The Financial Supervisory Commission requires that a bank’s offshore banking unit which operates securities business concurrently without obtaining a license for such concurrent operation is required to obtain a license within six months on a supplemental basis after the release of this Directive (Taiwan)

Teresa Huang

The Financial Supervisory Commission issued the Jin-Guan-Yin-Wai-10600244510 Directive of November 27, 2017 (hereinafter, the “Directive”) to prescribe relevant requirements for securities business handled by a bank’s offshore banking units. The Directive came into effect on the day of its issuance.

It was first pointed out in this Directive that a bank’s offshore banking unit which concurrently operates brokerage or intermediary services for the trading of foreign currency denominated securities relating to Article 4, Paragraph 1, Subparagraph 4 of the Offshore Banking Act, trading of foreign currency denominated securities under Subparagraph 6 of the same paragraph, and securities underwriting business outside of the Republic of China under Subparagraph 7 of the same paragraph shall formulate relevant policies and follow know-your-customer, customer classification, product review classification and product appropriateness requirements. Meanwhile, the internal control and audit systems such as marketing procedure and risk notification shall also be controlled, internal operating procedures shall be established and thoroughly implemented, and product sales information shall be periodically provided to the competent authority.  For concurrent operation of securities business, the books and records of an offshore banking unit shall be separately maintained and be disclosed in the financial statements of the independent securities department set by the head office (or the branch set up by a foreign bank upon application for recognition).

In addition, this Directive points out that the securities involving the concurrent securities business operated by a bank’s offshore banking unit not only shall be approved by the competent authority and the denomination currency shall not be New Taiwan Dollars, but also the underlying objects and investment portfolio shall not involve any New Taiwan Dollar exchange rate, New Taiwan Dollar interest benchmark or New Taiwan Dollar denominated products.

Finally, for securities business which has been previously handled by a bank’s offshore banking unit without a license, supplemental application shall be filed within six months after the issuance of this Directive. As for transactions which have been handled by a bank’s offshore banking unit with trading counterparts not meeting the requirements of this Directive and are still in existence before the release of this Directive, the handling of such transactions may continue based on the original terms until their maturity dates.