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Title: Rules Governing Securities Investment Trust Enterprises
Date: 2009.09.25 ( Amended )

Article Content

 
Chapter I General Provisions
Article 1     These Rules are prescribed pursuant to the provisions of Paragraph 2 of Article 18 of the Securities and Exchange Law (the "Law").
Article 2     The term "Securities Investment Trust Enterprise" ("SITE") referred to herein shall mean the enterprise engaging in the following businesses:
  1. issuing beneficiary certificates for raising securities investment trust fund;
  2. using securities investment trust fund in the investment in securities and its related products;
  3. accepting consignment of discretionary account investment; and
  4. other relevant businesses as approved by the Securities & Futures Commission of the Ministry of Finance ("SFC").
    The beneficiary certificates referred to in Item 1 above may be collected and delivered through book-entry transfer, in which case printing of physical beneficiary certificates may be exempt.
    A SITE engaging in the business as referred to in Item 3 of Paragraph 1 above shall process business matters in accordance with the Regulations Governing the Discretionary Account Business of Securities Investment Consulting Enterprises and Securities Investment Trust Enterprises.
Article 3     The operation of a SITE shall be approved by the SFC.
Article 4     The SITE shall be organized in the form of company-limited-by-shares only, and its paid-in capital shall not be less than NT$300,000,000.
    The total amount of the minimum paid-in capital referred to in the preceding Paragraph shall be fully subscribed to by the promoters at the time of incorporation.
Article 5     The total combined number of shares held by each of a SITE's shareholders, except for those shareholders meeting the qualifications under Article 8 herein, and the shareholder's related persons or other persons in whose name shares are held, shall not be more than 25% of the total issued and outstanding shares of such SITE.
    The total numbers of shares held by the shareholder of the SITE established prior to the March 1, 1996 amendment and implementation of these Rules and its related persons or other persons in whose name shares are held shall not be subject to the restriction referred to in the preceding Paragraph, provided that purchase of shares shall not be allowed if the portion in excess of 25% has been assigned.
    The term "related persons" referred to in the preceding two Paragraphs shall mean any of the following:
  1. Where the shareholder is a natural person, the spouse, blood relative within the second degree, or the enterprise in which the shareholder or its spouse is acting as the responsible person; or
  2. Where the shareholder is a juridical person, any juristic person who is under the common control of, or who controls or is controlled by, the juristic person shareholder.
Article 6     A director or supervisor of a SITE or a shareholder holding more than a 5% share of the total outstanding shares of a SITE may not concurrently serve as the promoter of any other domestic SITE or hold more than 5% of the outstanding shares of such a SITE.
    A person having the relationship of affiliated enterprise as defined under Chapter 6-1 of the Company Law with respect to a director, supervisor or shareholder holding more than 5% of the outstanding shares of a SITE may not assume the position of promoter, director, supervisor, or shareholder with a more than 5% of the outstanding shares of another SITE.
Article 7     One or more of the shareholders of a SITE shall conform to the qualifications set forth under Article 8, and the total combined shares of said persons shall not be less than 20% of the total outstanding shares of the SITE.
    When a shareholder as referred to in the preceding paragraph assigns shares, the SITE shall apply for recordation with the Securities and Futures Commission prior to such assignment.
Chapter II Establishment of a SITE
Article 8     In operating a SITE, the promoters shall include a fund management institution, bank, insurance company, securities firm or financial holding company which meets the following qualifications, and the aggregate shares subscribed to by such promoters shall not be less than 20% of the shares of the first issue:
  1. Fund Management Institutions:
    1. The fund management institution shall have been established for a full three years, and shall not have received any disposition from the competent authority of its home country in relation to fund management affairs during the preceding three years.
    2. The fund management institution shall have experience in the management or operation of international securities investment trust fund business;
    3. Among the assets managed by the fund manager and its affiliates in which it holds 50% or more of the shares, the total asset value of the mutual funds, unit trust or investment trust funds which are publicly offered for investment in securities shall not be less than NT$65 billion.
  2. Banks:
    1. The bank shall have been established for a full three years, and shall not have received any disposition from the competent authority of its home country in relation to fund management affairs during the preceding three years.
    2. The bank shall have experience in international banking, securities or trust business.
    3. The bank shall have ranked among the top 1,000 world banks in terms of assets or net worth in the preceding year.
  3. Insurance Company:
    1. The insurance company shall have been established for a full three years, and shall not have received any disposition from the competent authority of its home country in relation to fund management affairs during the preceding three years.
    2. The insurance company shall have experience in the management of insurance funds.
    3. The insurance company shall hold securities with a total asset value of at least NT$8 billion.
  4. Securities firm:
    1. The securities firm shall have been established for three full years, and shall be a securities firm engaging in combined securities underwriting, dealing, and brokerage operations.
    2. The securities firm shall have received no disposition under Article 66, subparagraphs 2-4 of these Rules in the preceding three years; in the case of a foreign securities firm, the firm shall have received no disposition from the competent authority of its home country equivalent to the abovementioned disposition.
    3. The securities firm shall have actual paid-in capital of NT$8 billion or more, and in its CPA audited and certified financial report for the most recent period shall have reported a net worth for all shares of not less than par value.
