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Amendments

Title:

Directions for the Conduct of Wealth Management Business by Securities Firms  CH

Amended Date: 2020.09.10 (Articles 6 amended,English version coming soon)
Current English version amended on 2015.01.21 

Title: Directions for the Conduct of Wealth Management Business by Securities Firms(2013.12.30)
Date:
1     These Directions are adopted pursuant to the proviso of Article 45, paragraph 1 of the Securities and Exchange Act.
4     A securities firm may conduct wealth management business by means of trusts, and apply to concurrently operate money trusts and securities trusts. Except as provided by applicable laws or regulations or as otherwise provided by the Financial Supervisory Commission (FSC), the types of trust business shall be limited to the following:
  1. non-discretionary individual management.
  2. non-discretionary collective management.
  3. semi-discretionary individual management for which the principal designates the scope or method of use.
    A securities firm shall manage trust assets separately from its proprietary assets and other trust assets. When a securities firm accepts, uses, and manages trust assets, the trust assets shall be represented under the name of trust assets of the securities firm. If the trust asset is money, the securities firm shall deposit it in a bank meeting the following qualifications:
  1. In the case of a domestic bank (including any subsidiary organized and registered by a foreign bank in the Republic of China pursuant to the Banking Act ), the common equity ratio, tier-one capital ratio, and capital adequacy ratio shall meet the following requirements:
    1. They may not be less than the minimum ratios specified under Article 5, paragraph 1, subparagraphs 1 and 2 of the Regulations Governing the Capital Adequacy and Capital Category of Banks.
    2. If any minimum ratio under the preceding item is raised by the FSC pursuant to Article 5, paragraph 2 of the Regulations Governing the Capital Adequacy and Capital Category of Banks, the bank's ratio may not be less than the raised ratio.
  2. In the case of a foreign bank's branch in the Republic of China, the credit rating of its head office shall meet the standard set out in Attachment 1.
    A securities firm conducting the type of business under paragraph 1, subparagraph 3, and accepting NT$10 million or more from the customer in original trust assets, shall, pursuant to the Regulations Governing the Concurrent Operation of Trust Business, Standards Governing the Establishment of Securities Investment Consulting Enterprises, and Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises (hereinafter, "Regulations Governing the Conduct of Discretionary Investment Business"), apply to concurrently operate a securities investment consulting enterprise (SICE) that conducts discretionary investment business by means of trusts, and shall first have obtained the FSC's permission to operate a mandate-type discretionary investment business and have completed the procedures for re-issuance of the business license, and its permission for such business must not have been revoked by the FSC.
5     A securities firm applying to conduct the business under point 2, paragraph 1, subparagraph 1 shall meet the following conditions and qualifications, and shall obtain approval from the FSC:
  1. Regulatory capital adequacy ratio: its regulatory capital adequacy ratio reported prior to applying exceeds 200 percent.
  2. Financial position meets any of the following conditions:
    1. Its CPA audited or reviewed financial report for the most recent period shows no accumulated deficit, and its financial position meets the provisions of Articles 13, 14, 16, 18, 18-1 and 19 of the Regulations Governing Securities Firms.
    2. The holding company that directly or indirectly holds 100 percent of the shares of the securities firm provides an unconditional and irrevocable guaranty securing the liabilities of the securities firm.
  3. Legal compliance
    1. Has not, within the past three months, been sanctioned under Article 66, subparagraph 1 of the Securities and Exchange Act or under Article 100, paragraph 1, subparagraph 1 of the Futures Trading Act.
    2. Has not, within the past six months, been sanctioned under Article 66, subparagraph 2 of the Securities and Exchange Act or under Article 100, paragraph 1, subparagraph 2 of the Futures Trading Act.
    3. Has not, within the past one year, had a sanction imposed by the FSC to suspend its business.
    4. Has not, within the past two years, had a sanction imposed by the FSC to void any part of its business permit.
    5. Has not, within the past one year, had a sanction of suspended or restricted trading imposed on it by the Taiwan Stock Exchange Corporation (TWSE), GreTai Securities Market (GTSM), or Taiwan Futures Exchange (TAIFEX), under the operating rules or bylaws thereof.
  4. Has established a legal compliance unit and a person in charge thereof pursuant to the Regulations Governing the Establishment of Internal Control Systems by Service Enterprises in Securities and Futures Markets (hereinafter "Regulations Governing Internal Control").
    A securities firm that fails to meet the compliance requirements in subparagraph (3) of the preceding paragraph may be exempted from restriction under that subparagraph if has already corrected the infraction and provide specific documentary proof thereof.
    An ROC branch of a foreign securities firm applying to conduct business under paragraph 1 shall comply with paragraph 1, subparagraphs 3 and 4, and the regulatory capital adequacy ratio, financial position, and the long-term credit rating of its head office shall comply respectively with subparagraphs 1 and 2 of paragraph 1, and Attachment 2.
6     A securities firm applying to conduct the business under point 2, paragraph 1, subparagraph 2 shall meet the below-listed conditions and qualifications, and obtain the approval of the FSC:
  1. Regulatory capital adequacy ratio: The regulatory capital adequacy ratio prior to application exceeds 200 percent.
  2. The financial condition meets one of the following conditions:
    1. The CPA-audited and attested financial report for the most recent period states net worth of not less than NT$10 billion and not lower than the paid-in capital.
    2. The CPA-audited and attested financial report for the most recent period states total assets of not less than NT$20 billion, net worth of not less than NT$6 billion and not less than paid-in capital, and a profit in each of the past three years.
    3. A holding company that directly or indirectly holds 100 percent of the shares of the securities firm, or a financial holding company that has a controlling interest in the securities firm, meets the conditions in one of the two preceding subparagraphs, and issues an unconditional and irrevocable guaranty securing the liabilities of the securities firm.
