Government Announces Rules for Offshore Funds

　　Taiwan’s policies for the trillion-dollar offshore funds business moved a step forward with the promulgation of the Regulations Governing Offshore Funds on August 2. The new Regulations are based on the provisions of the Securities Investment Trust and Consulting Act, which was promulgated on June 30, 2004. The regulations cover placement, sale, and investment consulting in regard to offshore funds, and encompass the entities engaging in such businesses as well as their qualifying conditions, application and reporting procedures, business behavior, and advertising and promotion, etc.

　　The regulations have a total of 59 articles in five chapters. They stipulate that offshore fund-management institutions should commission a single general agent and marketing institution to handle the placement and sale of the funds in Taiwan. A general agent may be a investment trust, investment consulting, or securities broker with paid-in capital of at least NT$70 million, a per-share net value that is not lower than par value, and related sales and auditing personnel that meet set conditions. It must also put up a business bond. A marketing agency engaging in this business must have a per-share net value that is not less than par, must not have been disciplined under other laws or regulations, and must have personnel who meet set conditions. If the relevant personnel do not meet the qualifying conditions, the company will have a grace period of one year to make needed adjustments.

　　Unless it has been granted special approval by the Financial Supervisory Commission or has been recognized by an official ROC agency in the place of its registration, an offshore fund that applies for sale in Taiwan must have been established for at least one year. The ratios of its investment in derivative products, mainland Chinese securities, and red-chip shares must conform to FSC rules, and it may not invest in gold, commodities, or real estate. It must have total fund assets in excess of US$2 billion or the equivalent in other foreign currencies, and its custodial institution must have a credit rating that conforms to a set minimum.

　　An offshore fund may market itself in Taiwan to banking, bills and securities, insurance companies, financial holding companies and other juridical persons or institutions approved by the FSC up to a total number of 35. In case of private placement, it should submit a report to the FSC within five days after all of the funds are paid in.

　　Offshore funds that, prior to the promulgation of the Regulations Governing Offshore Funds, operated through securities investment consulting firms, will be granted a one-year grace period before having to report in accordance with the new rules. The FSC indicates that the implementation of the Regulations Governing Offshore Funds will protect domestic investors’ investments in overseas funds, and will provide domestic and offshore fund companies with a legal environment for fair competition. For more information on the Regulations Governing Offshore Funds, please consult http://www.sfb.gov.tw/secnews/law-an/94040002849_index.htm.

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