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1     These Procedures are adopted pursuant to Article 3, paragraph 3 of the Taipei Exchange Rules Governing the Review of Call (Put) Warrants for Trading on the TPEx (Warrant Review Rules).
2     Except where otherwise provided by act or regulation, review of applications for issuance and trading of call (put) warrants by the Taipei Exchange (TPEx) will be performed in accordance with these Procedures. Given amendment of applicable provisions of an act or regulation on which these Procedures are based, the new provisions will govern.
3     Applicants meeting the qualifications under Article 4 of the Warrant Review Rules and applying to the TPEx for approval as a qualified issuer of call (put) warrants shall prepare an Application for Issuance of Call (Put) Warrants, containing all required information and documents, for submission to the TPEx. TPEx mail department personnel will sign for acceptance of applications, which will be distributed to the proper case-handling units. After accepting an assignment, case handlers shall proceed with formal review in accordance with Point 5 herein.
    When a securities firm obtains approval from the competent authority as a qualified issuer of call (put) warrants and applies to the TPEx for a planned issue of TPEx listed call (put) warrants, the issuer shall submit the Application for Issuance of TPEx listed Call (Put) Warrants, along with other required documents, by 3 p.m. on the date of application in accordance with the provisions of the preceding paragraph. After case-handling personnel accept an application, they shall proceed with review in accordance with Point 6 herein.
    A securities firm that has received approval from the competent authority as a qualified issuer of call (put) warrants and files an application with the TPEx for contract-based call (put) warrants it intends to trade shall submit an application along with other required documents to the TPEx prior to 3 p.m. on the date of application. After case-handling personnel accept an application, they shall proceed with review in accordance with Point 7 herein.
4     In handling an applicant's initial application for approval as a qualified issuer of call (put) warrants, the TPEx shall review its parent company only or individual financial reports for the most recent 2 years, audited and attested by a CPA, passed by the board of directors, and recognized by the supervisors; when the application date is more than 6 months into the fiscal year, the company shall be requested to additionally submit a parent company only or individual financial report that has been audited and attested or reviewed by a CPA as required by regulations for that half-year period. For a Taiwan branch office of a foreign entity, financial reports for its head office (bank headquarters) as well as the Taiwan branch office shall be submitted for reference in the review.
5     When the TPEx accepts an application for approval of the applicant as a qualified issuer of call (put) warrants, the applicant shall submit a review fee of NT$200,000, after which case-handling personnel will undertake a formal review of the application and its attachments. Guidelines, procedures, and deadlines for the formal review shall be as follows:
  1. Applications shall be inspected to ascertain that a full set of documents has been submitted, and an "Attachments Checklist for Applications for Issuance of Call (Put) Warrants" (Table 1) filled out. Applicants failing to submit complete documents shall be requested to supplement the necessary documents within a prescribed period of time; where documents are not supplemented within the given period, the case handler shall issue a notice of rejection of the application, with a copy submitted to the competent authority.
  2. Review guidelines:
    1. The CPA's audit report:
    2. Where the applicant is a domestic company, the accounting firm attesting the financial reports for the most recent 2 years shall be a joint accounting firm approved by the competent authority. The audit report shall be prepared in accordance with generally accepted accounting principles (GAAP), and shall state whether it was prepared based on the Regulations Governing the Preparation of Financial Reports by Securities Issuers or the Regulations Governing the Preparation of Financial Reports by Securities Firms. The "generally accepted accounting principles" mentioned herein shall mean the International Financial Reporting Standards ( IFRS), International Accounting Standards (IAS), and Interpretations developed by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC), as recognized by the competent authority. Where the financial report is prepared in accordance with the Government Budget Act, the Audit Act, or related acts or regulations, a certified public accountant shall revise the report to bring it into conformance with GAAP, and shall explain the areas of divergence from GAAP and their effect.
      Where the applicant is a foreign entity, the financial report may be prepared in accordance with the laws and regulations of the issuer's home country. A Taiwan CPA shall issue an opinion on the differences between the accounting principles applied in the issuer's home country and those of Taiwan and their effects on the financial report. The net worth that results after the aforementioned adjustments shall conform to Article 5, paragraph 3 of the Regulations Governing the Issuance of Call (Put) Warrants by Issuers (the Issuance Regulations).
