FSC Allows Banks to Accept Commissions for Investment in
2022-08-17
August 17, 2022
FSC Allows Banks to Accept Commissions for Investment in "Offshore Funds that do not have the Nature of a Securities Investment Trust Fund" through Trusts
To continue to promote asset management services for high-asset customers in Taiwan, the Financial Supervisory Commission (hereinafter referred to as the FSC) has promulgated an order (hereinafter referred to as the Regulations) on August 15, 2022 to allow banks to process asset management businesses for high-asset customers to accept commissions for investment in "offshore funds that do not have the nature of a securities investment trust fund" in accordance with Subparagraph 8, Paragraph 1 of Article 5 of the Regulations Governing Banks Conducting Financial Products and Services for High-Asset Customers. This provides high-asset customers with a wider range of financial products and services. In addition, banks may commence operations without filing additional applications after completing related internal regulations.
The FSC stated that as “offshore funds that do not have the nature of a securities investment trust fund" have lower market liquidity and transparency than “offshore funds that have the nature of a securities investment trust fund”, the eligibility for investment is higher and it is more suitable for investors with a certain level of expertise, experience, and financial resources who are willing to take on related investment risks and focus on long-term investments. The deregulation mainly targets domestic high-asset customers who may have used offshore channels for access to or investment in hedging funds, private equity funds, or other investment products. The FSC thus added the channel of investment in “offshore funds that do not have the nature of a securities investment trust fund” through trusts.
The FSC has previously allowed securities investment trust enterprises and securities investment consulting enterprises to provide sales and consulting services for “offshore funds that do not have the nature of a securities investment trust fund” to high-asset customers in the No. Financial-Supervisory-Securities-SITE -1090147633 order dated May 31, 2021. On August 13, 2021, the FSC issued the No. Financial-Supervisory-Securities-Firms-1100362907 order to allow securities firms to use sub-brokerage to accept commissions for the purchase and sales of “offshore funds that do not have the nature of a securities investment trust fund”. To ensure the consistency of asset management businesses processed by different financial institutions, the FSC hereby allows banks to process asset management businesses for high-asset customers to accept commissions for investment in such funds through trusts to strengthen the products and services provided by domestic financial institutions to customers.
The promulgation of the Regulations will help banks implement asset management businesses of high-asset customers. Banks must complete related internal regulations and sign a contract with the foreign asset management institution or its designated institution before they start accepting commissions for investment in "offshore funds that do not have the nature of a securities investment trust fund". The key points of the Regulations are as follows:
1. Clients are limited to professional institution investors, high net worth corporate investors, and high-asset customers. With reference to the aforementioned FSC order dated May 31, 2021 and August 13, 2021, the total number of clients may not exceed 99 persons. (Subparagraph 1, Article 1 of the Regulations)
2. To help banks manage the total number of the aforementioned clients, banks must sign a contract with the foreign asset management institution or its designated institution in advance and specify in the contract that no other institution in Taiwan may be commissioned to process such operations. (Subparagraph 2, Article 1 of the Regulations)
3. To monitor the sales of “offshore funds that do not have the nature of a securities investment trust fund” in Taiwan, the FSC requires banks that accept commissions for investment in such funds to report information on the status of commissioned investments to the Securities Investment Trust & Consulting Association of the R.O.C. (Subparagraph 3, Article 1 of the Regulations)
FSC Allows Banks to Accept Commissions for Investment in "Offshore Funds that do not have the Nature of a Securities Investment Trust Fund" through Trusts
To continue to promote asset management services for high-asset customers in Taiwan, the Financial Supervisory Commission (hereinafter referred to as the FSC) has promulgated an order (hereinafter referred to as the Regulations) on August 15, 2022 to allow banks to process asset management businesses for high-asset customers to accept commissions for investment in "offshore funds that do not have the nature of a securities investment trust fund" in accordance with Subparagraph 8, Paragraph 1 of Article 5 of the Regulations Governing Banks Conducting Financial Products and Services for High-Asset Customers. This provides high-asset customers with a wider range of financial products and services. In addition, banks may commence operations without filing additional applications after completing related internal regulations.
The FSC stated that as “offshore funds that do not have the nature of a securities investment trust fund" have lower market liquidity and transparency than “offshore funds that have the nature of a securities investment trust fund”, the eligibility for investment is higher and it is more suitable for investors with a certain level of expertise, experience, and financial resources who are willing to take on related investment risks and focus on long-term investments. The deregulation mainly targets domestic high-asset customers who may have used offshore channels for access to or investment in hedging funds, private equity funds, or other investment products. The FSC thus added the channel of investment in “offshore funds that do not have the nature of a securities investment trust fund” through trusts.
The FSC has previously allowed securities investment trust enterprises and securities investment consulting enterprises to provide sales and consulting services for “offshore funds that do not have the nature of a securities investment trust fund” to high-asset customers in the No. Financial-Supervisory-Securities-SITE -1090147633 order dated May 31, 2021. On August 13, 2021, the FSC issued the No. Financial-Supervisory-Securities-Firms-1100362907 order to allow securities firms to use sub-brokerage to accept commissions for the purchase and sales of “offshore funds that do not have the nature of a securities investment trust fund”. To ensure the consistency of asset management businesses processed by different financial institutions, the FSC hereby allows banks to process asset management businesses for high-asset customers to accept commissions for investment in such funds through trusts to strengthen the products and services provided by domestic financial institutions to customers.
The promulgation of the Regulations will help banks implement asset management businesses of high-asset customers. Banks must complete related internal regulations and sign a contract with the foreign asset management institution or its designated institution before they start accepting commissions for investment in "offshore funds that do not have the nature of a securities investment trust fund". The key points of the Regulations are as follows:
1. Clients are limited to professional institution investors, high net worth corporate investors, and high-asset customers. With reference to the aforementioned FSC order dated May 31, 2021 and August 13, 2021, the total number of clients may not exceed 99 persons. (Subparagraph 1, Article 1 of the Regulations)
2. To help banks manage the total number of the aforementioned clients, banks must sign a contract with the foreign asset management institution or its designated institution in advance and specify in the contract that no other institution in Taiwan may be commissioned to process such operations. (Subparagraph 2, Article 1 of the Regulations)
3. To monitor the sales of “offshore funds that do not have the nature of a securities investment trust fund” in Taiwan, the FSC requires banks that accept commissions for investment in such funds to report information on the status of commissioned investments to the Securities Investment Trust & Consulting Association of the R.O.C. (Subparagraph 3, Article 1 of the Regulations)
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2022-10-11