5 Things Should Know In Developing Taiwan. 3rd: Walk Through The Regulation System and Constrains
Updated: Sep 8, 2021
Plan to broaden your business in Taiwan Institution market? NIC, the experienced consultant in the industry, shares the critical 5 things you should know from previous insights and the coming 2 ones.
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Sophisticated system of laws and regulation confuses the foreign managers
The complexity of Taiwan regulation governing the various financial products are hugely beyond your imagination. Subject to complicated systems of laws, acts, regulations, directions and interpretative letters, (and sometimes unspoken rules), the product design and business model construction are not always as easy as you expect. In practice, the interpretative letter which is later published by the competent authorities even may be more practical to direct the industry players.
Subject to Central Regulation Standard Act., the state’s laws and regulations are conveyed in different levels. The administrative rules, on the other hand, are not of the nature of a statutory order and do not require a direct legal authorization.
Act: A statute may be named as act, penal act, special act or comprehensive act.
Regulation: An ordinance publicized by a government agency may be named as organic rule, norm rule, enforcement rule, directive rule, guidance rule, standard rule or canon rule according to its nature.
Administrative rules: The commonly used administrative rules are named "points", "notes", "procedures", "principles", "Measures" and so on.
Q&A or unspoken rules: When various questions are raised from the industry players, Q&A of procedures are occasionally published hereby by the competent authorities to comfort the confusions in general, but also need to comply.
The regulations governing offshore funds and foreign investment from the professional institutions are shortlisted for sample expression, but not include all, as below.
Regulation Governing Securities Investment Trust Enterprises
Regulation Governing Securities Investment Consulting Enterprises
Regulation Governing Responsible Person and Associated Persons of Securities Investment Consulting Enterprises
Standards Governing the Establishment of Securities Investment Consulting Enterprises
Regulation Governing Information to be published in Private Placement Memoranda by Securities Investment Consulting Enterprises When Privately Offering Securities Investment Trust Funds
Regulation Governing Foreign Investments by Insurance Companies
Directions for Use by Securities Investment Trust Enterprises of Securities Investment Funds for Trading of Securities-Related Products
Self-regulation of Discretionary Investments by Insurance Companies (CHI)
Matters Required to be included in the Consignment Agreement of Offshore Fund Institution and Appointed Institution When Privately Offering Securities Investment Trust Funds (CHI)
FAQ of Privately Offering Securities Investment Trust Funds (CHI)
According to the regulation, the most frequent asked question is what’s the eligible way to distribute products in Taiwan. Basically, there are two ways according to Regulation Governing Offshore Funds.
Unique Master Agent scheme and registered offshore funds
The master agent scheme which, to a highly extent, is the big program for offshore fund managers to operate business in Taiwan. Offshore fund manager or an institution shall appoint a single Master Agent to represent it in the offering and sale of its funds in Taiwan, compliant with the rule of Regulations Governing Offshore Funds. As of February 2019, there are totally 41 Master Agents registered in Taiwan. Majority to them are the subsidiaries registered in Taiwan in the Group strategical perspective to exclusively support the mutual funds sales of their foreign asset management companies in the mother group. Those asset managers who do not have the local pre))sence have to appoint a local agent alternatively, authorizing a qualified domestic Master Agent, which is responsible for all sales distribution, reporting and operation executions within Taiwan.
Through private placement mechanism for unregistered funds
The master agent scheme controls the mass market from the retails. However, the offshore funds unauthorized by the competent authorities still have niche access to raise capitals from Taiwan investors. For instance from the private placement route, up to 99 investors, subscriptions could from professional investors, or professional institutions i.e. Lifers or Investment Corporate, etc. In this route, local private placement agent is still necessary for all work related to reporting status to authority.
The dynamic fund distribution routes highlight the importance of how you understand the local market practice and the complicated legal and compliance system across different regulations governing the products and qualifications.
The ideal scenario for managers who want to distribute products in Taiwan is figuring out every detail regulation to understand why insurance companies is interested in certain product or not allowed to invest in specific product. However, it’s uneasy to have a completed picture of regulation and industry sense, in a short time, when you decide to develop fund business in Taiwan. Getting good legal advice when entering the Taiwan market is an absolute priority for offshore fund management companies. Interested? Contact us!