      When an accountant issues an audit report with anything other than an unqualified opinion, the case handler shall note the relevant facts and reasons and assess the degree of their influence on the financial report.
      If there has been a change in the issuer's attesting CPA within the most recent 3 years, the case handler shall request the applicant, the original attesting CPA, and its successor to submit a written explanation regarding the reasons for the change, and shall gain an understanding of the factors and the reasoning involved.
    3. Financial reports:
    4. The case handler shall review the CPA's audit or review report, any annotations thereto, and the section headings to determine that the form and content of the issuer's financial report conforms to regulations. The case handler shall ascertain whether there are any unusual entries in the report, analyze whether any unusual conditions are indicated by recent developments in the issuer's financial status and profitability, and fill out a "Call (Put) Warrant Issuer's Financial Report Checklist" (Table 2). Where any unusual circumstances are discovered, the CPA shall be requested to submit an additional clarification.
    5. Risk management system:
    6. The case handler shall assess whether the applicant or its risk management institution has established a risk-management system that includes risk-control computer equipment and appropriate personnel, and shall determine whether internal audit and control systems have been established. The case handler shall analyze the issuer's risk-management capabilities for any irregularities, and fill out a "Checklist for the Call (Put) Warrant Issuer's Risk Management System and Strategies for Offsetting Foreseeable Risk" (Table 3).
    7. Conditions under Warrant Review Rules Requiring Withholding of Approval:
    8. The case handler shall determine, based on the documents submitted by the applicant, whether the net worth, profitability, and relevant contracts in the applicant's financial reports conform to the provisions of the Issuance Regulations, and determine whether any conditions, as listed under Article 7 of those Issuance Regulations, require withholding of approval. The case handler shall fill out an "Approval Checklist for Application to Issue Call (Put) Warrants" (Table 4).
    9. Lawyer's opinion:
      The case handler shall examine the lawyer's opinion and other related forms and documents submitted by the applicant with regard to whether the relevant approval certificates, letters of approval from the competent authorities, documents issued by the credit rating institution, declarations submitted by the applicant, and the applicant's status with respect to the circumstances under Article 7of the Issuance Regulations have been thoroughly reviewed, the documents found to be valid, and the applicant in conformance with relevant laws and regulations. The case handler shall then fill out a "Checklist for Lawyer's Legal Opinion on the Call (Put) Warrant Issuer's Qualification" (Table 5).
  3. Review procedures and schedule:
    When, after examining the relevant materials and filling out the required checklists, the case handler discovers a failure to submit all required documents or information, the case handler shall request the issuer to supplement the required documents or information within a prescribed period of time. Where documents are not supplemented by the deadline, the case handler shall issue a notice of rejection of the application, with a copy submitted to the competent authority.
    After receipt of the Application for Approval for Issuance of Call (Put) Warrants, the TPEx case handler shall, within 10 business days, complete the checklists under Tables 1 to 5 and submit them to higher levels for review, except where the issuer is required to submit further clarification or where the documents submitted are incomplete. Under special circumstances, the case handler may, with written approval, extend the review period.
    Where application documents are found to be complete in the formal review, the issuer meets the requirements for qualification, and further review at higher levels finds the application in order, the TPEx will submit the application to the competent authority for approval along with its review report and required attachments.
6     After accepting a securities firm's application for listing of a planned issue of call (put) warrants, TPEx case handlers shall undertake a review of the application and its attachments. Guidelines, procedures, and deadlines for review shall be as follows:
  1. The case handler shall determine whether the issuer has submitted a complete set of documents and fill out a "Checklist for Applications for Listing of Call (Put) Warrants" (Table 6). Where the documents submitted are found to be incomplete, the case handler shall request the issuer to supplement them within a prescribed period of time. Where documents are not supplemented by the deadline, the case handler shall issue a notice of rejection of the application, with a copy submitted to the competent authority.
