FSC Revises Regulations Governing Offshore Funds

The Financial Supervisory Commission completed a partial revision of the Regulations Governing Offshore Funds on May 31 with the aim of preventing the short-selling of offshore funds and protecting the interests of long-term investors. The revision also provides guidance for general agents and sellers of offshore funds in the implementation of internal controls. The main points of the revision are given below:

1.          To prevent the short-selling of offshore funds, a new provision requires sellers of such funds to thoroughly implement the measures for the prevention of short-selling as contained in public explanations, and to provide information on their investors to the offshore fund institutions or general agents. It also details the information that offshore fund institutions or their general agents must provide to sellers, as well as the obligation to maintain confidentiality.

2.          A new provision exempts general agents and sellers that have received their business licenses for less than one fiscal year from the requirement that net worth must not be less than face value.

3.          To simplify daily reporting by general agents and sellers, and to accommodate the need for general agents to obtain the sellers’ trading information from the offshore fund institution, general agents will now be required to report information regarding offshore funds and the requirement for sellers to report is deleted.

4.          A new provision designed to prevent short-selling and money laundering by general agents and sellers requires the internal-control systems of general agents and fund sellers to include the prevention of short-selling and money laundering.

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