  5. Financial Holding Company:
    1. The financial holding company shall have been established in accordance with the provisions of the Financial Holding Company Law.
    2. Subsidiaries in which the financial holding company holds 50% or more of the shares shall conform to at least one of the qualifications in the preceding three subparagraphs.
    When a promoter meeting the qualifications of the preceding paragraph assigns shares, the SITE shall make an application for recordation with the Securities and Futures Commission prior to such assignment.
Article 9     A SITE promoter shall not meet any of the following conditions:
  1. Having once committed a crime under the Organized Crime Prevention Act, where less than five years have passed since completion of the term of sentence following upon a conclusive judgment;
  2. The promoter has previously been sentenced to imprisonment for one year or more for fraud, breach of trust or misappropriation, where less than two years have passed since completion of the term of such imprisonment;
  3. The promoter has been convicted of having committed misappropriation related to public function or occupation and the completion of the term of imprisonment has expired for less than two years;
  4. The promoter has been adjudicated bankrupt and his rights have not been reinstated, or where the promoter previously served as the director, supervisor, manager, or otherwise held an equivalent position of a juristic person when such juristic person was adjudicated bankrupt, and a period of three (3) years has not elapsed since the bankruptcy was concluded or a settlement has not been fulfilled;
  5. The promoter's checks or notes have been rejected by any financial institution for a specified term that has not yet elapsed;
  6. The promoter has either no legal disposing capacity or limited disposing capacity;
  7. A fine or a heavier punishment has been imposed on the promoter in accordance with the Law, and less than three (3) years have elapsed after the completion of the punishment, the expiration of the period of suspension of punishment, or pardon;
  8. The promoter was discharged from its functional duties pursuant to Article 56, and Item 2 of Article 66 of the Law, and a period of three (3) years have not elapsed since such punishment;
  9. The promoter is convicted of having violated the provision of Paragraph 1 of Article 29 of the Banking Law by engaging in acceptance of deposits, acting as a trustee in managing trust funds or trust properties for the public, or conducting inward and outward remittance business, and less than three (3) years have elapsed after the completion of the punishment, expiration of the period of suspension of punishment, or pardon;
  10. The promoter has violated Article 33 of the Trust Enterprise Law by engaging in trust business, and less than three years have passed after the completion of the punishment or the period of suspension of punishment following upon a conclusive judgment.
  11. The promoter has previously acted as the director or supervisor of a securities firm, SITE, or securities investment consulting enterprise, and during the term of such position, such enterprise has been subject to disposition under Article 66, Subparagraphs 3 or 4 of the Law, resulting in suspension of business or cancellation of its operating license, and less than one year has passed subsequent to such disposition.
  12. The promoter has been subject to removal from position or suspension of executive capacities under Article 100, Paragraph 1, Subparagraph 2 or Article 101, Paragraph 1 of the Futures Trading Law, and less than five years have passed subsequent to such disposition.
  13. There is a finding that the promoter has allowed the use of its own name by others for the purpose of acting as the promoter, director, supervisor, manager or business personnel of a SITE.
  14. Factual evidence shows that the promoter has engaged in or been involved in other dishonest or improper activities, demonstrating that the promoter is unsuitable for engaging in securities investment trust business.
    Where the promoter is a juristic person, the provisions of the preceding Paragraph shall apply mutatis mutandis with respect to the exercise of duties by a representative or designated representative.
Article 10     A promoter of a SITE shall not concurrently serve as the promoter of another domestic SITE during the prescribed period in which shares may not be transferred as set forth under Article 163, Paragraph 2 of the Company Law.
    A person who has served as the promoter of a SITE in accordance with the qualifications set forth under Article 8 may not serve as the promoter of any other SITE within three years of the date of issuance of the operating license of that SITE by the Securities and Futures Commission.
Article 11     To operate a SITE, the promoters shall, within the time limit set by the SFC, submit an application together with the following documents to the SFC for approval:
  1. Articles of incorporation;
  2. A business plan, listing principles for operation of business, internal organization and division of responsibility, plans for offering and issuance of securities investment trust funds and plans for development for the next three years, hiring and training of personnel, condition of site facilities, and financial forecasts for the next three years;
  3. A roster of promoters, listing the names of natural or juristic persons, their resident or corporate address and amount of investment;
  4. Minutes of promoters meeting;
  5. Supporting documents of the promoters' qualifications in conformance with Article 8 herein;
  6. A statement that none of the conditions in the preceding two articles apply to the promoter(s);
  7. The review form for application for SITE establishment reviewed by lawyers or CPAs, and the summary opinion issued with respect thereto;
  8. Other documents as required by the SFC.
    If the particulars in the documents referred to in the preceding Paragraph are incomplete and if such situation can be corrected, the SFC may notify the applicant to make corrections within a specified time limit. Failure to make corrections within the time limit shall subject the application to rejection.