  2. Review guidelines:
    1. Call (put) warrants:
      The case handler shall examine whether the issuance plan for the call (put) warrants, and the linked underlyings, conform to Article 10, Article 11, and Article 12, subparagraph 4 of the TPEx Warrant Review Rules, and fill out a "Call (Put) Warrant Issuance Plan Checklist" (Table 7), but in the case of a follow-on issue of call (put) warrants, the circumstances set out in the aforementioned Article 12, subparagraph 4 need not be examined.
    2. Public prospectus:
      The case handler shall examine whether the form and content of the prospectus for public sale conforms to the TPEx's Guidelines for Particulars to be Listed in the Public Prospectus for Issuance of Call (Put) Warrants, and fill out a "Call (Put) Warrant Public Sale Prospectus Checklist" (Table 8), except that this provision does not apply to a follow-on issue of call (put) warrants.
    3. Disclosure of strategy for offsetting risks:
      The case handler shall examine whether the strategy put forth by the securities firm for offsetting risks includes concrete provisions for all possible risks and losses associated with the given issue of call (put) warrants, as well as associated hedging strategies, and fill out a "Checklist for Strategies for Offsetting Foreseeable Risks in Issues of Call (Put) Warrants" (Table 9).
    4. Lawyer's legal opinion:
      The case handler shall examine the legal opinion and other related forms and documents submitted by the securities firm with regard to whether the terms of issuance of the call (put) warrant, public sale prospectus, the declarations of the securities firm, and the securities firm's status with respect to whether the circumstances under Article 12 of the Warrant Review Rules have been thoroughly reviewed, the documents found valid, and the securities firm found to be in conformance with relevant laws and regulations. The case handler shall then fill out a "Checklist for the Lawyer's Legal Opinion on Call (Put) Warrants" (Table 10).
  3. Review procedures and deadline:
    The TPEx case handler shall complete review of the issuance plan by market opening on the first business day after receipt of the application for listing of call (put) warrants, and submit it, together with the listing agreement executed between the TPEx and the issuer, to the competent authority for recordation.
  4. Following issuance by the TPEx of approval documents to the securities firm, the TPEx shall undertake a re-review of the items of the issuer's application and the related documents, and where circumstances are found during the review period requiring approval to be withheld, the TPEx may void the letter of approval, and report the same to the competent authority for recordation.
7     After receipt of a securities firm's application for contract-based call (put) warrants it intends to trade, the TPEx case handler shall undertake review of the application documents and attachments. Guidelines, procedures, and deadlines for review shall be as follows:
  1. Applications shall be inspected to ascertain that a full set of documents has been submitted, and a "Document Checklist for Applications for Contract-Based Call (Put) Warrants" (Table 6-1) filled out. A notice of rejection of the application shall be issued and copied to the competent authority in cases of failure to submit a complete set of application documents.
  2. Review guidelines:
    1. The contract for the contract-based call (put) warrants shall be examined to ascertain whether its content conforms to the provisions of Articles 15 to 18 of the Warrant Review Rules, and a "Checklist for Review of Contract-based Call (Put) Warrant Contracts" (Table 7-1) shall be filled out.
    2. The risk-offsetting strategies submitted by the securities firm shall be examined to ascertain whether they contain concrete descriptions of all possible risks and losses in trading of contract-based call (put) warrants, along with associated hedging measures, and a "Checklist for Strategies for Offsetting Foreseeable Risk in Contract-based Call (Put) Warrants (Table 9-1) shall be filled out.
  3. Upon receipt of the given application for contract-based call (put) warrants, the TPEx case handler shall complete review of the contract on the date of receipt of the application and shall issue a letter of approval if approval is granted after review.
  4. Upon examination and determination by the TPEx handling personnel that the documents submitted by the securities firm do not contain the matters prescribed in sub-subparagraph 2 of this point, then upon a signed submission approved by the president of the TPEx, the handling personnel will reject the application.
  5. TPEx case-handling personnel shall compile information on applications for contract-based call (put) warrants on a monthly basis, which shall be submitted by letter to the competent authority for recordation.
