| Article 1 |
These Regulations are adopted pursuant to Article 50 paragraph 2, Article 52 paragraph 3, Article 54 paragraph 2, Article 55 paragraph 3, Article 56 paragraph 1, Article 58, Article 60 paragraph 2, Article 61 paragraphs 2 and 3, Article 62 paragraph 6, Article 64, and Article 65 paragraph 2 of the Securities Investment Trust and Consulting Act ("SITC Act"). |
| Article 2-1 |
When a SITE, a SICE, or a securities broker provides trust-type discretionary investment services, it shall accept no less than NT$10 million in original trust assets from the principal, and shall apply for concurrent operation of money trusts and securities trusts in accordance with these Regulations and the Regulations Governing the Concurrent Operation of Trust Business by Securities Investment Trust Enterprises, Securities Investment Consulting Enterprises, and Securities Firms.
Enterprises which provide trust-type discretionary investment services pursuant to the preceding paragraph shall do so in accordance with the SITC Act, these Regulations, and related laws and regulations, and shall additionally abide by the Trust Act, the Trust Enterprise Act, regulations governing the concurrent operation of trust business, and other related provisions. |
| Article 4 |
A SITE applying to provide discretionary investment services shall possess the following qualifications:
1. Having already established a securities investment trust fund.
2. A net worth per share not lower than par value in the CPA-audited and certified financial report for the preceding period.
3. Having received no sanction pursuant to Article 103, subparagraph 1 of the SITC Act, Article 100, paragraph 1, subparagraph 1 of the Futures Trading Act, or Article 66, subparagraph 1 of the Securities and Exchange Act within the preceding half-year.
4. Having received no sanction equal to or greater than those under Article 103, subparagraphs 2 through 5 of the SITC Act, Article 100, paragraph 1, subparagraphs 2 through 4 of the Futures Trading Act, or Article 66, subparagraphs 2 through 4 of the Securities and Exchange Act within the preceding two years.
5. Having made substantive corrections after being sanctioned pursuant to the preceding two subparagraphs and receiving an order to take corrective action.
6. Other qualifications as may be prescribed by the FSC.
A SITE that applies to provide trust-type discretionary investment services shall meet the qualifications of the preceding paragraph, and shall additionally have received permission from the FSC for the operation of mandate-type discretionary investment business and have completed procedures for issuance of a new business license, and its business permission shall also not have been revoked by the FSC. |
| Article 5 |
A SICE applying to provide discretionary investment services shall possess the following qualifications:
1. Paid-in capital of no less than NT$50 million. For a SICE making this application that concurrently conducts futures advisory business or a SICE simultaneously applying to conduct discretionary investment business and to concurrently conduct futures advisory business, actual paid-in capital shall be no less than NT$70 million.
2. The CPA-audited and certified financial report for the preceding period, showing a net worth per share not lower than par value.
3. Having been in business for two full years, and having the capability to provide discretionary investment services.
4. Having not been subject within the past three months to a warning, penalty for default, suspension of some or all of the rights and interests normally enjoyed by a member, or voidance or suspension of membership qualifications by the Securities Investment Trust and Consulting Association of the R.O.C. (SITCA) or the Chinese National Futures Association, pursuant to their self-regulatory rules, resulting from its operation of securities investment analysis or futures research and analysis.
5. Having received no sanction pursuant to Article 103, subparagraph 1 of the SITC Act, Article 100, paragraph 1, subparagraph 1 of the Futures Trading Act, or Article 66, subparagraph 1 of the Securities and Exchange Act within the preceding the preceding half-year.
6. Having received no sanction equal to or greater than those under Article 103, subparagraphs 2 through 5 of the SITC Act, Article 100, paragraph 1, subparagraphs 2 through 4 of the Futures Trading Act, or Article 66, subparagraphs 2 through 4 of the Securities and Exchange Act within the preceding two years.
7. Having effected substantive correction after previously receiving a disposition or sanction under subparagraphs 4 through 6 and being ordered to make correction.
