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Amended Article

Title：

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

Amended Date： 2022.11.07 
Article Content Content Search Article No. Search Legal Basis Amended Article Legislative History Chinese
2     The term "wealth management business" refers to a securities firm, through its associated persons, providing a high net worth customer with the following services according to the demands of the customer:
  1. 1. Consulting in connection with asset allocation or financial planning, or services in connection with the sale of financial products..
  2. 2. Conducting financial planning and the execution or handling of asset allocation on behalf of the customer by means of a trust.
    Each individual securities firm sets its own criteria, based on its operational strategies, or with reference to the criteria for professional investors under Article 3 of the Regulations Governing Offshore Structured Products, for what constitutes a "high net worth customer" as set out in the preceding paragraph.
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7     If wealth management business conducted by a securities firm involves another financial business for which special approval is required, permission for concurrent conduct of such business and the qualification requirements for personnel to engage in the business shall be handled in accordance with legal provisions governing the business in question.
    If wealth management business conducted by a securities firm involves offshore structured products or any other financial products for which a distinction exists between professional investor and non-professional investor, the securities firm shall additionally conduct the business pursuant to the regulations applicable thereto.
16     When a securities firm adopts working procedures for business promotion and risk management of customer accounts, such procedures shall include at least:
  1. The securities firm shall adopt standard operating procedures for conducting the promotion of wealth management business, to ensure that the workflow and related documents are compliant with the applicable legal requirements, and shall cover such matters as product explanations, risk disclosure, and fee itemizations and standards (including products sold on consignment).
  2. When selling products, the securities firm shall provide a risk disclosure statement to the customer, and shall ask the customer to provide written confirmation that he or she understands the product risks.
  3. The securities firm shall prepare and provide to the customer a handbook on customer rights and interests, and shall include information on how the customer can express comments and lodge complaints, the mechanism whereby the securities firm responds to and handles customer comments, and other information related to the safeguarding of customer rights and interests.
  4. If a securities firm conducting wealth management business recommends or sells to a customer any product issued by another institution, it shall be liable for any dispute arising in connection with any promotion of false products or failure to properly disclose associated risk. This liability shall be fully disclosed to customers in the handbook on customer rights and interests referred to in subparagraph (3).
  5. The securities firm shall establish transaction control mechanisms to avoid providing to customers products or services exceeding their credit limits, financial capacity, or suitable investment scope, and to avoid unauthorized business activities or improper consulting activities by wealth managers.
  6. For important documents and reports that the securities firm provides to the customer, it shall establish an appropriate control mechanism and indicate the number of years information is to be kept on file, to ensure the suitability and accuracy of the content. Where there is an information change or data error of material significance, the securities firm shall promptly notify the customer and handle the matter appropriately.
  7. The securities firm shall adopt appropriate working rules, and closely monitor, evaluate, and report to the customer any changes in a customer's asset allocation and investment portfolio.
  8. The securities firm shall establish a system for reporting to the customer regularly and from time to time. Apart from the report items set out in subparagraphs (6) and (7), which are mandatory, the content, scope, manner, and frequency of other related reports shall be set by mutual agreement between the two parties.
  9. When selling a financial product, the securities firm shall give comprehensive consideration to the term and risk level of the financial product, and to the customer's age, experience in the trading of financial products, and degree of risk tolerance.
  10. When conducting wealth management business, the securities firm shall keep records of the content of its important communications with the customer with respect to matters such as its introduction of the financial products and risk disclosures and shall keep the records on file for inspection.
    For securities firms conducting wealth management business, guidelines with respect to the conduct of financial product sales, sales advertising and business promotional activities shall be drawn up by the Securities Association and reported to the FSC for review and approval.
    Where a securities firm conducts wealth management business by means of trusts, its advertising, soliciting, and business promotional activities for the trust business shall be governed by the Regulations Governing the Scope of Business, Restrictions on Transfer of Beneficiary Rights, Risk Disclosure, Marketing, and Conclusion of Contract by Trust Enterprises (hereinafter,"Regulations Governing the Conclusion of Contract by Trust Enterprises".
