Article 46-1 of the Real Estate Securitization Statute (hereinafter, the “Statute”) as amended was adopted during the 8th Meeting of the 4th Session of the 9th Term Legislative Yuan on November 14, 2017.
Article 46-1 of the Statute before amendment stipulated that in case of any falsehood or concealment of the major contents of a prospectus for a real estate investment trust or real estate asset trust, relevant participating institutions shall be jointly and severally liable to bona fide counterparts for their damage. The requirement under Article 46-1 of the Statute before amendment that a promoter or the trustor or responsible person of a real estate asset trust who is not able to conduct before-the-fact audit shall be jointly and severally liable together with other institutions, promoters or trustors for any falsehood or concealment in the main contents of a prospectus is obviously too stringent and unreasonable.
In addition, the individuals set forth in Article 46-1, Subparagraphs 3 through 8 of the Statute before amendment are the ones who provide the main contents and information in a prospectus or investment specification based on their expertise. However, they may not necessarily be able to speak to the accuracy and comprehensiveness of the contents which fall beyond their expertise or which they do not provide. In addition, they only receive a specific ratio of remuneration for their services. That Article 46-1 of the Statute before amendment caused the above individuals to assume unforeseeable and inassessable risks is unfavorable to the participation in real estate securitization cases by the above individuals.
Considering that the contents of a prospectus are mostly information contributed by various participating institutions or professionals and that the institutions or professionals may not necessarily be able to confirm the accuracy and comprehensiveness of the materials provided by other participating institutions, Article 46-1 of the Statute as amended distributes the liabilities of relevant participating institutions in order to balance the assumption of risks and responsibilities. To wit, with the exception of an entrusted institution, if various related parties can substantiate that due diligence has been done with justified grounds for believing that there is no falsehood or concealment in the main contents or justified reasons for the belief that the certified opinions are true, they will be released from liabilities. In addition, the requirement that a promoter or the trustor and responsible person of a real estate asset trust shall not be released from their liabilities by way of substantiation was deleted.