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Relevant Laws

Title:Taiwan Securities Association Rules Governing Underwriting and Resale of Securities by Securities Firms (2016.04.12)
Article 4-1     In the underwriting of securities on a firm commitment basis, except where prescribed by other laws and regulations, a securities underwriter shall act as prescribed by the following provisions with respect to the proportion of securities held for its own account, provided, however, that for any units purchased for its own account that remain unsubscribed at the closure of the underwriting period, these restrictions shall not apply:
  1. In an underwriting case involving cash capital increase, convertible (or exchangeable) corporate bonds, ordinary corporate bonds not handled by negotiated sale, financial bonds not handled by negotiated sale, or Taiwan depositary receipts for exchange (or over-the-counter (OTC)) listed companies, the underwriter shall hold for its own account from 5 percent to 15 percent of the total number of units underwritten;
  2. In an underwriting case for a cash capital increase by an emerging stock company other than an underwriting case for initial listing on the exchange or OTC market, the underwriter shall hold for its own account from 10 percent to 20 percent of the total number of units underwritten.
  3. In the underwriting of a cash capital increase for a company that is not exchange (or OTC) listed, the underwriter may hold for its own account a proportion not to exceed 15 percent of the total number of units underwritten;
  4. In an underwriting case involving preferred shares, preferred shares with warrants, or corporate bonds with warrants for public companies, the underwriter may hold for its own account a proportion not to exceed 15 percent of the total number of units underwritten;
  5. If a company already listed on a stock exchange or an OTC market, or an emerging stock company, either issues preferred shares and preferred shares with warrants for which the warrant is detachable (“preferred shares with detachable warrants”), corporate bonds and corporate bonds with warrants for which the warrant is detachable (“corporate bonds with detachable warrants”), the underwriter may set respectively the percentage to hold for its own account, provided that the percentage may not exceed 15 percent of the total number of units underwritten;
  6. In an underwriting case involving a secondary distribution of beneficial interest securities by a trustee institution or a secondary distribution of asset-backed securities by a special purpose company that is not undertaken through negotiated sale, purchases on own account shall not exceed fifteen percent of the total amount underwritten;
  7. In an underwriting case where an offering of real estate asset trust beneficial interest securities by a trustee institution is not undertaken through negotiated sale, purchases on own account shall not exceed fifteen percent of the total amount underwritten.
    In the underwriting cases contemplated under the preceding paragraph, for issues undertaken entirely by book building, each underwriter shall hold for its own account not more than 10 percent of the total number of units underwritten.
    Where a public company carrying out a cash capital increase encounters waiver of subscription rights by an existing government-agency shareholder in accordance with the provisions of Article 267, paragraph 3 of the Company Act, the portion thus incorporated into the public underwriting may be excluded when calculating the "total number of units underwritten" set out in paragraph 1, subparagraph 1.
    In a case involving an initial listing on a stock exchange (or OTC) market of securities not registered for emerging market trading or a case involving underwriting of an initial issuance of Taiwan Depositary Receipts, if the securities underwriter carries out the underwriting through public sale to outside parties, it shall first set aside 1,000 common shares (or 1,000 units of depositary receipts) from the offering for subscription by the Securities and Futures Investors Protection Center.
    Except for underwriting cases involving an OTC company transferring its listing to a stock exchange, or for underwriting cases for which there are other acts and regulations that provide otherwise, if an underwriting case involving an initial listing of shares in common stock on a stock exchange (or OTC) market is carried out on a firm commitment basis, the lead underwriter shall stipulate with the issuing company that the issuing company is to coordinate with its shareholders to provide previously issued shares in common stock (the number thereof to be set at a certain percentage of the total volume of shares to be sold publicly to outside parties in the current underwriting case) to the lead underwriter for the purpose of exercising overallotment during the underwriting period. The related procedures shall be carried out in accordance with the Taiwan Securities Association Rules Governing the Underwriting Procedures to be Followed by Underwriters in Conducting an Initial Listing on a Stock Exchange or Over-the-Counter Market.
Article 7     In the underwriting of securities issued through competitive auction as prescribed in the preceding article, except where the issuer is a government-owned enterprise or another party for which there are other acts or regulations that provide otherwise, underwriting of that portion of the offering put up for public sale to outside parties shall be handled in accordance with the following provisions:
  1. In an underwriting case involving an initial listing of shares on a stock exchange or an OTC market, the shares may be offered either entirely through competitive auction, or through a combination of competitive auction and public subscription. However, the portion allocated through public subscription shall not exceed 20 percent of the total number of shares underwritten.