Article 12     In any of the following events, the application for operation of the SITE may be disapproved by the SFC:
  1. There has been violation of any of the provisions of Article 6 herein;
  2. The qualifications of the promoter do not conform with the provisions of Article 8 herein;
  3. Any of the conditions listed under Article 9 or Article 10 are found to apply to a promoter;
  4. The application documents or particulars thereof are found to be false or untrue;
  5. The business plan is not concrete or cannot be effectively implemented;
  6. There is the possibility that the promoter's professional competence is not sufficient for sound and effective engagement in SITE business;
  7. Where any other provision of these Rules is not met.
Article 13     The SITE shall, within six (6) months from the date of SFC approval, complete company registration and submit to the SFC the following documents along with an application for issuance of business license:
  1. An application form.
  2. Company registration documents;
  3. The articles of Incorporation;
  4. A roster of shareholders and minutes of the shareholders meeting;
  5. A declaration that the shareholders have committed no violation of the provisions of Article 5.
  6. A roster of directors and supervisors and minutes of the meeting of the Board of Directors;
  7. A financial report issued within one month of the date of application, audited and certified by a CPA, for which an unqualified opinion was issued.
  8. A declaration that the directors, supervisors, and managers have committed no violation of the provisions of Article 53 of the Law or Article 6, Paragraph 1 or Article 17 of these Rules.
  9. Evidentiary documents showing that the general manager meets the qualifications set forth under Article 18, Paragraph 1.
  10. Evidentiary documents showing that the assistant general manager meets the qualifications set forth under Article 19, Paragraph 1.
  11. A declaration stating that the responsible person and department supervisors conform with the provisions of Articles 17 and 32.
  12. A roster of the managers, department supervisors, and business personnel, and documents evidencing their qualifications.
  13. A photocopy of the title or lease for the operating venue and floor plans and photographs thereof.
  14. A written description of the internal control system and an unqualified review opinion issued by a CPA.
  15. Documents certifying approval for entry into the Securities Investment Trust and Consulting Association of the R.O.C. ("the Association").
  16. Review form for application for issuance of operating license for a SITE.
  17. Other documents as required by the SFC.
    If the SITE fails to apply for issuance of a business license within the time limit referred to in the preceding Paragraph, the approval for operation of the SITE shall be revoked; provided that if there is any justifiable reason, an application for extension may be filed with the SFC. The period of extension shall not be more than six (6) months, and only one extension shall be allowed.
    A SITE shall enter into the Association within one month after commencing business.
Article 14     A SITE which meets the following conditions may apply to set up a branch office:
  1. The company has been in operation for more than one (1) year, provided that where establishment of a branch office is the result of merger or assignment, this restriction shall not apply;
  2. The financial report for the previous period, audited and certified by a CPA, shows a net value of each share not less than the face value.
  3. No warning disposition issued by the Securities and Futures Commission in accordance with Article 66, Paragraph 1 of the Securities and Exchange Law has been received during the previous three months.
  4. No disposition issued by the Securities and Futures Commission ordering revocation of the position of director, supervisor, or manager in accordance with Article 66, Paragraph 2 of the Securities and Exchange Law has been received during the previous six months.
  5. No disposition issued by the Securities and Futures Commission in accordance with Article 66, Paragraph 3 of the Securities and Exchange Law ordering suspension of business has been received during the previous year.
  6. No disposition issued by the Securities and Futures Commission in accordance with Article 66, Paragraph 4 of the Securities and Exchange Law revoking the operating permit for a branch organization has been received during the previous two years.
    Where a SITE has received a disposition under Paragraphs 3-6 above, and has failed to effect substantive improvement during application for establishment of a branch organization, the SFC may reject the application.
Article 15     A SITE establishing a branch organization shall apply to the SFC for approval with the following documents:
  1. An application form for establishment of a branch organization.
  2. Articles of incorporation.
  3. A business plan: the business plan shall list the principles for operation of business by the branch organization, internal organization and division of responsibility, recruiting of personnel, a general description of facilities on site, and a financial forecast for the upcoming year.
  4. Minutes of the board of directors meeting at which the resolution was made to establish a branch organization.
  5. A description of the internal control system of the branch organization.
  6. A declaration stating that the manager of the branch organization meets the qualifications set forth under Articles 17 and 32 herein.
  7. Other documents as required by SFC regulations.
    Where the items to be set forth in the documents for application referred to in the preceding paragraph are incomplete and where supplementation may be made, the SFC may notify the applicant to make supplementation with a prescribed period; where the applicant fails to supplement the information within the prescribed period, the application shall be rejected.
Article 16     A SITE shall complete establishment and registration of a branch organization within six months from the date of approval by the SFC, and shall apply to the SFC for issuance of a branch organization operating permit with the following documents:
  1. An application form.
  2. A photocopy of the registration certificate for the branch organization.
  3. A photocopy of the title or lease for the operating venue of the branch organization and a floor plan and photographs of the site.
  4. Other documents as required by SFC regulations.
    Where a SITE has failed to apply for issuance of an operating permit for a branch organization within the time period prescribed in the preceding paragraph, the SFC may revoke approval for establishment of the branch organization, provided that with legitimate cause, application may be made to the SFC for an extension prior to the end of the prescribed period. Such extension shall not exceed six months, and shall be granted once only.