8. Other qualifications as may be prescribed by the FSC.
A SICE that applies to provide trust-type discretionary investment services shall meet the qualifications of subparagraphs 2 through 8 of the preceding paragraph, and shall additionally meet the following qualifications:
1. Paid-in capital not lower than the sum of the amount prescribed in paragraph 1, subparagraph 1 and NT$50 million; for a managed futures enterprise that concurrently operates or is at the same time applying to concurrently provide trust-type discretionary investment services, paid-in capital not lower than the sum of the minimum paid-in capital amount prescribed in Article 15 of the Standards for the Establishment of Managed Futures Enterprises and NT$50 million. |
| Article 6 |
A SITE or a SICE that applies to provide discretionary investment services shall fill out an application form, attaching the following documents, for submission to the SITCA, which shall review and forward them to the FSC for permission:
1. Articles of incorporation.
2. Company bylaws.
3. The CPA-audited and certified financial report for the most recent fiscal year. If the date of application is more than six months past the start of the new fiscal year, the CPA-audited and certified financial report for the first half of the fiscal year shall also be attached.
4. The meeting minutes of the relevant board of directors meetings.
5. A SICE shall submit documentation of the matters under paragraph 1, subparagraph 3 of the preceding article, but is exempt from this requirement when applying to offer trust-type discretionary investment services.
6. A declaration that the particulars set out in the application and its attachments involve no misrepresentations or nondisclosures.
7. A SITE or a SICE that applies to provide trust-type discretionary investment services shall at the same time attach the documents prescribed in the Regulations Governing the Concurrent Operation of Trust Business by Securities Investment Trust Enterprises, Securities Investment Consulting Enterprises, and Securities Firms.
The company bylaws referred to in subparagraph 2 of the preceding paragraph shall include an internal control system that sets out, with respect to discretionary investment services, operating principles, operating procedures, segregation of duties and responsibilities, resolution of business disputes, personnel training and education, and administrative matters.
A SITE or a SICE may simultaneously apply for a branch unit to provide support in the promotion of its discretionary investment business. |
| Article 7 |
Within three months after the date of FSC approval for the offering of discretionary investment services, the SITE or SICE shall fill out an application for issuance of a new business license with the following documents attached for submission to SITCA, which shall review and forward them to the FSC for permission:
1. Documentary proof of company registration.
2. The SITE or SICE business license.
3. The name of the organization conforming to the provisions of Article 8, and a register of personnel meeting qualification requirements, issued by the SITCA after reviewing their qualifications, together with the relevant documentary proof of qualifications.
4. The audit report from a CPA special audit on the internal control system for the discretionary investment services.
5. A prospectus prepared in accordance with the provisions of Article 21 herein.
6. Documentary proof that the operating bond required under Article 10 has been furnished.
7. A declaration that the particulars set out in the application and its attachments contain no misrepresentations or nondisclosures.
The CPA performing the audit required by subparagraph 4 of the preceding paragraph shall be one qualified to audit and attest the financial reports of public companies.
The FSC may revoke the permission of a SITE or a SICE that fails to apply for issuance of a new business license within the period prescribed by paragraph 1, provided that with legitimate reason, an application may be forwarded to the FSC through SITCA prior to the end of the prescribed period for a one-time extension of three months only.
A SITE or a SICE that offers trust-type discretionary investment services shall apply for issuance of a new business license pursuant to the provisions of paragraph 1, and in addition, prior to commencing business, shall complete registration of new lines of business pursuant to the Regulations Governing the Concurrent Operation of Trust Business by Securities Investment Trust Enterprises, Securities Investment Consulting Enterprises, and Securities Firms and report to the FSC with documentation showing approval for membership in the Trust Association of the R.O.C.and the lodging of the required compensation reserve. |
| Article 7-1 |
A SITE or a SICE that offers discretionary investment services and applies for promotion and business solicitation for its discretionary investment services by a branch unit shall fill out an application, with the following documents attached, and apply to the FSC for permission:
1. Board of directors meeting minutes containing a resolution for the branch unit to engage in promotion and business solicitation for discretionary investment services.
2. The internal control system for the promotion and solicitation of discretionary investment services by the branch unit.
3. A declaration that the particulars set out in the application and its attachments involve no misrepresentations or nondisclosures.
The internal control system of subparagraph 2 of the preceding paragraph shall include rules governing the concurrent appointment and the conduct of associated persons at the branch unit who engage in promotion and solicitation for the discretionary investment services. |
| Article 7-2 |
A SITE or a SICE that offers discretionary investment services and makes an application pursuant to the preceding paragraph shall fill out an application form, with the following documents attached, and within six months after the date of receiving FSC permission, apply to the FSC for issuance of a new business license for its branch unit:
1. A register, issued by the SITCA, of associated persons at the branch unit engaging in promotion and solicitation for discretionary investment services whose qualifications have passed review, and documentation of their qualifications.
2. A declaration stating that none of the circumstances under Article 68 of the SITC Act apply to any officer, department supervisor, or associated person of the branch unit.
