Laws Information

法規資訊
Title: Regulations Governing Securities Investment Trust Funds
Am Date: 2018-07-23
Legislative History: Articles 4, 10, 11, 17, 20, 27, 29, 35, 37, and 51 amended and issued per 23 July 2018 Order No. Financial-Supervisory-Securities-SITC-1070324960 of the Financial Supervisory Commission

Transaction

Amended

Article 4
In managing a fund to invest or trade, a SITE shall base its decisions on its analysis; it shall keep records of its execution thereof, and shall also submit a review on a monthly basis. Its analysis and decisions shall be founded on reasonable grounds and bases.
The SITE shall include the analysis, decisions, execution, and review referred to in the preceding paragraph in the internal control system, and faithfully implement the system.
The SITE shall keep records of the control activities under the preceding paragraph, and shall preserve them for not less than 5 years.

Article 10
A SITE offering a trust fund shall utilize the fund’s assets in accordance with these Regulations and the provisions of the trust agreement, and except where otherwise provided by these Regulations or the FSC, shall comply with the following provisions:
1. The SITE may not invest in non-listed or non-OTC-listed stocks or privately-placed securities.
2. The SITE may not make loans or provide security, provided that a SITE that meets the requirements of Article 10-1 is not subject to this restriction.
3. The SITE may not engage in securities margin transactions.
4. The SITE may not engage in trading of securities or securities-related products between the various other funds, collective trust funds, discretionary accounts, or accounts for trading of securities with self-owned funds under the common management of the SITE, provided that this shall not apply in the case of cross-trades unintentionally occurring on a centralized securities exchange market or on Over-the-Counter Markets.
5. The SITE may not invest in its own securities or in securities issued by any company that is an interested company relative to the SITE.
6. The SITE may not use a fund to purchase the certificates of beneficial interest of that same fund, provided that this restriction shall not apply in the case of beneficiaries’ requests for redemption of certificates of beneficial interest, or when certificates of beneficial interest are redeemed because of the discontinuance of all or some part of the fund.
7. The SITE may not invest in structured interest rate products, with the exception of floating rate notes. However, this restriction shall not apply when structured interest rate products are a fund’s principal investment vehicle and are so designated by the fund’s name.
8. The total amount invested by any fund in the stocks, corporate bonds, or financial bonds of any single listed or OTC-listed company may not exceed ten percent of the net asset value of the fund.
9. The total amount invested by any fund in the shares of any single listed or OTC-listed company may not exceed ten percent of the total issued and outstanding shares of that company; the total amount invested by all funds under the common management of a SITE in the shares of any one listed or OTC-listed company may also not exceed ten percent of the total issued and outstanding shares of that company.
10. The total amount invested by any fund in an underwriting of shares of any single listed or OTC-listed company may not exceed one percent of the total shares underwritten; the total amount invested by all funds under the common management of a SITE in any single underwriting may not exceed three percent of the total of underwritten shares being.
11. The total amount invested by a fund in the certificates of beneficial interest of other funds may not exceed 20 percent of the first fund’s total asset value, provided that this restriction shall not apply in the case of a fund of funds or exchange-traded funds under Article 37, paragraph 4.
12. With the exception of exchange-traded funds under Article 37, paragraph 4, the total number of beneficial units of any single fund that may be invested in by any fund may not exceed 10 percent of the beneficial units already issued by the fund being invested in; the total number of beneficial units of any single fund that may be invested in by all funds under the common management of a SITE may not exceed 20 percent of the issued beneficial units of the fund being invested in.
13. The total amount invested by a fund in the unsecured corporate bonds of any single company may not exceed ten percent of the unsecured corporate bonds issued by that company.
14. The securities held by a fund may not be loaned to another person, provided that this restriction shall not apply given compliance with Article 14 and Article 14-1.
15. Proxy forms for shareholders’ meetings of an issuing company whose shares are purchased by a fund may not be sold or transferred.
16. No fund may authorize stock trades by any single securities firm that exceed 30 percent of the total monetary value of the fund’s stock trades in the given fiscal year. This provision shall not apply, however, to funds that have been established for less than one full fiscal year.
17. The total amount any fund may invest in short-term bills and securities issued, guaranteed, or endorsed by any single company may not exceed ten percent of the fund’s total asset value. However, this restriction does not apply to investments in beneficial certificates of funds.
18. The total amount invested by a fund in the international financial institution bonds issued by any single international financial institution with FSC approval to issue such bonds within Taiwan may not exceed ten percent of the fund’s net asset value, and may not exceed ten percent of the international financial institution bonds issued within Taiwan by the given international financial institution.
19. The SITE may not engage in any improper trading activity and thereby affect the net asset value of a fund under its management.
20. The SITE may not engage in any other act prohibited by the FSC.
The term “various funds” in subparagraph 4 of the preceding paragraph and the term “all funds under the common management of a SITE” in subparagraphs 9, 10, and 12 include securities investment trust funds and futures trust funds publicly or privately offered by a SITE.
The ceiling on the ratio of a SITE’s use of a fund for investment in an underwritten stock shall be calculated by combining the amount of that investment with the shares of listed and OTC-listed companies of a similar type held to arrive at the total number of shares or total monetary amount; the amount of investment in depositary receipts shall be combined with the shares held in the issuing company of the depositary receipts, and the ceiling on the ratio of investment in that company similarly based on the combined figures for either monetary values or numbers of shares.
“Corporate bonds” as referred to in paragraph 1, subparagraphs 8 and 13 shall include common corporate bonds, convertible corporate bonds, exchangeable corporate bonds, and corporate bonds with warrants.