Chapter III Management of the responsible person and business personnel
Article 17     Where any of the circumstances set forth in the provisions of Article 9, Paragraph 1 herein apply, a person may not serve in the capacity of responsible person, department head, manager of a branch organization, or business personnel of a SITE; persons already serving in such capacity shall be dismissed.
Article 18     The general manager of a SITE shall possess leadership ability and be capable of effectively managing a SITE, and shall possess one of the following qualifications:
  1. Qualification as a securities investment analyst obtained in accordance with the Rules Governing Securities Investment Consulting Enterprises, and with three or more years of relevant experience at a professional investment institution.
  2. Graduate of a local or foreign junior college recognized by the Ministry of Education or an equivalent or higher degree, with five or more years of relevant experience at a professional investing institution and having held the post of assistant manager or equivalent position for one or more years, or having held the position of manager or an equivalent position for three years or more, and with a good record of performance.
  3. Graduate of a local or foreign junior college recognized by the Ministry of Education or an equivalent or higher degree, with five or more years of administrative or management experience in securities, futures, finance, or insurance, and having held a level nine Ch'ien-jen civil service position or equivalent post three or more years with a good record of performance.
  4. Other academic and career qualifications sufficient to establish professional knowledge of securities and finance and management experience and leadership ability adequate for sound and effective management of a SITE.
    Where the general manager of a SITE is unable to execute the duties of his position as a result of a period of leave, suspension of execution of duties, or for other reasons, the SITE shall appoint a representative agent with equivalent qualifications to represent the general manager.
    The scope of the professional investment institution and relevant experience referred to in Paragraph 1 shall be determined by the SFC.
    A SITE shall submit evidentiary documents showing proposed selection qualifications to the SFC for review and approval prior to the hiring of a general manager.
    The general manager of a SITE may not concurrently hold the position of director, branch manager, or securities investment fund manager in the same enterprise.
    Where, prior to enforcement of these Rules on 17 October 2001, a SITE employs a general manager who does not meet the qualifications set forth in the preceding paragraph, the SITE shall remedy such condition within one year after the Rules become effective.
Article 19     The assistant general manager of a SITE shall possess leadership ability and the ability to effectively assist in the management of a SITE. The assistant manager overseeing the investment research department shall also possess one of the following qualifications:
  1. Qualification as a securities investment analyst obtained in accordance with the Rules Governing Securities Investment Consulting Enterprises, with two or more years of relevant experience at a professional investment institution.
  2. Graduate of a local or foreign junior college recognized by the Ministry of Education or an equivalent or higher degree, with five or more years of relevant experience at a professional investing institution and having held the post of manager or an equivalent position for two or more years with a good record of performance.
  3. Graduate of a local or foreign junior college recognized by the Ministry of Education or an equivalent or higher degree, with four or more years of administrative or management experience in securities, futures, finance, or insurance, and having held a level eight Ch'ien-jen civil service position or equivalent post two or more years with a good record of performance.
  4. Other academic and career qualifications sufficient to establish professional knowledge of securities and finance, management experience, and leadership ability adequate for sound and effective management of SITE business.
    The scope of the professional investment institution and the relevant experience referred to in the preceding paragraph shall be determined through the application, mutatis mutandis, of the provisions of Paragraph 3 of the preceding article.
    Where the responsibilities of a position are the same as those of the assistant general manager overseeing an investment research department as set forth in other laws or the articles of incorporation of an investment trust enterprise, such position shall also be subject to application, mutatis mutandis, of the provisions of Paragraph 1 of this article.
Article 20     A SITE shall establish departments for investment research, finance and accounting, and internal auditing and control.
Article 21     The term "business personnel" as used in these Rules shall refer to personnel engaged in the following:
  1. Handling the offering and issuance of beneficiary certificates.
  2. Investment research and analysis.
  3. Fund operation and management.
  4. Execution of trades in marketable securities with funds.
  5. Research and analysis related to discretionary accounts, investment strategies, or execution of trades.
  6. Internal auditing and control.
  7. Serving as leading accountant.
  8. Assisting in any of the matters set forth in the preceding seven subparagraphs.
    The number of business personnel listed under Subparagraphs 1-6 above shall not be less than one-half of the total number of business personnel.
Article 22     The department heads, branch managers and business personnel of a SITE shall be hired on a full-time basis; prior to assumption of duties, they shall be registered with the Association by the SITE to which they belong and shall not perform business duties without such registration.
    Where there is any change in the SITE personnel listed in the preceding paragraph, the SITE shall register the change with the Association within five business days after the change. Prior to effective registration, the SITE to which such personnel belong may not disclaim responsibility for their conduct.
Article 23     The items to be included in registration of the responsible person, department heads, branch managers, and business personnel of a SITE shall be drafted by the SFC, and shall take effect after submission to and approval by the Association; the same shall apply to any amendments thereto.
Article 24     The internal auditing personnel of a SITE may not undertake matters outside the scope of their registration, and other business personnel may not concurrently assume the duties of internal auditing personnel. The internal auditing personnel shall audit the finances and business of the company on a regular basis and at various intervals and prepare a written record for inspection.