3. A declaration that the particulars set out in the application and its attachments involve no misrepresentations or nondisclosures.
Permission for a branch unit to engage in promotion and solicitation of discretionary investment services will be revoked for any SITE or SICE that does not apply to the FSC for issuance of a new business license for the branch unit for such business within the stated deadline of the preceding paragraph, provided that when a legitimate reason exists, an application may be made to the FSC for a one-time extension of no more than three months. |
| Article 7-3 |
Given any of the following circumstances in an application by a SITE or a SICE for operation of discretionary investment business, the FSC may withhold permission:
1. The internal control system is insufficiently specific or cannot be effectively implemented.
2. The department supervisors or associated persons operating the discretionary investment business do not meet the provisions of the Regulations Governing Responsible Persons and Associated Persons of Securities Investment Consulting Enterprises regarding qualification or exclusively holding the given position.
3. The content of the application or matters set out therein are discovered to contain misrepresentations.
4. Other circumstances under which it is deemed necessary to withhold approval in order to protect the public interest.
The FSC may withhold permission given any of the following circumstances in an application by a SITE or a SICE for operation of trust-type discretionary investment business:
1. The circumstances in any of the subparagraphs of the preceding paragraph.
2. The person with authority to determine the disposition of trust assets does not meet the requirement under the Trust Enterprise Act of not concurrently holding any other position.
3. The responsible person of the SITE or SICE and the associated persons that operate and manage trusts do not possess the qualifications or the specialized knowledge or experience in relation to trusts required by the Regulations Governing the Concurrent Operation of Trust Business by Securities Investment Trust Enterprises, Securities Investment Consulting Enterprises, and Securities Firms. |
| Article 16 |
The range of securities-related products which a SITE or SICE may trade using discretionary investment assets shall be limited to the following:
1. Trading orders that futures commission merchants are allowed to handle per FSC announcements made in accordance with Article 5 of the Futures Trading Act, and trading in securities-related futures contracts, option contracts, and futures option contracts. The SITE or SICE shall place an order with an FCM to execute the trades.
2. FSC-approved off-futures exchange trading in financial products derived from currencies, securities, interest rates, or securities indices.
The ratios, methods of calculating risk exposure, and related regulations regarding the use of discretionary investment assets by a SITE or a SICE in trading securities-related products pursuant to the preceding paragraph shall be separately adopted by the FSC.
When a SITE or a SICE has received FSC approval for concurrent operation of a managed futures enterprise, it may apply for approval by the FSC of exemption from the limiting ratios of the preceding paragraph with respect to its utilization of discretionary investment assets in trading securities-related products. Its risk exposure may not then exceed 100 percent of the net asset value of the discretionary investment account. |
| Article 19-1 |
Except where the FSC provides otherwise, the supervisor of a department dedicated to discretionary investment business and the discretionary investment manager at a SITE or a SICE and that person's spouse, minor children, and other persons in whose name that person makes transactions may not engage in trading of a given company's shares and equity-type derivative products from the time that the SITE or SICE decides to utilize discretionary investment assets to engage in trading of the given company's shares or equity-type derivative financial products until such time as the given company's shares or equity-type derivative financial products are no longer held as part of the discretionary assets. |
| Article 22 |
A SITE or a SICE that provides discretionary investment services shall enter into a discretionary investment services contract with the customer, clearly stipulating all discretionary investment rights and obligations between the SITE or SICE and the customer that derive from the mandate or trust relationship. A copy of the contract shall be sent to the custodian of the discretionary investment assets.
The discretionary investment services contract of the preceding paragraph shall be separately executed with each customer by the SITE or SICE, and except where law, regulation, or the FSC provides otherwise, no collective mandate or collective trust may be accepted thereunder. The discretionary investment services contract shall set out the following matters, and where establishes is a trust relationship, it shall additionally set out the particulars of each subparagraph of Article 19, paragraph 1 of the Trust Enterprise Act:
1. The names and addresses of the parties to the contract.
2. The reasons and time limits for any rescission of the contract subsequent to signing.
3. The discretionary investment assets initially placed for investment.
4. Stipulations regarding basic investment and trading policies, scope of investment and trading, and any changes thereto. Types and names of securities or products shall be clearly listed as part of the scope of investment and trading.
5. The granting of authorization for investment or trading decisions and any restrictions thereon.
6. The granting of authorization to direct utilization of assets and any restrictions thereon.
7. Designation of the investment manager and any change in that designation.
8. Designation of the custodian of the discretionary investment assets and any change in that designation, and directions regarding the method of custody and the method of collection and delivery.
