The FSC deregulated the switch from private placement for real estate securitization to public offering to promote private investment in public infrastructure (Taiwan)

Jhen-Yi Chen

The Financial Supervisory Commission (hereinafter, the “FSC”) promulgated the amendments to the Guidelines for Handling the Issuance of Beneficial Securities by Trustee Institutions and the Issuance of Asset-Backed Securities by Special Purpose Companies (hereinafter, the “Guidelines”) and the Regulations Governing Public Placement or Private Offering of Real Estate Investment Trust or Asset Trust Beneficiary Securities (hereinafter, the “Regulations”) on April 8, 2019.  The amendments are highlighted below.

First, Article 5 of the Regulations as amended stipulates that if three years have elapsed since beneficiary certificates were privately placed or additionally privately placed by a trustee institution, and if stable revenues have been generated from investment in real estate or rights relating to real estate, the trustee institution may submit an application to the competent authority along with a proposal for appropriate credit enhancement mechanisms to change into a public offering before applying to the Taiwan Stock Exchange or the Taipei Exchange for listing or for trading in the premises of securities firms.

In addition, Article 4 of the Guidelines as amended changes the past requirement that a trustee institution placing or privately placing beneficiary certificates was required to apply to the competent authority for approval on a case-by-case basis but could not file one-time application for separate placements.  The new provision provides that beneficiary certificates or asset-backed securities may be issued in a comprehensive manner in five years.  Upon application, relevant documents shall be submitted to the competent authority for approval or for effective reporting.  However, the period of scheduled issuance shall not exceed five years.  Those who conduct a public offering or private placement of beneficiary certificates or asset-backed securities in a comprehensive manner are required to apply to the competent authority for reference after each placement or private placement is completed.

Moreover, Article 8 of the Guidelines as amended provides that for a trustee institution required to follow an approval system due to its prior sanction records, the scope of laws under which it was previously sanctioned is adjusted so that such law is limited to the Trust Law and causes of sanction irrelevant to the handling of securitization matters such as the Banking Law, the Insurance Law and the Securities and Exchange Law are deleted.

In addition, a trustee institution seeking to issue beneficiary certificates or a special purpose company seeking to issue asset-backed securities is required to apply to the competent authority for approval first.  For example, in case of an originator which is not a financial institution with its indebtedness greater than twice the net worth but does not entrust the same type of assets to a trustee institution or assign the same to a special purpose company to issue beneficiary certificates or asset-backed securities for the first time, and the originator’s financial structure is not materially different from that indicated in the previous application for approval or effective reporting, a reporting system may apply.