Article 25     The SITE shall appoint a fund manager, with any one of the following qualifications, for each securities investment trust fund who shall bear full responsibility for the utilization of that fund:
  1. Qualification as a securities investment analyst obtained in accordance with the Rules Governing Securities Investment Consulting Enterprises.
  2. Qualification through a high-level securities firm personnel test administered by an agency at the request of the Securities Association, or holding a certificate issued by the SFC for qualification in the same test, and three or more years of experience at a professional investment institution a securities investment analyst or in securities investment strategy.
  3. Qualification through a securities investment trust and consulting enterprise personnel test administered by an agency at the request of the Association, and two or more years of experience at a professional investment institution in securities investment analysis or securities investment strategy.
  4. An incumbent fund manager who served in that position for one or more years prior to amendment and enforcement of these Rules on 17 October 2001 and continued in that position thereafter for a total combined period of two years.
  5. One or more years of experience as an investment manager handling full discretionary investment affairs for clients with an unblemished record.
    The "professional investment institution" referred to in the preceding paragraph shall be defined by the application, mutatis mutandis, of Article 18-3.
    The number, fund amount, and other qualifications of the funds for which a fund manager may be responsible shall be determined by the SFC.
Article 26     Department heads, branch managers, and business personnel engaged in activities listed under Article 21, Paragraph 1, Subparagraphs 1-6, shall, in addition to the requirement that fund managers meet the qualifications in the preceding article, possess one of the following qualifications:
  1. Qualification as a securities investment analyst obtained in accordance with the Rules Governing Securities Investment Consulting Enterprises.
  2. Qualification through a securities investment trust and consulting enterprise personnel test administered by an agency at the request of the Association, and one or more years of experience at a professional investment institution relevant to securities or futures.
  3. Qualification through a high-level securities firm personnel test administered by an agency at the request of the Securities Association, or holding a certificate formerly issued by the SFC for qualification in the same test, and two or more years of experience relevant to securities or futures at a professional investment institution.
  4. Graduate of a local or foreign university recognized by the Ministry of Education or holding an equivalent or higher degree, while having three or more years of relevant experience as an associated person at a securities or futures institution or a trust enterprise.
    The scope of the "professional investment institution" and the relevant experience as provided in subparagraphs 2 and 3 of the preceding paragraph shall be defined by the application, mutatis mutandis, of Article 18-3.
Article 27     The business personnel employed at a SITE shall attend pre-employment and on-the-job training courses at an institution designated by the SFC.
    Newly hired business personnel of a SITE and those returning after a leave of two or more years shall attend pre-employment courses within a half year of employment; business personnel already employed shall, during their term of employment, attend on-the-job training courses, the duration and content of which shall be determined by the SFC.
    Business personnel who have not yet attended the training courses referred to under Paragraph 1, or those who fail to qualify and also fail to obtain qualification after further supplementary training within one year, may not serve as SITE business personnel, and their registration as SITE business personnel shall be cancelled by the Association.
Article 28     A SITE and its responsible person, department heads, branch managers and business personnel shall faithfully execute their duties under the principles of honesty and trustworthiness.
    Except where otherwise provided by relevant laws and regulations, the SITE and the persons referred to in the preceding paragraph may not engage in the following types of conduct:
  1. Divulging information made known to them in the performance of their duties to any third party, or using such information for trading in securities or securities-related products;
  2. Purchasing or selling securities for themselves or for the benefit of any other person or engaging in cross-trading with consigned investment funds without legitimate reason when utilizing the securities investment trust fund for trading in securities or securities-related products;
  3. Conducting false, fraudulent, or other misleading advertising or promotional activities;
  4. Failing to re-allocate handling fees returned by security firms or futures commission merchants to fund assets or accepting other benefits when utilizing securities investment trust fund to trade in securities or securities-related products, provided that this restriction shall not apply where such practices are in conformance with SFC regulations;
  5. Promoting the sale of beneficiary certificates by agreeing upon or providing specific benefits or considerations or by bearing losses;
  6. Accepting money or other benefits for assigning proxies to attend shareholders meeting or exercising the voting rights of shares held by the securities investment trust fund;
  7. Attempting to inflate or deflate the trading price of certain securities on the securities exchange market or to perform other acts which may damage the rights and interests of the investors of a securities investment trust fund when using said fund to trade in securities or securities-related products;
  8. Changing a settled transaction made on a commission basis from the account of the fund to their own or another person's account or a full-discretion trading account, or from their own or other person's account or a full-discretion trading account to the account of the fund, when using the securities investment trust fund to trade in securities or securities-related products;
  9. Recommending trading in a particular stock or making judgments or predictions about the future price of a particular stock in a public forum or in the broadcast media.
  10. Using non-specialist personnel to solicit clients or providing unreasonable commissions.
  11. Engaging in other matters prohibited by the SFC.
    The provisions of the preceding paragraph shall apply without exception to other employees of a SITE.
    The SITE shall establish internal personnel management rules as prescribed by the Association and implement the same.
Article 29     Unless otherwise approved by the SFC, during the period from the time a SITE decides to utilize a securities investment trust fund to trade in a particular listed or over-the-counter stock until the time the securities investment trust fund no longer holds such stock, the responsible person, department heads, branch managers, or fund managers shall not engage in trading in the same stock.