Article 11
The term “an interested company relative to the SITE” in paragraph 1, subparagraph 5 of Article 10 refers to any one of the following circumstances:
1. A company having the relationship with the SITE forth in Chapter 6-1 of the Company Act.
2. A SITE director or supervisor, or a shareholder with total shareholdings of five percent or more.
3. Any of the above persons, or a manager of the SITE, when they are the same person as the given company’s director, supervisor, manager, or shareholder with a ten percent or greater shareholding, or have a spousal relationship with such person.
The term “combined shareholdings” as used in subparagraph 2 of the preceding paragraph refers to the total shareholdings of the enterprise in the SITE, plus the shareholdings in the same SITE of the enterprise’s director, supervisor, or manager, as well as those of an enterprise directly or indirectly controlled by the first enterprise.
The provisions of paragraph 1 apply mutatis mutandis to the representative or designated representative of a juristic person director or supervisor who executes the duties of the juristic person.

Article 17
A SITE offering a fund for investment in domestic subordinated corporate bonds or subordinated financial bonds shall observe the following conditions:
1. Fund investment shall be restricted to listed or OTC-listed subordinated corporate bonds or subordinated financial bonds.
2. The total investment by any such fund in subordinated corporate bonds or subordinated financial bonds issued by any single company may not exceed ten percent of the total value of the given issue (or tranche, where the issue is tranched).
3. Subordinated corporate bonds or subordinated financial bonds in which the fund invests shall have a credit rating at or above a prescribed level issued by an FSC-approved or recognized credit-rating institution.

Article 20
A SITE using a fund to trade in securities shall apply the relevant provisions of these Regulations in accordance with the trust agreement provisions regarding regions, markets, and types and scope of securities investment.
If an expiration date is stipulated for a fund, and for purposes of meeting the investment strategy needs, the securities investment trust agreement may specify that the restrictions of Articles 25, 26, and 29 and Article 30, paragraph 1 do not apply during a certain period of time before the expiration date of the fund.
If a SITE meets the conditions specified by the FSC, when the SITE applies to offer a fund, it may, for the purposes of meeting investment strategy needs, and upon applying to the FSC and receiving its approval, specify in the securities investment trust agreement restrictions relating to the types, scopes, and ratios of domestic and foreign securities in which the fund will invest, and be exempted from the restrictions set out in Article 8, Article 10, paragraph 1, Articles 15 to 17, Article 27, and Article 30, paragraph 1.

Article 27
Except where law and regulation provide otherwise, bond funds may not invest in the following investment instruments:
1. Stocks.
2. Equity-type securities, provided that convertible corporate bonds, corporate bonds with warrants, and exchangeable corporate bonds are not subject to this restriction.
3. Structured interest rate products. However, this restriction shall not apply to floating rate notes.
The total amount of investment in convertible corporate bonds, corporate bonds with warrants, and exchangeable corporate bonds by a SITE utilizing a bond fund may not exceed 10 percent of the net asset value of the fund.
When the convertible corporate bonds, corporate bonds with warrants, or exchangeable corporate bonds held by a bond fund meet conditions such that there is any bond conversion, exercise of warrants, or exchange for stock, the fund shall make adjustments within one year to achieve conformance with requirements.

Article 29
A bond fund’s asset portfolio shall have a weighted average duration of no less than one year, provided that this restriction shall not apply to funds established for less than three months, or in the month prior to the trust agreement’s termination date, or to a fund that invests primarily in floating rate notes.

Article 35
To achieve conformity with an index’s composition, a SITE utlizing index fund assets may invest in securities without regard for the restrictions of Article 10, paragraph 1, subparagraph 5, subparagraph 8, or the main provision of subparagraph 17, provided that if the total amount of investment in any one of the securities exceeds 10 percent of the net asset value of the fund, its investment does not exceed the weighting given the individual component security within the index.
When a SITE utilizes an index fund’s assets, if an adjustment of the index’s composition or the index replication strategy measures so require, and if the conditions of the FSC are met, the SITE need not be subject to the proviso of the preceding paragraph.

Article 37
“Exchange-traded fund (ETF)” refers to a fund which tracks, simulates, or replicates the performance of an index and is traded on a securities exchange market, with subscription and redemption of ETF units carried out through physical delivery or by the method prescribed in the trust agreement.
The component securities of the subject index of the preceding paragraph include stocks, bonds, and other securities approved by the FSC.
The subject index of paragraph 1 shall meet the conditions given in Article 32, paragraph 2.
An ETF may be linked to a single offshore ETF that complies with the requirements of Article 26 of the Regulations Governing Offshore Funds.
If any event in Article 12, paragraph 6 of the Regulations Governing Offshore Funds occurs with respect to a single offshore ETF that is linked to by an ETF as described in the preceding paragraph, the SITE shall, after receiving notice of a meeting of beneficial owners issued by the offshore fund entity or any other relevant notice, report to the FSC for approval, and make a public announcement within 3 days from the date of occurrence of the event.

Article 51
A SITE may privately place certificates of beneficial interest with the following entities:
1. Banking enterprises, bills finance enterprises, trust enterprises, insurance enterprises, securities enterprises, financial holding companies, or other juristic persons or institutions approved by the FSC.
2. Natural persons, juristic persons, or funds that meet FSC-imposed requirements.
The total number of offerees under subparagraph 2 of the preceding paragraph may not exceed 99 persons.
Prior to completion of the offering, the SITE bears the obligation of providing financial, operational, or other information relevant to the given placement of certificates of beneficial interest in response to reasonable requests from the entities listed under paragraph 1, subparagraph 2.
A SITE privately placing a fund with specific persons may not engage in normal advertising activities or publicly offer inducements during the period of offering and sale.
Any SITE violating the provisions of the preceding paragraph will be deemed to have made a public offering to non-specified persons.