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Relevant Laws

Title：Taiwan Securities Association Rules Governing Underwriting and Resale of Securities by Securities Firms (2016.04.12)
Article 23     A lead underwriter underwriting securities by book building shall first carry out the matters listed in the following subparagraphs. All relevant agreements shall be signed or sealed by the lead underwriter, each co-underwriter, and the issuer (issuing institution), and then reported to the Taiwan Securities Association by the first business day prior to the start of the book building period (or by the second business day in the case of an initial listing on a stock exchange or an OTC market):
  1. formation of the underwriting syndicate by solicitation of co-underwriters;
  2. determination of the total quantity of securities to be offered by book building, and the number of units expected to be sold via overallotment;
  3. estimation of the anticipated offering price range, as determined in consultation with the issuer (issuing institution);
  4. determination of the firm-commitment fee or best-efforts underwriting fee, as determined in consultation with the issuer (issuing institution);
  5. determination of the lot size, in the event that the securities will be offered by public subscription.
  6. the issuer shall provide the securities underwriter with a list of the persons who are disqualified from participating in book building under these Rules.
Article 24     In the underwriting of securities by book building, the lead underwriter shall publish a book building announcement in daily newspapers on the first day on which book building bids are accepted. The content of said announcement shall be reported in hardcopy and electronic media to the Taiwan Securities Association by the first business day prior to the start of the book building period (or by the second business day in the case of an initial listing on a stock exchange or an OTC market), and shall include the items in the following subparagraphs:
  1. The name of the security.
  2. Total number of underwritten units, number of units expected to be sold via overallotment, number of units retained by the securities underwriters for their own accounts, the number of units for public sale, and the number of units for allocation by book building as a proportion of the total number of securities put up for public sale; in the case of an initial listing on a stock exchange or an OTC market involving simultaneous book building and public subscription procedures, the lead underwriter shall also note that it will adjust book building volume on the basis of the number of subscriptions received during the public subscription procedure.
  3. Where securities underwriters collect a book building bid deposit in accordance with the provisions of Article 40, Article 41, Article 42, or Article 42-1, the lead underwriter shall indicate the collection method, who is required to pay it, the amount, and conditions under which the deposit may be confiscated.
  4. Matters relating to the securities underwriters' collection from allotees of the entire amount of advance book building payments in accordance with Article 42-1.
  5. Matters relating to the collection of book building processing fees by securities underwriters in accordance with Article 26.
  6. The names, addresses, and telephone numbers of the underwriters.
  7. The anticipated offering price range. (If a case of an offering prior to an initial listing on a stock exchange or an OTC market involves emerging stock trading, the lower limit of the anticipated offering price range may not be less than 70 percent of the simple arithmetic mean trade price for the 10 business days in which trades have been executed in Emerging Stock trading before the book building agreement has been registered with the Taiwan Securities Association, and relevant explanations shall be attached.)
  8. The manner of disclosure of the prospectus, including: (1) a statement clarifying that the anticipated offering price range as disclosed in the prospectus is an estimate based on information gathered during book building; and (2) an explanation of how to inquire about subsequent offering price revisions.
  9. The securities on offer, and the method, time period, and site for submission of bids.
  10. Parties from whom book building bids will be accepted.
  11. The pricing date (in the case of an initial listing on a stock exchange or an OTC market involving simultaneous book building and public subscription procedures).
  12. Other supplemental items that must be disclosed in order to safeguard the public interest and investors.
    In the section specifying the parties from whom book building bids will be accepted (as set forth under the preceding paragraph), the announcement shall print the relevant provisions of Articles 35, 43, and 43-1, according to the type of securities on offer.
    In an underwriting case involving an initial listing on a stock exchange or an OTC market, when the lead underwriter registers with the Taiwan Securities Association the offering using hardcopy media as required in paragraph 1, it shall also submit a timetable adopted in compliance with the provisions of Article 42-1 and a declaration by the issuing company that it has already held a roadshow in accordance with TWSE or TPEx rules.
    If a declaration is not submitted in accordance with the preceding paragraph or the TWSE or TPEx notifies the Taiwan Securities Association that the issuing company has failed to hold a roadshow in accordance with regulations, the book building shall be postponed.
