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Regulations Governing Offshore Funds(2010.09.03) |
| Date： |
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Article 3
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An offshore fund manager or an institution appointed by the offshore fund manager ("offshore fund institution") shall appoint a single master agent to represent it in the offering and sale of its funds in Taiwan.
A master agent may represent one or more offshore fund institutions in offering and selling funds thereof in Taiwan.
A sub-distributor may handle the offering and sale of one or more offshore funds in Taiwan.
Unless otherwise provided in these Regulations, the provisions hereof concerning master agents or sub-distributors shall apply to investment in offshore funds through trust enterprises under non-discretionary trust of money agreements or through securities brokers under foreign securities brokerage agreements.
Except in cases of investment in offshore funds through trust enterprises under non-discretionary trust of money agreements, a sub-distributor handling the purchase, redemption, or switch of an offshore fund by investors shall forward the transaction instructions to the offshore fund institution via the master agent.
A participating dealer processing or engaging in the purchase or redemption of offshore exchange traded funds (ETFs) shall do so by the method prescribed by the offshore fund institution, and is not required to go through the master agent when transmitting transaction instructions to the offshore fund institution.
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Article 10
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A master agent other than one handling the offering and sale of offshore ETFs in Taiwan shall post an operating bond as specified below with a financial institution permitted to provide custodian services and having a certain credit rating or higher from a credit rating agency recognized by the FSC:
- Where the master agent represents funds managed by one offshore fund manager, NT$30,000,000;
- Where the master agent represents funds managed by two offshore fund managers, NT$50,000,000;
- Where the master agent represents funds managed by three or more offshore fund managers, NT$70,000,000.
Except for investments in offshore funds through a non-discretionary trust of money agreement, where a sub-distributor purchases offshore funds in its own name on behalf of investors, the sub-distributor shall post an operating bond of NT$20,000,000 with a financial institution meeting the qualification in the preceding paragraph.
The operating bonds under the preceding two paragraphs shall be in cash, bank deposits, government bonds, or financial bonds, shall be free of any pledge or any form of encumbrance, and shall be placed with only one financial institution. Any change of the custodian institution or withdrawal of an operating bond may proceed only after it has been reported to the FSC via the SITCA and approved by the FSC. Directions for the procedures for deposit, withdrawal, and substitution of operating bonds, and any subsequent amendments thereto, shall be prescribed by the SITCA and submitted to the FSC for approval.
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Article 12
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The master agent shall publicly announce the following events within three days from the occurrence thereof:
- Revocation of the represented offshore fund’s approval or restriction of its investment activities by the competent authority in the place where the offshore fund is registered;
- Inability of the offshore fund institution to continue to conduct relevant business due to dissolution, suspension of business, transfer of business, merger or acquisition, cessation of business, voidance or revocation of its permit under laws or regulations of the country where it is located, or other similar material event;
- Voidance by the FSC of the registration of an offshore fund represented by the master agent;
- Any disposition made with respect to the offshore fund manager by the competent authority thereof;
- Any suspension or resumption of transactions of an offshore fund represented by the master agent;
- Any amendment or addition to the content of an offshore fund prospectus or other relevant documents delivered to investors with respect to an offshore fund represented by the master agent, where the change or addition materially affects investors’ rights or interests;
- Any investor litigation or material dispute in connection with the offering and sale in Taiwan of an offshore fund represented by the master agent;
- Any material change to the finances or business of the master agent;
- Any change in sub-distributors;
- Any change in participating dealers;
- Any occurrence of a material event relating to the offshore ETF represented by the master agent, and such event materially affects investors’ rights or interests, or any approval to change the underlying index by the competent authority in the place where the ETF is registered;
- Any miscalculation of the fund's net asset value that exceeds the specified tolerable range set by the competent authority in the place where the offshore fund is registered;
- Any other event materially affecting investors’ rights or interests.
The master agent shall report any matters under subparagraphs 1, 2, 4, 5, 11, or 12 of the preceding paragraph to the FSC within 3 days from the occurrence thereof. The master agent shall submit any matters under subparagraphs 9 or 10 to the SITCA in advance for its review and approval, and the SITCA shall then prepare a monthly report to the FSC. The master agent shall, by the 5th day of the following month, summarize and report any matters under subparagraphs 6 to 8 or subparagraph 13 to the SITCA, which shall then forward the report to the FSC.
Where the master agent is unable to continue offering and distributing any offshore fund due to events referred to in subparagraphs 1 through 3 of paragraph 1, the master agent shall assist investors to carry out subsequent redemption, switch, or other relevant matters relating to the offshore funds. An offshore fund shall require the approval of the FSC for any of the following events, and shall publicly announce such event within three days from the occurrence thereof:
- Transfer, merger, or liquidation of the fund;
- Increase in the remuneration of the offshore fund manager or the custodian institution;
- Termination of the offering and sale of the offshore fund in Taiwan;
- Change of the offshore fund manager or the custodian institution of the offshore fund;
- Change of the fund name;
- Change of the basic investment policies or scope of the fund for investing in securities or trading securities related products, where inconsistent with the provisions of Article 23 hereof;
- Change of the fund type as a result of a change of its investment portfolio or strategy;
- Significant adjustment in the organization or change of name of the fund manager or the custodian institution.
- Any other matter required by the FSC for its approval.
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Article 39-1
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In conducting the business of selling offshore funds, a master agent or sub-distributor shall, before the commencement of sale, disclose to the investors any remuneration, fees, or other benefits it receives from the offshore fund institution or master agent, as the case may be.
