February 2023
Oli Wong and Jiselle Ong
To enhance the flexibility and efficiency of capital utilization, timely disclose financial information, and strengthen the supervision over overseas investment by futures commission merchants (hereinafter, “FCMs”), the Financial Supervisory Commission (hereinafter, the “FSC”) announced amendments to the Regulations Governing Futures Commission Merchants (hereinafter, the “Regulations”)[1] on December 22, 2022. Except for Article 24 of the Regulations, the rest of the Amendments went into effect on the announcement date. The Amendments are highlighted below:
1. To enhance the financial flexibility and capital utilization efficiency of the FCMs, the FSC used the Regulations Governing Securities Firms[2] for reference in stipulating the Amendments that if the special reserve reaches 25% of the paid-in capital, the excess may be capitalized; in addition, the Regulations established the legal basis for placing and issuing securities by FCMs (Articles 18 and 18-1 of the Regulations).
2. To balance the impact of administrative dispositions on the business development of FCMs, the Regulations specifically stipulated the circumstances where the FSC may reject the filing of a cash capital increase or corporate bond issuance by an FCM[3], provided that this restriction does not apply in cases where FCMs merge, or where a violation has been specifically corrected and the correction has been recognized by the FSC (Article 18-2 of the Regulations).
3. To accommodate the amendments to the Company Act, it is stipulated that when an FCM (either a public or non-public company) distributes surplus earnings or makes up losses, the financial report audited and attested by a certified public accountant shall be followed (Article 18-3 of the Regulations).
4. For the consistency of financial industry regulation, it is specifically stipulated that futures companies that publicly issue stocks, and futures subsidiaries affiliated with financial holding companies, shall announce and submit their annual financial reports within 75 days after the end of the fiscal year, and this requirement shall go into effect from the fiscal year of 2022 onwards (Articles 24 and 58 of the Regulations).
5. To strengthen the regulation of overseas investment, it is specifically stipulated that when a significant incident occurs in an overseas enterprise invested by an FCM, such an incident should be reported within three business days upon knowledge or occurrence of the incident. In addition, to further clarify such regulation, it is stipulated that FCMs may apply to the FSC for approval to increase their investment in overseas enterprises if they have not been subject to certain sanctions by the FSC, and have not been suspended or restricted from trading by the Taiwan Stock Exchange, the Taipei Exchange, and the Taiwan Futures Exchange or a futures clearing houses, for a certain period of time (Articles 56-5 and 56-10 of the Regulations).
[1] The FSC used the Regulations Governing Securities Firms as the reference for these Amendments.
[2] Article 14 of the Regulations Governing Securities Firms
[3] For example, circumstances such as having received a disciplinary warning from the FSC in the last three months or having been ordered by the FSC to relieve or replace the duties of any director (or supervisor) or managerial officer in the last six months. See Article 18-2 of the Regulations for details.
The contents of all materials (Content) available on the website belong to and remain with Lee, Tsai & Partners. All rights are reserved by Lee, Tsai & Partners, and the Content may not be reproduced, downloaded, disseminated, published, or transferred in any form or by any means, except with the prior permission of Lee, Tsai & Partners.
The Content is for informational purposes only and is not offered as legal or professional advice on any particular issue or case. The Content may not reflect the most current legal and regulatory developments. Lee, Tsai & Partners and the editors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The contributing authors’ opinions do not represent the position of Lee, Tsai & Partners. If the reader has any suggestions or questions, please do not hesitate to contact Lee, Tsai & Partners.