Newsletter
REGULATIONS GOVERNING OFFSHORE FUNDS AMENDED
To facilitate the practice of related operations following the authorization of the offering and sale in Taiwan of offshore exchange-traded funds (ETFs), on 25 September 2008 the Financial Supervisory Commission (FSC) announced amendments to the Regulations Governing Offshore Funds. The amendments are intended to take account of the characteristics of this type of investment vehicle in terms of listing, trading, and settlement; to comprehensively define eligibility for listing applications, application documents, and related operational procedures; and to protect investors' interests. The main points of the amendments are as follows:
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A general condition under the Regulations for the listing and trading in Taiwan of an offshore ETF is that the fund's place of registration and the location of its managing institution are recognized and announced by the FSC, based on the principles of equality and reciprocity and of mutual listing. However, the amended Regulations waive this condition for an offshore ETF that is offered and issued under bilateral or multilateral cooperation between financial regulatory agencies.
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Taking into consideration the characteristics of offshore ETFs in terms of their purchase and redemption on primary markets and of their listing and trading on secondary markets, new provisions define purchase and redemption procedures and modes of payment for offshore ETFs, and exempt the master agent of an ETF from the requirements to deposit an operating bond, and to deliver an investor information summary and a Chinese translation of the prospectus to investors that trade the fund's certificates on the Taiwan Stock Exchange.
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The relevant provisions are amended to comprehensively define application documents, application procedures, matters to be reported to the regulator, and matters to be publicly announced with regard to offshore ETFs, and to protect investors' interests.
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The provisions regarding limits on an offshore fund's investments in stocks related to mainland China are amended in line with the abolition of limits on the proportion of an offshore fund's assets that may be invested in Hong-Kong- and Macao-traded PRC stocks (H-shares) and in red-chip stocks. To take account of the fact that the custodian institution of an offshore fund may have no credit rating, a new provision allows the credit rating of the enterprise group to which a custodian institution belongs to be substituted if the custodian institution itself has no credit rating.
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Various measures are introduced in order to implement the policy of shifting toward public disclosure of information instead of reporting to the regulator, as well as to enhance information disclosure and to protect investors' interests: The matters required to be reported to the regulatory authority by a master agent, and the time limits for such reporting, are amended. New provisions require that where the regulatory regime in the fund's place of registration requires the issuance of semi-annual financial reports, these reports should be publicly announced in Taiwan. Other new provisions set new time limits for the public announcement of a change in or termination of a master agency, and of the update or amendment of a prospectus or investor brochure.
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In the interests of uniformity of regulation, a new provision, based on the rules for sales agents of Taiwan-based funds, states that other institutions approved by the regulatory authority may act as sales agents of offshore funds.