18     (Deleted)
19     A securities firm shall adopt internal control and internal auditing regimes in accordance with the working procedures and mechanisms. The internal audit department or legal compliance department shall regularly review the content of the various rules to ensure compliance with laws and regulations, and intensify the auditing of the implementation of wealth management business, to control and manage the compliance of work procedures and transaction procedures with internal rules and with laws and regulations.
    The internal audit department shall intensify auditing of the implementation of work procedures relating to "Know Your Customers" evaluation, suitability of customer investment amounts and scope, and anti-money laundering procedures, and review the effectiveness of the establishment of related controls and mechanisms.
    A securities firm, when applying to conduct wealth management business by means of trusts, shall appoint at least one individual dedicated to internal auditing.
    The internal auditor as referred to in the preceding paragraph may concurrently hold the position of internal auditor for both wealth management business and securities businesses.
27     When a securities firm conducts wealth management business by means of trusts, it shall carry out tax withholding for the customer, who is the taxpayer, and issue a tax withholding statement for the fiscal year in which the income occurs in accordance with the Income Tax Act and its related regulations.
    When a securities firm conducts wealth management business, it may collect a fee from the customer, with the fee rate to be stipulated between the securities firm and the customer.
    The provisions of Point 26, paragraph 3 shall apply mutatis mutandis to the method of transfer when returning a customer's funds after the securities firm has withheld tax and deducted applicable fees in accordance with the preceding two paragraphs.
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29     A securities firm conducting wealth management business by means of trusts shall transmit relevant information for each month, that is prepared in the format prescribed by the Securities Association and has been reported to the FSC for recordation, to the Securities Association by the 10th day of the following month.
    For a securities firm conducting wealth management business by means of trusts, when it reports to the Trust Association with statements related to trust accounts pursuant to Article 10 of the Regulations Governing the Concurrent Operation of Trust Business, it shall also report to the Securities Association with copies of the same statements.
32     With the exception of the type of business under Point 4, paragraph 1, subparagraph 4, which shall be conducted pursuant to the Regulations Governing Management and Utilization of Collective Investment Trust Funds, to conduct business set out in Point 2, paragraph 1, subparagraph 2 herein a securities firm shall submit the application, together with following documents, to the TWSE, which shall review them and forward a report to the FSC for its approval:
  1. Documentary proof that the securities firm meets the qualification requirements for conducting business set out in Point 2, paragraph 1, subparagraph 1 herein (not required if the securities firm is simultaneously applying for approval for that business).
  2. Articles of incorporation or equivalent documents.
  3. Documentary proof of the regulatory capital adequacy ratio.
  4. The CPA-audited and attested financial report for the most recent period.
  5. Documentary proof of the long-term credit rating.
  6. Documentary proof that the securities firm meets the qualification requirements for operating this line of business (proof that it has not been sanctioned by the FSC is not needed).
  7. Minutes of the meeting at which the board of directors passed the resolution to apply to operate this line of business.
  8. Documentary proof of the effectiveness of the internal control system and risk management culture, passed by resolution of the board of directors:
    1. The securities firm has specifically corrected any material defects in internal controls.
    2. The securities firm has properly handled customer complaint cases and maintains good quality in treating customers fairly.
    3. The board of directors and senior management personnel effectively implement corporate governance and take measures to enhance the effectiveness of the risk management culture.
  9. Business plan, with content including the following items:
    1. Business planning: the trust business activities, types of trust business, and operational procedures and risk management for operating this line of business.
    2. Accounting system.
    3. Internal control system and internal audit system.
    4. Matters concerning protecting the rights and interests of customers.
    5. Business operation capability and investment of resources: staffing and equipment assessment (including information systems), plans for professional talent development and training for the next three years, salary and compensation incentives and performance evaluation system.
