On January 3, 2019, the Financial Supervisory Commission (FSC) made an advance announcement about the draft amendment to the Regulations Governing Issuance of Beneficiary Securities by Trustee and Asset-backed Securities by Special Purpose Company and the Regulations Governing the Public Offering or Private Placement of REIT and REAT Beneficiary Securities by a Trustee (collectively, “Regulations”), in which the shelf registration system for issuing beneficiary securities is established and the integration system facilitating the conversion of privately-placed beneficiary securities into beneficiary securities which could be traded in public market is introduced, in order to introduce private funding to invest in public construction, give the issuers of the beneficiary security more flexibility and promote the diversification of capital market instruments and fundraising methods.
I. Shelf Offering:
According to the current law, the trustee must apply for approval (or effective registration) on a case-by-case basis to issue beneficiary securities by public offering or private placement, both of which should be completed in single installment. In order to enhance the flexibility of financial planning and reduce the cost of issuance, this amendment formulates the provisions regarding the shelf registration system. The major content of such amendment includes:
1. Stipulating that after the application for shelf registration, the beneficiary securities or asset-backed securities may be issued in installments within the following five years;
2. decreasing the scope of financial assets securitization projects that must obtain an approval before the insurance of beneficiary securities and asset-backed securities , for the purpose of promoting the efficiency of the issuance of securitization; and
3. Extending the time limit of announcement and offering to meet the needs of the actual operations, and in response to the introduction of shelf registration, stipulating that the public offering or private placement applied for by way of shelf registration should be filed with the competent authority for reference after the completion of each public offering or private placement.
II. Formulating the integration system facilitating the conversion of privately-placed beneficiary securities into beneficiary securities which could be traded in public market:
The current laws and regulations regarding financial assets securitization and real estate securitization have stipulated provisions of private placement and public offering, but there is no mechanism in place for beneficiary securities issued by way of private placement to be converted into beneficiary securities which could be traded in public market.According to these Regulations revised after this amendment, issuers of the privately placed beneficiary securities which meet the following conditions may apply to FSC for conversion, and then apply to Taiwan Stock Exchange or Taipei Exchange for public listing or over-the-counter trading:
1. Privately placed beneficiary securities or asset-backed securities have been issued at least for three years from the date of delivery;
2. Entrusted property generates a stable cash flow; and
3. An appropriate credit enhancement mechanism is provided.