    In an underwriting case involving an initial issue of Taiwan depositary receipts, when the lead underwriter registers the issue with the Taiwan Securities Association using hardcopy media as required in paragraph 1, it shall also submit an evaluation of whether during the 3 months before the date of registration there has been any unusual movement in the price of the stock represented by the Taiwan depositary receipts.
Article 40     Where a company listed on a stock exchange or an OTC market carries out a cash capital increase through an issue of ordinary shares in which all shares are put up for underwritten distribution, and all shares put up for public sale are allocated through the book building method, after the price has been set and the underwriting contract has been registered with the Taiwan Securities Association, the following matters shall be carried out:
  1. Day One: Publish an underwriting announcement and mail prospectuses and notices of payment due.
  2. Day Two: Payment period commences, and book building bid deposits not corresponding to allocated shares are returned to unsuccessful bidders.
  3. Day Three: Specified parties make payment; issuer applies to the TWSE or the TPEx to list certificates of payment for shares on a stock exchange or an OTC market.
  4. Day Four: Underwriter carries out underwriting on standby commitment basis; shareholders' register is completed.
  5. Day Five: Certificates of payment for shares are listed on a stock exchange or an OTC market.
  6. Day Six: Certificates of payment for shares are issued and listed on a stock exchange or an OTC market.
    If any of the dates set forth in the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be postponed accordingly.
    The dates set forth under paragraph 1 may be changed if necessary by applying for approval with the Taiwan Securities Association.
    Where a company listed on a stock exchange or an OTC market carrying out a cash capital increase through an issue of ordinary shares uses the book building method to allocate all shares (other than those securities set aside for subscription by the company's employees) that are put up for underwritten distribution and public sale, those shares allocated to the company's employees may be handled in accordance with the provisions of paragraph 1, provided that said employees can comply with the payment period specified in paragraph 1.
    Where matters are undertaken in the manner set forth under paragraph 1, shares may be allocated on a priority basis to existing shareholders; provided, however, that the restrictions listed in Articles 27 and 43-1, paragraph 2 shall still apply.
    When a bidder submits a book building bid form, the securities underwriter may collect a bid deposit from the bidder of not more than 20 percent of the value of the securities bid for.
    The book building bid deposits not corresponding to allocated shares as referred to in the above paragraph 1 subparagraph 2 means the book building bid deposits paid by unsuccessful bidders, and bid deposits paid by lottery winners in excess of the amount required for securities actually allocated to them.
    The payment to be made by the bidder as referred to in paragraph 1 subparagraph 2 above shall be the price of the securities subscribed less any book building bid deposit remaining after the bidder has received (or not received) a refund in accordance with the provisions of the preceding paragraph. In the event a bidder does not fulfill his payment obligation within the allotted time, the securities underwriter may confiscate the book building bid deposit and shall retain for its own account said securities at the price offered to the bidder.
    A securities underwriter when collecting book building bid deposits as prescribed by paragraph 6 above shall do so by means of a trust, and shall specify in the trust contract the handling of default by the bidder and the damages for default..
Article 41     Where an underwriting case (other than one handled in accordance with the provisions of the preceding paragraph) is handled as prescribed by Article 21, Article 22, and Article 22-1, and all units are offered through a book building process, after the price has been set and the underwriting contract has been registered with the Taiwan Securities Association, the following matters shall be carried out:
  1. Day One: Publish an underwriting announcement and begin mailing subscription notices, prospectuses, related subscription notices, and notices of payment due.
  2. Day Two: Payment date, and date for refund of book building bid deposits not corresponding to allocated securities.
  3. Day Three: Payment deadline; issuer applies to the TWSE or the TPEx for a securities listing on a stock exchange or an OTC market.
  4. Day Four: Complete compilation of related registers.
  5. Day Five: Announcement of securities listing on a stock exchange or an OTC market.
  6. Day Six: Securities are issued and listed on a stock exchange or an OTC market.
    In an underwriting carried out as set forth under Article 22 subparagraph 4, the requirements set forth in subparagraphs 4, 5, and 6 above (concerning application to the TWSE or the TPEx for a listing on a stock exchange or an OTC market) shall not apply.