The master agent or sub-distributor shall promptly give notice to the investors of any change in the information disclosed under the preceding paragraph.
The enforcement guidelines for content of information to be disclosed and notification of change to be made under the preceding two paragraphs, and any subsequent amendment thereto, shall be drafted by the SITCA and ratified by the FSC.
The offshore fund master agent or sub-distributor shall take the actions required by the preceding three paragraphs within six months after the issuance of the 3 September 2010 amendment to these Regulations.
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Article 40
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Unless otherwise provided by law, the master agent and the sub-distributor(s) may not:
- Offer or sell offshore funds by means of fraud, coercion, or other improper means;
- Agree with an investor to share profits or losses on investments in offshore funds;
- Engage in any false or deceptive act or other conduct obviously inconsistent with facts or intended to mislead others;
- Engage in any act contrary to the intent of the instructions of an investor or the investor's interests, without the consent of the investor, with intent to profit for itself or any third party;
- Utilize an investor's funds in breach of the investor? instructions;
- Continue to offer or sell an offshore fund after the offering and sale has been suspended, voided, or revoked by the FSC in accordance with Article 31 hereof;
- Allow any third party to use the name of the master agent, the sub-distributor, or an associated person of the master agent or the sub-distributor to engage in offering and sale of offshore funds, or appoint an unqualified distributor or associated person to engage in the offering and sale of offshore funds;
- Violate any law or regulation or any code of conduct set by a self-regulatory institution when engaging in the advertising and business promotion of an offshore fund;
- Engage in any other activity that is prohibited by a law or regulation or self-regulatory code.
The offshore fund institution and the master agent may not pay the sub-distributor or its personnel any remuneration, fees, or other benefits not specified in the sub-distribution agreement. In conducting the business of selling offshore funds, the sub-distributor and its personnel may not receive from the offshore fund institution or master agent any remuneration, fees, or other benefits not specified in the sub-distribution agreement.
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Article 52
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An offshore fund institution may conduct private placements of offshore funds to the following counterparties in Taiwan:
- Banks, bills finance enterprises, trust enterprises, insurance companies, securities enterprises, financial holding companies, and other juristic persons or institutions approved by the FSC;
- Natural persons, juristic persons, or funds meeting the conditions set by the FSC.
The total number of counterparties under subparagraph 2 of the preceding paragraph may not exceed 35 persons.
On reasonable request by a counterparty under subparagraph 2 of paragraph 1, prior to consummation of a private placement, the offshore fund institution shall be obligated to provide financial, business, or other information relevant to the current private placement of a fund.
In conducting private placements to specified counterparties, the offshore fund institution may not make any general advertisement or public inducement.
If paragraph 1or 2, or the preceding paragraph is violated, the placement shall be deemed a public offering to non-specified persons.
In order to privately place offshore funds in Taiwan to those counterparties specified in paragraph 1, subparagraph 1, the offshore fund institution may mandate a bank, trust enterprise, securities broker, SITE, or SICE to handle such business. In order to privately place offshore funds in Taiwan to those counterparties specified in paragraph 1, subparagraph 2, the offshore fund institution shall for such purposes mandate a bank, trust enterprise, securities broker, SITE, or SICE that meets the qualification conditions specified in Article 9, subparagraphs 2 to 7 and that has paid-in capital, appropriated operating capital, or exclusively allocated operating capital of not less than NT$30,000,000, and shall also comply or ensure the compliance with the following:
- The internal control system of the mandated institution shall include such operational principles as know-your-customer, product suitability analysis, filing with the SITCA for change or termination of the mandated institution, and its obligations for assistance and notification to the investors.
- The fund manager shall have obtained an asset management license or eligibility in the place of registration.
- The code of conduct for the institution mandated by the privately placed offshore fund.
The code of conduct under subparagraph 3 of the preceding paragraph, and any subsequent amendment thereto, shall be drafted by the SITCA and ratified by the FSC.
The mandated institution shall enter into a mandate agreement with the offshore fund institution; the required content of such agreement, and any subsequent amendment thereto, shall be drafted by the SITCA and ratified by the FSC.
The percentage of the investment in any individual privately placed offshore fund that is contributed by Taiwan investors may not exceed the limit set by the FSC.
In order to privately place offshore funds to specified persons in Taiwan, an offshore fund institution shall mandate an agent for litigious matters and an agent for tax matters.
In conducting a private placement to specified persons in Taiwan, if outward and inward remittance of investors' funds will be involved, the mandated institution shall submit relevant documentation to the CBC to apply for permission for relevant foreign exchange business.
Where an offshore fund institution itself conducts a private placement to specified persons in Taiwan, if outward or inward remittance of funds will be involved, the remittance shall be handled by the counterparty in accordance with the Regulations Governing the Reporting of Foreign Exchange Receipts and Disbursements or Transactions.
All receipts/payments of settlement monies and fees by the counterparty in respect of a private placement of offshore funds by an offshore fund institution shall be made in foreign currency. An offshore fund privately placed prior to the 3 September 2010 amendment and issuance of these Regulations whose placees include those specified in paragraph 1, subparagraph 2 shall, within six months after the issuance of the amendment to these Regulations, be submitted to review by the SITCA. If any non-compliance is found, the offshore fund institution and mandated institution may not accept any new purchase request, and shall assist the investors to apply for redemption or take any other necessary action.
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