  3. Legal Compliance
    1. Has not, within the past three months, been sanctioned under Article 66, subparagraph 1 of the Securities and Exchange Act or under Article 100, paragraph 1, subparagraph 1 of the Futures Trading Act.
    2. Has not, within the past six months, been sanctioned under Article 66, subparagraph 2 of the Securities and Exchange Act or under Article 100, paragraph 1, subparagraph 2 of the Futures Trading Act.
    3. Has not, within the past one year, had a sanction imposed by the FSC to suspend its business.
    4. Has not, within the past two years, had a sanction imposed by the FSC to void any part of its business permit.
    5. Has not, within the past one year, had a sanction of suspended or restricted trading imposed on it by the TWSE, GTSM, or TAIFEX, under the operating rules or corporate thereof.
    6. Has not, within the past 6 months, been given an official reprimand or ordered to take corrective action under Article 44 of the Trust Enterprise Act.
    7. Has not, within the past 2 years, been sanctioned under Article 44, subparagraph 1, 2, or 3 of the Trust Enterprise Act.
  4. Has established a legal compliance unit and a person in charge thereof pursuant to the Regulations Governing Internal Control.
    After a securities firm has been approved by the FSC to conduct the business under the preceding paragraph, if its regulatory capital adequacy ratio or net worth for two consecutive months fail to meet the requirements of the preceding paragraph, it shall suspend conducting the business under the preceding paragraph, and may resume it only after its regulatory capital adequacy ratio or net worth have met the requirements for three consecutive months, and it has reported to and received approval from the FSC.
    A securities firm failing to meet a condition in subparagraph 3 of paragraph 1 may be exempted from restriction under that subparagraph if has already corrected the infraction and provides specific documentary proof thereof.
    An ROC branch of a foreign securities firm applying to conduct business under paragraph 1 shall comply with paragraph 1, subparagraphs 3 and 4, and the regulatory capital adequacy ratio, financial condition, and long-term credit rating of its head office shall comply respectively with subparagraphs 1, and 2 of paragraph 1, and Attachment 3.
9     To conduct wealth management business, a securities firm that conducts wealth management business shall establish a dedicated department in its head office, and charge the department with the duties of business planning and implementation, and management of personnel.
     The personnel of a securities firm's head office or branch unit conducting wealth management business shall meet the conditions and qualifications required for associated persons conducting wealth management business. Persons failing to meet such conditions and qualification may neither sell products in the name of wealth management nor carry on business in the name of wealth managers.
10     A securities firm conducting wealth management business by means of trusts shall set up a dedicated department for trust business in its head office. Such dedicated department for trust business may be merged into the dedicated department under Point 9, paragraph 1, provided that those in the merged dedicated department with power to decide the allocation of trust assets may not handle businesses from outside of the dedicated department
    The dedicated department for trust business under the preceding paragraph may handle the acceptance, management, allocation, and disposition of trust assets. Unless approval is obtained from the FSC, the trust business that a branch office may conduct is limited to accepting trust assets.
    When the type of business under Point 4, paragraph 1, subparagraph 3 conducted by a securities firm involves discretionary investment business, the securities firm may establish within the dedicated department for trust business under paragraph 1 a dedicated unit for discretionary investment business to handle discretionary investment business, or follow the provisions set out in Article 31-1, paragraph 1 of the Regulations Governing the Conduct of Discretionary Investment Business.
    The personnel of the dedicated unit of the preceding paragraph may not handle business other than that of the dedicated unit, nor may business of the dedicated unit be handled by personnel other than those of the unit.
11     The personnel handling wealth management business in a securities firm shall meet the following qualifications and conditions:
  1. (1) The persons in charge shall meet the qualifications and conditions under Article 5 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms (hereinafter, "Regulations Governing Personnel"), and the associated persons shall meet the qualifications and conditions of Article 6 of the Regulations Governing Personnel.
  2. (2) Meets other qualifications and conditions and training criteria set by the Taiwan Securities Association (the "Securities Association"), and reported to and approved by the FSC.
        When a securities firm conducts wealth management business by means of trusts, the supervising personnel (including the person in charge of the internal audit department), managerial personnel, and associated persons shall meet the provisions of the Regulations Governing the Required Qualifications for Responsible Persons and Required Trust Expertise or Experience for Operating and Managerial Personnel of Trust Enterprises (hereinafter, the "Regulations Governing Expertise or Experience") with the exceptions of Articles 3 to 9 and Article 12 thereof.
    The internal auditing of a securities firm conducting wealth management business shall meet the following qualifications and conditions:
  1. (1) Internal audit personnel for the business under Point 2, paragraph 1, subparagraph 1 shall meet the qualifications and conditions under paragraph 1.
  2. (2) Internal audit personnel for the business under Point 2, paragraph 1, subparagraph 2 shall meet the qualifications and conditions of Article 16, paragraph 1 of the Regulations Governing Expertise or Experience.

     For a securities firm conducting wealth management business by means of trusts, its officers with authority to approve business operations or transactions shall comply with Article 24 of the Regulations Governing the Implementation of Internal Control and Audit Systems by Financial Holding Companies and Banking Enterprises, or attend training sessions for internal auditors organized by institutions approved by the FSC, and obtain the required qualifications.