8     A securities firm that issues call (put) warrants for TPEx listing shall carry out the issuance and shall submit related materials to the TPEx in accordance with the following provisions:
  1. Following issuance by the TPEx of documents for approval of the issuance plan for call (put) warrants, the securities firm shall enter the announcement of sale of call (put) warrants into the TPEx-designated website for information reporting, and after approval of the listing by the TPEx, the securities firm shall, at least 2 business days prior to the projected listing date, consult with the TPEx on matters related to the projected listing. The projected listing date may not be later than 10 business days after the date of consultation with the TPEx. In the case of a follow-on issue of call (put) warrants, the securities firm shall, at least 1 business day prior to the projected listing date, carry out the aforesaid consultation with the TPEx on matters related to the projected listing.
    Prior to completion of all necessary arrangements for listing with the TPEx and upon the commencement of an extension period, the issuer shall pay the listing fee to the TPEx. In the case of a follow-on issue of call (put) warrants, the issuer shall pay the listing fee no later than the projected listing date.
    Listing fees shall be determined by the application of the provisions for fee rates under the TPEx's Fee Rate Standards for TPEx Listing of Securities.
  2. After the securities firm has made arrangements for the projected listing date, the TPEx shall immediately review its application form and related attachments and carry out public announcement of TPEx listing. If verification shows the issue does not meet listing terms and conditions, the listing agreement shall immediately be voided, and its voidance reported by letter to the competent authority for recordation.
  3. The issuer shall do the following with respect to an extendable callable bull contracts or extendable callable bear contracts that it issues:
    1. Unless the quantity of outstanding units is less than 100,000 units, or special circumstances exist and the approval of the TPEx has been obtained, the issuer shall, 20 business days prior to the expiration of the period of validity of warrants, apply with the TPEx to extend the period of validity of the warrants and input the relevant information on the TPEx-designated information reporting website.
    2. If on the last trading day the warrants meet the criteria for the required extension of validity under Article 11, paragraph 1, subparagraph 8, item D of the TPEx Warrant Review Rules, the issuer shall on such day input the relevant matters on the TPEx-designated information reporting website, and submit the downloaded information to the TPEx. If the criteria for validity extension are not met, the issuer shall on the business day following the last trading day input the information on the TPEx-designated information reporting website pursuant to Article 10-1, paragraph 6 of the TPEx Warrant Review Rules, and submit the downloaded information to the TPEx.
    3. The issuer shall, on the day preceding the extension period, adjust the strike price or point and knock-out price or point for the extension period in accordance with Article 12-3 of the TPEx Warrant Review Rules. During the extension period, the above-mentioned strike price and knock-out price shall be adjusted accordingly if the issuing company of the underlying securities distributes dividends or bonuses, increases or decreases capital, or undergoes a stock split, merger or consolidation, or conducts other related matters, or if a securities investment trust enterprise or futures trust enterprise distributes dividends on an underlying ETF or conducts other related matters.
9     A securities firm applying to trade contract-based call (put) warrants shall make the application and submit related information to the TPEx in accordance with the following provisions:
  1. After the TPEx issues an approval document for the securities firm's contract for contract-based call (put) warrants, the securities firm shall enter pertinent information on the given call (put) warrant into the TPEx-designated information reporting website, and shall also enter such information at the time of exercise, expiry, or cancellation of the warrants.
  2. On or before the first business day following the securities firm's receipt of the approval letter issued by the TPEx, the securities firm shall pay a review fee to the TPEx. The fee standard shall be based on the total contract dollar amount per each application for contract-based call (put) warrant, as follows:
    0.03 percent of the portion not more than NTD300 million (NTD300 per million);
    0.02 percent of the portion exceeding NTD300 million but not more than NTD500 million (NTD200 per million);
    0.01 percent of the portion exceeding NTD500 million (NTD100 per million).
    If the amount calculated according to the above standard is less than NTD5,000, a fee of NTD5,000 shall be collected.
  3. The securities firm shall report in writing to the TPEx 5 business days prior to the expiry of contract-based call (put) warrant or on the first business day following an investor's cancellation of the warrant.
10     The TPEx case handling department for applications for call (put) warrant listings shall compile a monthly report on such applications for submission to the board of directors.
11     These Procedures and any amendments thereto shall take force upon ratification by the competent authority.