold a board of directors' meeting no less frequently than once every quarter. The board meeting may be convened at any time in the event of an emergency. To convene a board meeting, it shall be expressly stated in the articles of incorporation that a notice be sent to each director and supervisor, stating the reason to hold the meeting, seven days before the meeting date. The meeting notice shall include sufficient information necessary to prepare the directors and supervisors for the meeting. In case of insufficient meeting information, directors shall have the right to request additional information or the board of directors may resolve to postpone reviews of a proposal.
A securities firm shall create the rules for the proceedings of the board of directors' meetings. Regulations for issues to be handled at the meeting, how a meeting is proceeded, particulars to be stated in the meeting minutes, public announcement and other matters for compliance shall be governed by the Regulations Governing Procedure for Board of Directors Meetings of Public Companies.
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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, and review of the effectiveness of said 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 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.
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 37-1
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The board of directors of a securities firm is advised to evaluate and monitor the following aspects of its direction of operation and performance in connection with intellectual properties, to ensure the firm develops an intellectual property regulatory system in accordance with the Plan-Do-Check-Act cycle:
- Formulate intellectual property regulatory policies, objectives and systems that are slightly associated with the operational strategies.
- Develop, implement and maintain on the basis of scale and form its regulatory systems governing the procurement, protection, maintenance and utilization of intellectual properties.
- Identify and provide the necessary resources sufficient to ensure effective implementation and maintenance of the intellectual property regulatory system.
- Observe internally and externally the risks and opportunities that intellectual property regulation may present and adopt corresponding measures.
- Plan for and implement a continuous improvement mechanism to ensure the operation and effects of the intellectual property regulatory regime meet the firm's expectations.
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Article 39
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A securities firm is advised to 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 taking out or renewing liability insurance for directors, 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 in accordance with the Company Act that the candidate nomination system shall be adopted for election of its supervisors, to assess carefully the qualifications of the nominees, and to ascertain whether any of the circumstances set forth in Article 30 of the Company Act and Article 53 of the Securities and Exchange Act applies with respect to the nominees, so that qualified supervisors will be elected. Said firm shall also abide by Article 192-1 of the Company Act.
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Article 46
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A supervisor may investigate the operational and financial conditions of the company from time to time and the relevant departments in the company shall provide the books or documents that will be needed for the supervisor's review, transcription, or copying.
When reviewing the finance or operations of the company, a supervisor may retain attorneys or accountants on behalf of the company to perform the review; however, the company shall inform the relevant persons of their confidentiality obligations.
The board of directors and managers shall submit reports in accordance with the request of the supervisors and shall not for any reason obstruct, circumvent, or refuse the inspection of the supervisor.
When a supervisor performs his/her duties, a securities firm shall provide necessary assistance as needed by the supervisor, and the reasonable expenses that the supervisor needs shall be borne by the company.
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Article 49
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A securities firm is advised to take out liability insurance for its supervisors 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 taking out or renewing liability insurance for supervisors, 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 57
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In developing its normal business and maximizing the shareholders interest, a securities firm shall pay attention to investor's interests, orders of securities markets, community, environmental protection and other pro bono activities, and shall have a high regard for the social responsibility of the company.
If the securities firm has investment plans, it shall take into account the implementation of corporate governance by the invested enterprise and whether said enterprise fulfils its duty to protect the environment and its social responsibility.
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