  2. In the underwriting of an offering of convertible bonds, or of warrants that have been detached from preferred shares with detachable warrants or warrants that have been detached from corporate bonds with detachable warrants, or in the underwriting of a cash capital increase by a company already listed on a stock exchange or an OTC market in which all units are put up for underwritten distribution, all units shall be offered through competitive auction.
  3. In an underwriting case involving the offering of corporate bonds with warrants or an underwriting case involving a secondary distribution, the units may be offered either entirely through competitive auction, or through a combination of competitive auction and public subscription.
Article 35     In the underwriting of securities by competitive auction, the securities underwriter is limited to accepting bids from the following persons:
  1. ROC nationals at least 20 years of age.
  2. ROC institutional investors and securities investment trust funds offered by securities investment trust enterprises.
  3. Overseas Chinese and foreign nationals, as permitted under the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals.
  4. The Development Fund of the Executive Yuan, the Postal Savings System, the Public Employees Pension Fund, the Labor Pension Fund, and the Labor Insurance Fund.
  5. Other parties granted permission by the government.
Article 36     When a securities underwriter accepts competitive auction bids, it shall obtain from each subscriber a declaration that it does not meet any of the descriptions set out in the following subparagraphs, and the underwriter shall refuse a bid if its discovers that the subscriber does meet one of the following descriptions:
  1. an equity-method investee of the issuing company (issuing institution);
  2. an investor that has equity-method investments in the issuing company (issuing institution);
  3. 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;
  4. a foundation that has received one-third or more of its paid-in endowment from the issuing company (issuing institution);
  5. 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;
  6. the spouse of a director, a supervisor, or the general manager of the issuing company (issuing institution);
  7. a director, supervisor, or employee of the underwriting syndicate, or a spouse thereof;
  8. any person as set out in the preceding subparagraphs who participates in the offering under the name of another person (i.e. a person who meets the criteria of a de facto related party as defined in Article 2 of the Securities and Exchange Act Enforcement Rules).
Article 73     In an underwriting case involving ordinary corporate bonds, financial bonds not involving stock equity, or corporate bonds from which the warrants have been detached, the investors that a securities underwriter is allowed to contact to make a negotiated sale shall be limited to citizens of the Republic of China and parties meeting one of the conditions set out in Article 35, subparagraphs 2 through 6, subject mutatis mutandis to the provisions of Article 36, subparagraphs 7 and 8.The list set out in subparagraph 7 thereunder shall be limited to the underwriting syndicate's juristic-person directors, juristic-person supervisors, and juristic-person shareholders owning more than 10 percent of the company's shares. If the prospective buyers are limited only to professional investors as defined in the Taipei Exchange Rules Governing Management of Foreign Currency Denominated International Bonds, it is allowable for the prospective buyers to be the underwriting syndicate's juristic-person directors, juristic-person supervisors, and juristic-person shareholders holding more than 10 percent of the company's shares. However, the terms of issuance accorded to them may not be more more favorable than those accorded to other prospective investors of the same category.
    In an underwriting case involving an offering of beneficial interest securities by a trustee institution or a public offering of asset-backed securities by a special purpose company, the types of investors that a securities underwriter is allowed to contact to make a negotiated sale shall be limited to citizens of the Republic of China and parties meeting one of the conditions set out in Article 35, subparagraphs 2 through 6, subject mutatis mutandis to the provisions of Article 36, subparagraphs 7 and 8; provided, however, that the list set out in subparagraph 7 thereunder shall be limited to the underwriting syndicate's juristic-person directors, juristic-person supervisors, and juristic-person shareholders owning more than 10 percent of the company's shares.
    In an underwriting case involving the beneficial interest securities of a real estate investment trust, the types of investors that a securities underwriter is allowed to contact to make a negotiated sale shall be subject mutatis mutandis to the provisions of Article 35 and Article 43-1, paragraph 1, subparagraphs 15 and 17.
    In an underwriting case involving call (put) warrants, the types of investors that the warrants may be sold to shall be subject to the provisions of the Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings as well as the Taipei Exchange Rules Governing Review of Call (Put) Warrants Traded on Over-the-Counter Markets.
    In an underwriting case involving an initial listing on a stock exchange or OTC market of either shares in common stock where the overallotment is handled by means of negotiated sale, the provisions of Articles 35 and Article 43-1, paragraph 1, subparagraphs 8 to 15 and 17 shall apply mutatis mutandis with respect to the parties that a securities underwriter is allowed to engage in the negotiated sale process.