9. Designation of the securities broker or futures broker, and any change in that designation.
10. Confidentiality obligations, and the obligation to exercise the due care of a good administrator.
11. The legal obligations associated with a change in equity holdings when the customer is a director, supervisor, or managerial officer or a public company, or shareholder in such a company holding more than 10 percent of the company's shares.
12. Reporting obligations.
13. The method of calculating compensation and fees for the commissioned services, and the manner and time of payment.
14. The effective date and duration of the contract.
15. Provisions for amendment or termination of the contract.
16. The obligation to give notice of any material change, and the means of notice.
17. Provisions regarding settlement obligations after termination of the contractual relationship.
18. Provisions for handling breach of contract.
19. Provisions for handling matters following bankruptcy, dissolution, cessation of business, suspension of business or voidance or revocation of the business permission.
20. A method for resolution of disputes, and the court of jurisdiction.
21. Other matters as may be prescribed by the FSC.
The discretionary investment assets initially placed for investment, as referred to in subparagraph 3 of the preceding paragraph, shall be deposited in their entirety with the custodian of the discretionary investment assets at the time the discretionary investment services contract is signed; the same applies to any increase in those assets. This restriction shall not apply, however, when the discretionary assets are assets in a special ledger account for investment-linked insurance or Labor Pension Act annuity insurance and a separate stipulation in respect of those assets has been included in the discretionary investment services contract.
The basic investment and trading policies and the scope of investment and trading referred to in paragraph 2, subparagraph 4 shall be carefully negotiated on the basis of the customer's financial strength, investment or trading experience, and investment objectives, as well as the applicable restrictions of law or regulations.
The "designation of the securities broker or futures broker" referred to in paragraph 2, subparagraph 9 shall be made at the customer's own discretion. When the customer only designates a single securities broker or futures broker, the customer shall be clearly informed of the associated risks.
When, in accordance with the preceding paragraph, the customer at its own discretion designates the enterprise in another line of business as the securities broker or futures broker, the customer shall first be clearly informed of the associated risks, conflicts of interest, and related control measures, and separate written consent shall be obtained from the customer in addition to the discretionary investment services contract.
Where the customer makes no designation of a securities broker or futures broker, the SITE or SICE shall designate the broker, giving due attention to appropriate diversification and avoiding overconcentration. When the SITE or SICE is concurrently operated by an enterprise in another line of business, that enterprise may not be designated as the securities broker, and when that enterprise and the designated securities broker or futures broker are mutually invested or have a relationship of control and subordination, that fact shall be disclosed in the discretionary investment services contract. When the circumstances under Article 27 of the Trust Enterprise Act are present, they shall be stipulated in the trust agreement or advance notice shall be given and prior written consent obtained from the beneficial owner.
The compensation referred to in paragraph 2, subparagraph 13 may include collection of the performance compensation provided for in Article 20.
SITCA shall draft contract templates for discretionary investment business and adopt regulations governing mediation procedures in regard to the method of dispute resolution referred to in paragraph 2, subparagraph 20, which it shall submit to the FSC by letter for approval; the same shall apply to any amendment thereto.
The discretionary investment services contract of paragraph 1 and related materials shall be retained on file for a period of not less than five years after the contract ceases to have effect.
Designation or change in designation of the custodian of the discretionary investment assets as referred to in paragraph 2, subparagraph 8 shall not apply when the customer keeps the discretionary investment assets in its own custody as provided for in Article 11, paragraph 5. |
| Article 31-1 |
A SITE or a SICE that provides trust-type discretionary investment services shall establish a department dedicated to trust business and staff it with a sufficient number of competent managers and associated persons. The dedicated trust business department may be combined with the dedicated department of Article 8, paragraph 1, but after combination, persons in the dedicated department responsible for deciding the disposition of trust assets may not concurrently operate any other business outside the scope of the dedicated department.
The supervisor and associated persons of the dedicated department of the preceding paragraph may not handle business beyond the scope of the dedicated department, nor may their functions be performed by any person not registered as supervisor or associated person of the dedicated department.
The associated persons of the dedicated department of paragraph 1 who carry out research and analysis and make investment or trading decisions may not concurrently serve as, or have their positions concurrently filled by, associated persons who execute trades. In addition, associated persons who carry out research and analysis and make investment or trading decisions may not concurrently serve as or have their position filled by associated persons that make investment or trading decisions in the business of collective trust funds, the offering of securities investment trust funds, the offering of futures trust funds to unspecified persons, securities dealing, proprietary futures trading, or trading or investment with the enterprise's own funds.
