The Financial Supervisory Commission (hereinafter, the “FSC”) issued the Jin-Guan-Zheng-Tou-1070302972 Directive of February 12, 2018 to promulgate Articles 3, 56 and 57 of the Regulations Governing Securities Finance Enterprises (hereinafter, the “Regulations”) as amended. These amendments are highlighted below:
I. It is specifically stipulated that a securities finance enterprise shall set up its internal control system.
Currently, securities finance enterprises have set up their internal control system pursuant to Article 14-1 of the Securities and Exchange Law and the Guidelines for Handling Internal Control by Securities and Futures Enterprises. However, the Regulations havenot specifically required a finance enterprise to set up and thoroughly implement its internal control system. To promote the sound business operation of securities finance enterprises and to perfect the provisions concerning the internal control system shall be followed, Article 3 of the Regulations as amended specifically stipulates that a securities finance enterprise shall set up its internal control system pursuant to the Guidelines for Handling Internal Control by Securities and Futures Enterprises, and that its business operation shall comply with laws, regulations, and its articles of incorporation and internal control system.
II. The utilizing scope of a securities finance enterprise’scapitalobtained from the issuance of commercial papers is relaxed.
In view of the actual business needs of a securities finance enterprise, and in order to enhance the flexibility of its business operation, Article 56 of the Regulations was revised to relaxthe securities finance enterprise’s capital obtained from the issuance of commercial papers. Such scope is expanded to the types of business set forth in Article 5, Paragraph 1 of the Regulations.
III. It is specifically stipulated that a securities finance enterprise may use the proprietary capital to purchase “beneficiary certificates of securities investment trust funds.”
The previous provision under the Regulations,which stipulatesthat a securities finance enterprise may use the proprietary capital to “purchase beneficiary certificates with option of buy-back from securities investment trust businesses,” led toambiguitiesabout whether a securities finance enterprise may purchase exchange-traded funds (ETFs) traded in exchange market; therefore, the provisionin Article 57, Subparagraph 4 of the Regulations is revised as the “purchase of beneficiary certificates of securities investment trust funds” for the sake of clarity.