    If a date set forth in any of the subparagraphs under paragraph 1 falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be postponed accordingly.
    The dates set forth under paragraph 1 may be changed if necessary by applying for approval with the Taiwan Securities Association.
    If a company listed on a stock exchange or an OTC market carrying out a cash capital increase through an issue of preferred shares uses the book building method to allocate all shares (other than those securities set aside for subscription by the company's employees) that are put up for underwritten distribution and public sale, those shares allocated to the company's employees may be handled in accordance with the provisions of paragraph 1, provided that said employees can comply with the payment period specified in paragraph 1.
    In an underwriting case handled in accordance with the provisions of Article 21 or Article 22, paragraph 1, subparagraphs 1 to 3 and subparagraph 5, when a bidder submits a book building bid form, the securities underwriter may collect from the bidder a book building bid deposit equal to all or part of the value of the securities bid for.
    The phrase "book building bid deposits not corresponding to allocated securities" in paragraph 1 subparagraph 2 means the book building bid deposits paid by unsuccessful bidders, and bid deposits paid by lottery winners in excess of the amount required for securities actually allocated to them.
    The payment to be made by the bidder as referred to in paragraph 1 subparagraph 2 shall be the price of the securities subscribed to less any book building bid deposit to be refunded (or not refunded) to the bidder in accordance with the provisions of the preceding paragraph. In the event a bidder does not fulfill his payment obligation within the allotted time, the securities underwriter may confiscate the book building bid deposit and shall retain for its own account said securities at the price offered to the bidder.
    A securities underwriter when collecting book building bid deposits as prescribed by paragraph 5 shall do so by means of a trust, and shall specify in the trust contract the handling of default by the bidder and the damages for default..
Article 42     If the portion of an offering put up for public sale is underwritten partly by book building and partly by public subscription as prescribed in Article 22 (excepting underwriting as prescribed by the preceding Article), after the underwriting contract has been registered with the Taiwan Securities Association, the following matters shall be carried out:
  1. Day One: Publicly release a book building allocation announcement (an underwriting announcement shall be concurrently published at this time) and begin mailing subscription notifies, prospectuses, and notices of payment due.
  2. Payment period: The deadline shall be identical to that for payment of the subscription processing fee, the bid deposit, and prepaid postage, as set forth under Article 53 paragraph 1 subparagraph 5.
    If any of the dates set forth under the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be postponed accordingly.
    The dates specified under paragraph 1 may be changed if necessary by applying to the Taiwan Securities Association for approval.
    Where a company listed on a stock exchange or an OTC market carrying out a cash capital increase through an issue of preferred shares uses the book building method for a portion of the shares and public subscription method for another portion of the shares to allocate the shares (other than those securities set aside for subscription by the company's employees) that are put up for underwritten distribution and public sale, those shares allocated to the company's employees may be handled in accordance with the provisions of paragraph 1, provided that said employees can comply with the payment period specified in paragraph 1.
    When a bidder submits a book building bid form, the securities underwriter may collect from the bidder a book building bid deposit equal to all or part of the value of the securities bid for. The payment to be made by the bidder, as referred to in paragraph 1 subparagraph 2 above, shall be the price of the securities subscribed less the book building bid deposit. In the event a bidder does not fulfill his payment obligation within the allotted time, the securities underwriter may confiscate the book building bid deposit, and shall itself subscribe to the securities on the basis of the subscriber's payment.
    When the securities underwriter referred to in the preceding paragraph accepts a book building bid deposit from a subscriber, it shall do so by means of a trust, and shall specify in the trust contract the handling of default by the bidder and the damages for default..
Article 42-1     In an underwriting case where an initial listing on a stock exchange or an OTC market involves simultaneous book building and public subscription procedures conducted in accordance with Articles 21 and 21-1, the following matters shall be carried out beginning from the second business day after the book building agreement has been registered with the Taiwan Securities Association:
  1. Day One: Publish a book building announcement (together with a public subscription announcement) and begin accepting book building bids.