  10. A list of personnel that operate and manage trust business, and documentary proof of their qualifications.
  11. A written statement of the non-existence of the circumstances listed in Article 2 of the Regulations Governing Expertise or Experience with respect to the responsible person.
  12. A template trust agreement.
  13. Other documents as required by FSC regulations.
    An ROC branch of a foreign securities firm intending to apply to conduct the business under the preceding paragraph shall file its application with the TWSE, which shall forward a report to the FSC, and shall furnish with the application a letter of consent from the board of directors of its head office, or a document signed by an entity or personnel authorized by the head office.
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33     For an application for a securities firm's branch unit to conduct business set out in Point 2, paragraph 1, subparagraph 2 herein, the securities firm shall submit the application, together with following documents, to the TWSE, which shall review them and forward a report to the FSC for approval:
  1. Documentary proof of that the securities firm's head office has obtained the approval from the competent authority to operate wealth management and trust businesses.
  2. Minutes of the meeting at which the board of directors passed the resolution to apply to operate this line of business.
  3. Documentary proof of the effectiveness of the internal control system and risk management culture, passed by resolution of the board of directors:
    1. The securities firm has specifically corrected any material defects in internal controls.
    2. The securities firm has properly handled customer complaint cases and maintains good quality in treating customers fairly.
    3. The board of directors and senior management personnel effectively implement corporate governance and take measures to enhance the effectiveness of the risk management culture.
  4. Business plan, with content including the following items:
    1. Business planning: the trust business activities, types of trust business, and operational procedures and risk management for operating this line of business.
    2. Accounting system.
    3. Internal control system and internal audit system.
    4. Matters concerning protecting the rights and interests of customers.
    5. Business operation capability and investment of resources: staffing and equipment assessment (including information systems), plans for professional talent development and training for the next three years, salary and compensation incentives and performance evaluation system.
  5. A list of personnel that operate and manage trust business, and documentary proof of their qualifications.
  6. A written statement of the non-existence of the circumstances listed in Article 2 of the Regulations Governing Expertise or Experience with respect to the responsible person of the branch unit.
  7. Other documents as required by FSC regulations.
    Where the head office and a branch unit of a securities firm simultaneously apply for the approval to conduct the business under the preceding paragraph, they may consolidate the identical application documents.
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34     For an application for a securities firm's head office or branch unit to conduct wealth management business by means of trusts, the securities firm shall apply for reissuance of the permission license within 6 months from the date the permission is granted. If the securities firm fails to apply for reissuance within the time period, the FSC may revoke the permission license. Notwithstanding the foregoing, where there is a legitimate reason, an application may be filed with the FSC before expiration of that period, for an extension of 6 months, to be granted only once.
    When applying for reissuance of the permission license, the securities firm shall submit the registration particulars of its head office or branch unit, together with other documents as required by FSC regulations, to the TWSE, which shall review them and forward a report to the FSC.
    A securities firm conducting wealth management business by means of trust shall, in addition to applying for reissuance of its permission license, complete the registration of its added lines of business in the FSC-designated Internet reporting system, pursuant to the requirements of the Regulations Governing the Concurrent Operation of Trust Business. Prior to the registration, the securities firm shall have both the general manager and the person in charge of legal compliance to verify that the lines of business to be registered comply with applicable laws and regulations, and shall prepare documentary proof of admission to membership in the Trust Association and that it has set aside compensation reserve fund pursuant to provisions of the Trust Enterprise Act. Concurrent operation of trust business shall be commenced only after the TWSE has reviewed the aforementioned documentation and forwarded a report to the FSC.
    Where the head office or branch unit of a securities firm fails to commence operations within 3 months from its receipt of the permission license, or where it has commenced operations but subsequently suspends them of its own accord for 3 months or longer, the FSC may revoke the permission license. However, this restriction shall not apply where there is a legitimate reason, and an extension has been approved by the FSC.