The responsible person of a SITE or SICE that offers trust-type discretionary investment services and the associated persons that operate and manage trusts shall possess the qualifications or the specialized knowledge or experience prescribed by the Regulations Governing the Concurrent Operation of Trust Business by Securities Investment Trust Enterprises, Securities Investment Consulting Enterprises, and Securities Firms, and shall also possess the qualifications prescribed by the Regulations Governing Responsible Persons and Associated Persons of Securities Investment Consulting Enterprises. |
| Article 31-2 |
A SITE or a SICE that offers trust-type discretionary investment services shall lodge a compensation reserve in accordance with Article 34 of the Trust Enterprise Act and related provisions. |
| Article 31-3 |
A SITE or a SICE that offers trust-type discretionary investment services shall place the trust assets delivered by the customer in custody with a custodian of discretionary investment assets.
Under any of the following circumstances, an institution may not serve as a custodian of discretionary investment assets:
1. The institution is a fund custodian, has received an FSC disposition pursuant to Article 115 of the SITC Act, and the period of the disposition has not yet concluded.
2. The institution does not have a credit rating at or above a prescribed level issued by an FSC-recognized credit-rating agency.
3. Where any of the circumstances under Article 11, paragraph 3, subparagraphs 1 through 5 or paragraph 4 are present, except where approved by the FSC.
The SITE or SICE shall enter into a custody agreement with the custodian of the discretionary investment assets for implementing matters such as account opening for securities investment or trading of securities-related products, custody of funds and securities, payment of margins and premiums, settlement of transactions, account servicing, and exercise of equity rights.
Individual custody agreements of the type set out in the preceding paragraph shall be signed between the SITE or SICE and the custodian of the discretionary investment assets with respect to each individual customer, and except where law and regulation or the FSC provide otherwise, customers' discretionary assets may not be delivered to the custodian under a joint mandate.
Prior to implementing the matters under paragraph 3, the custodian of the discretionary investment assets shall first review the stipulated scope of the discretionary investment services contract and the restrictions it sets out.
The content and a template for the custody agreement of paragraph 3 shall be drafted by the SITCA and submitted to the FSC for approval. |
| Article 32 |
The provisions of Article 8-1, Article 9, Article 13 through Article 14-1, Article 16 through Article 21, Article 22, paragraph 1 through paragraph 10, Article 22-1 through Article 25, Article 27 through Article 31, Article 36, and Article 40 shall apply to a SITE or a SICE that provides trust-type discretionary investment services. |
| Article 41 |
The provisions of Article 14, Article 14-1, Articles 16 through 18, Article 19-1 through Article 21, Article 22 paragraph 2 (the forepart) and paragraphs 3 and 4, Article 22-1, Article 23, Article 24, Article 26 paragraph 3, and Articles 28 through 31 apply mutatis mutandis to a trust enterprise concurrently conducting discretionary investment business, provided that the provisions of Article 22 paragraph 3, Article 23, and Article 29 paragraph 2 do not apply where otherwise stipulated between the trust enterprise and the customer. |
| Article 41-1 |
An insurance enterprise that concurrently operates discretionary investment business, making decisions with discretionary authority about the utilization of subject assets under a special ledger account for investment-linked insurance business, shall establish a specialized department exclusively for the purpose, which shall be staffed with a sufficient number of competent supervisors and associated persons.
Except where the FSC provides otherwise, the supervisors and associated persons of the specialized department of the preceding paragraph may not engage in business other than that of the specialized department, nor may their duties be performed by persons other than the registered supervisors and associated persons of the department.
No associated person of paragraph 1 that carries out research and analysis and makes investment or trading decisions may concurrently serve as an associated person that executes transactions; in addition, no associated person that makes investment or trading decisions may concurrently serve as a person who makes investment or trading decisions with regard to the assets under an ordinary account of the insurance enterprise.
Any insurance enterprise producer who solicits business in which the enterprise has discretionary authority to decide the utilization of subject assets in investment-linked insurance, in addition to meeting the qualifications for associated persons set out in the Regulations Governing Responsible Persons and Associated Persons of Securities Investment Consulting Enterprises, shall also abide by the provisions of the SITC Act and the Regulations Governing Responsible Persons and Associated Persons of Securities Investment Consulting Enterprises. |
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