  2. Day Two: Public subscription commencement date.
  3. Day Four: Deadline for submission of book building bids and public subscriptions, and deadline for bidders to forward payment to their bank to cover subscription processing fees, subscription payments (calculated on the basis of the ceiling for the anticipated book building price range), and prepaid postage for lottery winner notification.
  4. Day Five:
    1. Set the offering price; the lead underwriter shall notify the TWSE and the Taiwan Securities Association of the actual offering price by 12:30 p.m. on that same day, and after 1:30 p.m. on that same day the TWSE shall disclose the information on its website and transmit it to brokers.
    2. Calculate the over-subscription ratio on the basis of the figure for public subscription volume as provided by the TWSE, and adjust the book building volume and public subscription volume accordingly.
    3. Conduct book building allocation.
    4. Execute underwriting contract.
    5. Date for deduction of subscription processing fees, subscription payments, and prepaid postage for lottery winner notifications; broker's bank undertakes matters regarding deduction of subscribers' subscription processing fees, subscription payments, and prepaid postage for lottery winner notifications.
  5. Day Six:
    1. Date for public drawing of lots. The TWSE undertakes the drawing, then produces and sends report of winner information to each broker, and compiles and reports the information to the lead underwriter for provision to subscribers for their review.
    2. File underwriting contract with the Taiwan Securities Association.
    3. Mail out allocation notices, prospectuses, and payment notices.
  6. Day Seven:
    1. Issue allocation announcement.
    2. Parties allotted shares through book building make payment.
    3. Payment date for subscription processing fees, subscription payments (calculated on the basis of the actual offering price), and postage.
    4. Brokers make no-interest refunds to non-lottery winners of bid deposits and prepaid postage; the subscription processing fees of non-lottery winners are not returned.
    5. If the offering price as set by the lead underwriter is lower than the bid deposit, brokers will make no-interest refunds to lottery winners of the difference between the bid deposit and the actual offering price.
    6. Underwriters shall send lottery winner notifications, prospectuses (or subscription forms), and other relevant materials to lottery winners by express registered mail or by electronic means.
    7. Issuer applies to the TWSE or the TPEx for a securities listing on a stock exchange or an OTC market..
  7. Day Eight: Specified parties make payment (the lead underwriter shall ascertain prior to 12 o'clock noon on that day whether the specified parties have made payment) or underwriters take up shares on their own accounts.
  8. Day Nine:
    1. Shareholders' register is completed.
    2. An issuer delivers certificates of payment to the Taiwan Depository & Clearing Corporation; a company applying for listing on a stock exchange or an OTC market delivers shares to the Taiwan Depository & Clearing Corporation.
    3. Listing of securities on a stock exchange or an OTC market is publicly announced.
  9. Day Ten:
    10. Securities are listed on a stock exchange or an OTC market.
    If a date set forth in any of the subparagraphs under the preceding paragraph falls on a weekend, regular holiday, or bank holiday, it shall be postponed by one day, and the dates that follow shall be postponed accordingly.
    The dates specified under paragraph 1 may be changed if necessary by applying to the Taiwan Securities Association for approval.
    When a bidder submits a book building bid form, the securities underwriter may collect from the bidder a book building bid deposit equal to all or part of the value of the securities bid for. The payment to be made by the bidder, as referred to in paragraph 1 subparagraph 6, item 2 above, shall be the price of the securities subscribed less the book building bid deposit. In the event a bidder does not fulfill his payment obligation within the allotted time, the securities underwriter may confiscate the book building bid deposit.
    When the securities underwriter referred to in the preceding paragraph accepts a book building bid deposit from a subscriber, it shall follow the requirements as prescribed by Article 12 paragraph 4.
    When an underwriter finalizes its book building allocation list, it may request that allotees pay the subscription price in full, and may cancel the eligibility for allocation of any bidder that fails to act as required.
    An underwriter may not reveal the actual offering price to any outside party before the TWSE discloses it on its website in accordance with paragraph 1, subparagraph 4, item 1.