    The shares held by the persons referred to in the preceding paragraph shall include those held by their spouses and minor children, and those held on their behalf under another's name.
    The responsible person of a SITE and its department heads, branch managers, fund managers, and interested parties shall, in accordance with SFC regulations, report any trading in listed or over-the-counter securities to the SITE to which they belong.
    The provision of Article 5, Paragraph 3 herein regarding interested parties shall apply mutatis mutandis to the preceding paragraph.
Article 30     The responsible person of a SITE and its department heads, branch managers, fund managers, or their spouses, when acting as a director, supervisor, manager, or shareholder with 5% or more of the total outstanding shares of a securities issuing company shall not participate in decision making when the SITE utilizes the securities investment trust fund to trade in the securities of such issuing company.
    The shares held by the persons referred to in the preceding paragraph shall include those held by their spouses and minor children, and those held on their behalf under another's name.
Article 31     The SITE and its responsible person, department heads, branch managers, or shareholder's representative in the share issuing company from which the SITE purchases stocks shall not assume the position of director, supervisor or manager of such issuing company.
Article 32     The responsible person, department heads, or branch managers of a SITE may not invest in other SITEs or concurrently act as a director, supervisor, or manager of another SITE, securities investment consulting enterprise, or securities firm.
Article 33     Where a director or supervisor is a juristic person, Article 28, Paragraphs 1 and 2 and Articles 29-32 shall apply mutatis mutandis to its representative or designated representative in the performance of duties.
Chapter IV Financial and Operational Management
Article 34     Within one (1) month after a business license is issued to a SITE, it shall apply for offering the securities investment trust fund in line with the SFC rules, start the offering within six (6) months after approval, and establish the fund within 45 days thereafter.
    If the SITE fails to file the application or offer/establish the fund, the approval for business operation shall be revoked, and the SITE shall be notified to return the business license within a specified time limit for cancellation; where the business license is not returned for cancellation, the SFC shall announce cancellation.
Article 35     Under any of the following circumstances, a SITE shall first report to the SFC for its approval:
  1. Amendment of the Articles of Incorporation;
  2. Suspension or resumption of its operations;
  3. Dissolution or merger;
  4. Assignment of the whole or a substantial portion of its business or assets;
  5. Acceptance of assignment of the whole or a substantial portion of the business or assets of others;
  6. A change in capitalization.
  7. A change in the operating venue of the company or branch office.
  8. Other matters subject to SFC approval.
Article 36     Under any of the following circumstances, in addition to due procedures under the law, a SITE shall, within five business days from the date of occurrence, report the circumstances by letter to the Association for its report to the SFC:
  1. A change in its directors, supervisors, or managers;
  2. Occurrence of a legal proceeding, non-contentious matter, or matter requiring arbitration by the Association as a result of SITE operations management or of execution of duties by business personnel;
  3. A change of shareholding by its directors, supervisors, or shareholders holding 5% or more of the total numbers of issued and outstanding shares;
  4. Other matters that shall be reported as prescribed by the SFC.
Article 37     A SITE's own capital shall not be loaned to another person, used for purchase of real estate not related to operations, or used for other than SITE purposes. Except for utilization as required by business operations, the use of SITE capital shall be limited to the following:
  1. Bank deposits;
  2. Purchase of government bonds or financial bonds;
  3. Purchase of treasury bills, negotiable fixed-term deposit certificates, or commercial papers;
  4. Purchase of SITE beneficiary certificates meeting SFC requirements and in a specified ratio.
  5. Other utilization as approved by the SFC.
    Except where it conforms with the requirements of Article 16, Paragraph 1 of the Company Law and with approval from the SFC, a SITE may not make guarantees, endorse bills, or provide assets to others for the purpose of collateral.
Article 38     The SITE shall, within four months after the close of each business year, make public announcement of its annual financial report and submit the same to the SFC following review and certification by a CPA, passage by the board of directors, and recognition of same by the supervisors.
    The annual financial report referred to in the preceding Paragraph shall be submitted to the Association for the compilation and submission of a report to the SFC.
Article 39     The securities investment trust agreement entered into by the SITE in accordance with the provisions of the Regulations Governing the Management of Securities Investment Trust Funds shall be submitted to the SFC for approval prior to the issuance of beneficiary certificates.
    Contents of the agreement referred to in the preceding Paragraph shall conform to the Regulations Governing the Management of Securities Investment Trust Funds.
Article 40     A prospectus shall be delivered to the subscriber prior to the SITE's issuance of beneficiary certificates in offering a securities investment trust fund.
    Particulars to be stated in the prospectus referred to in the preceding Paragraph shall be prescribed by the SFC.
Article 41     A SITE shall put the securities investment trust fund under the custody of a custodian institution and shall not keep the same under its own custody.
    The fund custodian institution referred to in the preceding Paragraph shall mean a bank or trust company entrusted by the SITE to provide custodian services for the securities investment trust fund and with a credit rating of a specific grade or higher from a credit rating agency recognized by the SFC.
Article 42     Individual accounts shall be established for each securities investment trust fund raised by the SITE and accounting books and records shall be established in accordance with the provisions prescribed by the SFC; they shall be kept in a manner and for the period set forth in the Business Accounting Law and relevant regulations.