    If the bids submitted during the book building are too few for the setting of a price, the lead underwriter shall notify the TWSE and the Taiwan Securities Association by the point in time set out in paragraph 1, subparagraph 4. The TWSE will not carry out a public drawing of lots, and brokers shall make no-interest refunds to bidders of bid deposits and prepaid postage for lottery winner notifications on the following business day, but subscription processing fees will not be refunded. Brokers shall also process the payment of subscription processing fees on that same day.
Article 43-1     The provisions of Article 35 apply mutatis mutandis to the parties from which a securities underwriter is allowed to accept book building bids. In addition, when conducting an underwriting case involving an initial listing on a stock exchange or an OTC market or an initial offering of Taiwan Depositary Receipts, the underwriter shall refuse bids involving the participation of any of the parties listed in the following subparagraphs, and shall also obtain declarations from bidders affirming that they meet the eligibility requirements for purchasers:
  1. An employee of the issuer.
  2. A director, supervisor, or managerial officer (or a spouse, son, or daughter thereof) of a company that has underwriting business dealings with an underwriter.
  3. A financial holding company to which an underwriter itself belongs, or another subsidiary of such a financial holding company; however, this restriction does not apply to a securities investment trust fund offered by a securities investment trust company belonging to such a financial holding company.
  4. A director, supervisor, or managerial officer (or a spouse, son, or daughter thereof) of a financial holding company to which an underwriter itself belongs, or of another subsidiary of such a financial holding company.
  5. A de facto related party of the issuer or an underwriter.
  6. An attesting CPA of the issuer, any other CPA of that CPA’s office, or a spouse thereof.
  7. A lawyer who has issued a legal opinion in connection with the underwriting case, or the spouse thereof.
  8. An equity-method investee of the issuing company (issuing institution).
  9. An investor that has equity-method investments in the issuing company (issuing institution).
  10. A company whose chairman or general manager is the same person as the chairman or general manager of the issuing company (issuing institution), or is the spouse thereof, or is a relative thereof within the second degree of kinship.
  11. A foundation that has received one-third or more of its paid-in endowment from the issuing company (issuing institution).
  12. The issuing company's (issuing institution's) directors, supervisors, general manager, assistant general manager(s), deputy assistant general managers, or any division officer serving directly under the general manager.
  13. The spouse of a director, a supervisor, or the general manager of the issuing company (issuing institution).
  14. A relative within the second degree of kinship of a director, a supervisor, or the general manager of the issuing company (issuing institution).
  15. A director, supervisor, or employee of the underwriting syndicate, or a spouse thereof, or a relative thereof within the second degree of kinship.
  16. A depositary institution of Taiwan depositary receipts and any director, supervisor, or managerial officer, employee (or a spouse, son, or daughter thereof) of the depositary institution.
  17. A party listed in any of the preceding subparagraphs that uses the name of another party to participate in subscription (i.e. a de facto related party that engages in any of the acts set out under Article 2 of the Securities and Exchange Act Enforcement Rules).
    When a securities firm, acting on behalf of a company already listed on a stock exchange or an OTC market, conducts an underwriting case involving a cash capital increase or an offering of corporate or financial bonds with equity characteristics, or warrants detached from preferred shares with detachable warrants or detached from corporate bonds with detachable warrants, the parties from whom it is allowed to accept book building bids shall be restricted by the mutatis mutandis application of subparagraphs 3 to 15 and 17 of the preceding paragraph.
    In a case of a secondary offering of Taiwan Depositary Receipts, the parties from whom book building bids are accepted shall be restricted by the mutatis mutandis application of subparagraphs 3 to 17 of paragraph 1.
    For securities allocated by an underwriter but not paid for by the subscribers and subsequently placed with a specified party, the provisions of paragraphs 1 to 3 shall apply mutatis mutandis to the specified party.
    When a securities firm conducts an underwriting case involving an initial listing on a stock exchange or an OTC market, or involving an initial issue of Taiwan depositary receipts, it furthermore shall obtain declarations from the bidders affirming their consent for the provision of the book building information (including the remittance bank and account number) to the TWSE and the TPEx for the establishment of files, provided that the information will not be externally disclosed for any purpose other than provision to the TWSE, TPEx, and the competent authority for securities for supervision and auditing purposes.