Article 43     A SITE may not engage in the following types of conduct when advertising, holding informational meetings, or conducting other promotional activities:
  1. Engage in promotion by using the SFC approval for fund offering as a confirmation of the matters for which application was made or as a guarantee of the value of the beneficiary certificates;
  2. Cause a mistaken belief that the safety of the principal can be guaranteed or profits protected;
  3. Solicit other persons to buy the beneficiary certificates by providing gifts or other benefits;
  4. Advertise by means of exaggerating past performance or negative advertising with respect to others in the industry.
  5. Engage in false, fraudulent, or other misleading acts.
  6. Produce advertising or other promotional activities for a SITE fund not yet approved for offering by the SFC.
  7. Engage in any other conduct prohibited by the SFC.
    A SITE shall report to the Association within ten days after conducting advertising, informational meetings, or other promotional activities. Where the Association discovers any of the conduct in Paragraph 1, Subparagraphs 1-6 above, it shall report by letter to the SFC prior to the end of each month for its disposition of the matter.
Article 44     Except where otherwise provided by relevant laws and regulations, when a SITE exercises voting rights inhering in shares held in its securities investment funds, it shall appoint one of its own SITE personnel as a representative to carry out the voting.
    When a SITE exercises the voting rights referred to in the preceding paragraph, it shall, based on the foremost interests of beneficiary certificates holders, support the proposal or the candidates for director or supervisor put forward by the board of directors of the company holding a percentage of shares conforming to the standards under Article 26 of the Securities and Exchange Law, provided that where there is a likelihood of damage to the interests of the company or shareholders by unsound management in the issuing company, voting shall be carried out pursuant to a resolution of the board of directors of the SITE.
    Prior to attendance at the shareholders meeting of an issuing company in which a SITE fund holds shares, the SITE shall produce a report on the assessment process related to its exercise of voting rights; where a resolution is passed under the circumstances referred to in the proviso of the preceding paragraph, a written record of the voting at each such shareholders meeting shall be submitted at the meetings of the SITE board of directors.
    A SITE shall register and keep custody of the notifications and attendance cards for the shareholders meetings of the issuing companies in which the SITE funds hold shares, and shall also make a written record of its exercise of voting rights at the shareholders meetings, the assessment process related to such, the decision-making processes, and the results of voting, and shall number them in consecutive order in files which shall be maintained for at least five years.
Article 45     Except where otherwise provided in relevant laws and regulations, a SITE that applies to invest in foreign securities enterprises shall conform to each of the following regulations:
  1. The SITE shall have been in operation for a full two-year period.
  2. The SITE shall have received no warning disposition from the SFC under Article 66, Subparagraph 1 of the Securities and Exchange Law within the previous three months.
  3. The SITE shall have received no disposition from the SFC under Article 66, Subparagraph 2 of the Securities and Exchange Law ordering removal of a director, supervisor, or manager from office within the previous six months.
  4. The SITE shall have received no disposition from the SFC under Article 66, Subparagraph 3 of the Securities and Exchange Law ordering suspension of its business during the previous year.
  5. The SITE shall have received no disposition from the SFC under Article 66, Subparagraph 4 of the Securities and Exchange Law revoking the operating license of a branch organization during the previous two years.
  6. The net value of each share shall not have dropped below the face value in the previous period as attested to by a financial report audited and certified by a CPA.
  7. The total amount invested in foreign securities enterprises may not exceed ten percent of the net worth of the SITE, provided that given the need and where special approval is granted, this restriction shall not apply.
    A SITE's investment in foreign securities enterprises shall be limited to investment within the business scope of the SITE itself.
Article 46     A SITE applying to invest in foreign securities enterprises shall submit an application to the SFC for approval with the following documents:
  1. Minutes of the meetings of the board of directors or shareholders.
  2. A CPA-certified financial report for the most recent period.
  3. An investment plan, which shall include the following:
    1. Investment plan: including the purpose of investment and expected results, source of funds and plan for utilization, operations plan, and plan for return on investment. With respect to a holding company, a plan for reinvestment shall also be submitted.
    2. Operations management plan: including the company's location, capitalization, profiles of other chief promoters or shareholders, operations, items of business, and principles of business management.
    3. Financial forecasts for the following three years.
  4. The articles of incorporation or equivalent documents for a newly established company or an invested company.
  5. The relevant regulatory provisions or self-regulatory regimes in the country of investment.
  6. Other documents that shall be required by the SFC.
    A SITE shall, within six months from the date of approval for investment in a foreign securities enterprise, submit evidentiary documents related to the actual investment for recordation with the SFC.
    Where there is a change in the items of investment following their approval by the SFC, such changes shall be reported to the SFC for recordation within ten days of the change.
Article 47     A SITE investing in a foreign securities investment enterprise shall, within three months from the date of approval by the SFC, report to the MOEA Investment Commission for approval or recordation.
    Where a SITE fails to carry out the matters set forth in the preceding paragraph, the SFC may revoke the originally approved items of investment.
Article 48     After obtaining approval for investing in a foreign securities enterprise, a SITE shall submit documents relating to outward remittance of funds or evidentiary documents showing registration or amendment of registration of the invested foreign securities enterprise to the SFC for its files within five days after obtaining such documents.
    The outward remittances referred to in the previous paragraph shall receive prior approval from the SFC, and shall be carried out in accordance with the Statute for the Regulation of Foreign Exchange.
    Within six months of the close of the financial year of the invested foreign securities enterprise, a SITE shall submit the yearly financial report of the invested enterprise for filing [with the SFC].
Article 49     Except where otherwise provided under the Law Governing Merger of Financial Institutions, SITEs applying for merger shall comply with the following regulations:
  1. The net value of each share shall not have dropped below the face value in the previous period as attested by a CPA-audited and certified financial report.
  2. Among the securities investment funds being managed, the number of funds in which the net asset value per unit is lower than the unit face value may not exceed one-half of the total number of funds being managed.
  3. The SITEs shall not have received an SFC disposition under Article 66, Paragraphs 2, 3, or 4 of the Law within the previous six months.
  4. There shall have been no large-scale transfers of shares within the previous year on the part of the directors, supervisors, or shareholders with a more than five percent shareholding.
  5. Where the shares of a SITE are being traded on the stock exchange, the SITE shall not have had trading information announced through the stock market monitoring system due to abnormal fluctuations in the price of the stock for a period of 30 business days prior to the public announcement of merger.
  6. Other regulations as prescribed by the SFC.
    Where a SITE applying for merger does not conform with the regulations under Subparagraphs 1-4 of the above paragraph, the SFC may issue ad hoc approval based on factors such as an overall consideration of the sound development of the stock market and the competitiveness of the SITE.
Article 50     In the event the SITE is unable to continue its securities investment trust business due to dissolution or revocation of its business license, it shall negotiate with another SFC-approved SITE to take over its business.
    Where the SITE fails to act in accordance with the provisions in the preceding Paragraph, the SFC shall coordinate with another SITE to take over such business. The securities investment trust agreement shall be terminated if no other SITE is willing to take over the said business.
    Where it is apparent that a securities investment trust fund is poorly managed by a SITE, the SFC shall have the right to order the SITE to transfer such securities investment trust fund to another SITE for management.
    A SITE which takes over such business in accordance with the procedures in the preceding three Paragraphs shall publicly announce the take-over or transfer.
Article 51     The SFC shall have the right to order the SITE or its related persons at any time to submit reports or other reference data in connection with its financial or business activities, and to directly inspect its financial and/or business standings.
Article 52     A SITE shall make public announcement of matters materially affecting the rights and interests of the investors within two days after the occurrence of such event, make a report to the SFC and send a copy thereof to securities-related agencies.
    "Matters materially affecting the rights and interests of the investors" refers to the following:
  1. Return of checks due to insufficient funds, bank refusal to honor transactions, or other matters resulting in loss of credit standing.
  2. Serious disruption of company operations resulting from litigation, non-contentious matters, administrative dispositions, or contentious administrative procedures.
  3. Application for reorganization with a court.
  4. A change in the chairman of the board of directors, general manager, or more than one-third of the directors.
  5. A change of the corporate CPA of the company or the securities investment trust funds it administers.
  6. Any of the circumstances set forth under Article 35, Subparagraphs 2-5.
  7. Purchase of real estate from affiliated persons.
  8. Any other matter sufficient to affect the continuing operation of the company or the equity rights of securities investment trust fund beneficiaries.
    The regulations under Article 5, Paragraph 3 regarding affiliated persons shall apply mutatis mutandis with respect to the preceding paragraph.
Article 53     When the SFC examines a SITE's financial/business reports and other reference information, or when it inspects the SITE's financial/business conditions, if the SITE is found not in compliance with the laws and regulations in any matter, the SFC may order the SITE to make corrections.
Article 54     Violators of any provisions herein shall be subject to punishment in accordance with the Law. In addition, the SFC may suspend acceptance of its application for offering securities investment trust fund for two years.
Chapter V Supplementary Provisions
Article 55     Persons holding the positions of general manager, assistant general manager, department head, branch manager, or business personnel at a SITE prior to amendment and enforcement of these Rules on 17 October 2001 who do not meet the qualifications set forth under Article 18, Paragraph 1, Article 19, Paragraph 1, Article 25, or Article 26 shall remedy such situation within two years after the amended Rules become effective; where remedy has not been effected by the end of that period, such persons may not hold the position of a SITE general manager, assistant general manager, department head, or branch manager, or undertake the matters set forth under Article 21, Paragraph 1, Subparagraphs 1-6.
Article 56     Where a SITE approved for establishment prior to amendment and enforcement of these Rules on 17 October 2001 does not conform with the provisions of Article 6 or Chapter 4, such situation shall be remedied within one year from the date on which the amended Rules become effective; where a SITE approved for establishment does not conform with the provisions of Article 7, remedy shall be effected within two years from the date on which the amended Rules become effective. Where remedy is not effected within the prescribed time periods, the SFC may revoke approval for SITE establishment.
Article 57     These Rules shall become effective on the date of promulgation.