First-step analysis: fintech regulation in Taiwan

[ad_1]

Financial regulation

Regulatory bodies

Which bodies regulate the provision of fintech products and services?

In Taiwan, the Financial Supervisory Commission (FSC) is the government body regulating all financial products and services. There are four bureaux established under the FSC: the Banking Bureau (BB), the Securities and Futures Bureau (SFB), the Insurance Bureau (IB) and the Financial Examination Bureau (EB) (collectively the Bureaux). Each of the BB, SFB and IB is separately responsible for regulating the banking, securities and insurance indus­tries. The EB is in charge of financial inspection and audits of financial institutions regulated by the FSC. Currently, none of the four bureaux has been specifically designated to regulate fintech products and services. Therefore, it should depend on the nature of such products and services to determine which bureau would be the body regulating the relevant fintech products or services.

As to the mechanism of the regulatory sandbox, the FSC is the competent authority; nonetheless, if the tested fintech product and service relates to the regulatory regime of other competent authorities (such as the Central Bank), the opinion of these relevant authority will also be consulted by the FSC.

Regulated activities

Which activities trigger a licensing requirement in your jurisdiction?

In Taiwan, conducting finance-related activities generally requires a licence from the FSC. These activities include the following, without limitation.

  • Securities-related activities: securities underwriting, securities brokerage, securities dealing (ie, proprietary trading), securities investment trust (ie, asset management) and securities investment consulting.
  • General consulting business, such as acting as financial advisers or agents to arrange investments or bring about merger or acquisition deals, does not require any licence. In addition, acting as principal in an investment deal does not require any licence (except for if a foreign investor should need a foreign investment approval and investment in regulated industries needs special approvals).
  • Bank-related activities:
    • lending: lending activities do not fall within the business to be exclusively conducted by a local licensed bank. However, as no financing company may be registered in Taiwan, it is currently not possible for an entity to register as a financing company to carry on lending activities in Taiwan;
    • factoring and invoice, discounting and secondary market loan trading;
    • deposit taking;
    • foreign exchange trading;
    • remittance; and
    • electronic payment, credit cards and electronic stored-value cards.

Consumer lending

Is consumer lending regulated in your jurisdiction?

A local licensed bank may carry on consumer lending activities. Although lending activities do not fall within the business to be exclusively conducted by a local licensed bank, carrying out lending activities as one of a company’s registered business activities is still not permitted in Taiwan.

Secondary market loan trading

Are there restrictions on trading loans in the secondary market in your jurisdiction?

The general principle under Taiwan’s Civil Code is that any receivable is assignable unless (1) the nature of the receivable does not permit this transfer; (2) the parties to the loan have agreed that the receivable shall not be transferred; or (3) the receivable, in nature, is not legally attachable. The receivables under loan, subject to (2) above, are generally transferable. However, a bank is subject to stricter rules that, generally, loans that remain performing cannot be transferred by a bank, with some limited exceptions (such as for the purpose of securitisation). For this reason, Taiwan does not currently have an active secondary loan market.

Collective investment schemes

Describe the regulatory regime for collective investment schemes and whether fintech companies providing alternative finance products or services would fall within its scope.

Local funds (securities investment trust funds)

The most common form of collective investment scheme in Taiwan is securities investment trust funds, which may be offered to the general public or privately placed to specified persons. Public offering of a securities investment trust fund needs prior approval or effective regis­tration with the FSC or the institution designated by the FSC. No prior approval is required for a private placement of a securities investment trust fund; however, it can only be placed to eligible investors and within five days after the payment of the subscription price for initial invest­ment offering, a report on the private placement shall be filed with the FSC or the institution designated by the FSC. Generally, the total number of qualified non-institutional investors under a private place­ment shall not exceed 99. Under current laws and regulations, public offering and private placement of securities investment trust funds may only be conducted by FSC-licensed securities investment trust enter­prises (SITEs). Currently, the paid-in capital of a SITE should not be lower than NT$300 million, and there exist certain qualifications for the shareholders of a SITE. A fintech company, which is not a SITE, will not be able to raise funds as a SITE does.

 

Offshore funds

Offshore funds with the nature of a securities investment trust fund may also be publicly offered (subject to FSC prior approval) or privately placed (subject to post-filing with the FSC or its designated institution) to Taiwan investors, subject to certain qualifications and conditions. An offshore fintech company, which does not have the nature of a securi­ties investment trust fund, will not be allowed to be offered in Taiwan.

Alternative investment funds

Are managers of alternative investment funds regulated?

Currently, only securities investment funds, real property trust funds and futures trust funds (which focus on investment in futures and deriv­atives) are permitted in Taiwan (except that SITEs and securities firms are now permitted to set up a subsidiary to act as the general partner of a private equity fund under the structure of limited partnership). These funds may only be offered and managed by FSC-licensed entities, such as SITEs, banks or futures trust enterprises. A fintech company, which is not a SITE, a bank or a future trust enterprise, will not be allowed to manage these funds in Taiwan.

Peer-to-peer and marketplace lending

Describe any specific regulation of peer-to-peer or marketplace lending in your jurisdiction.

While to date there are no laws or regulations specifically regulating or governing peer-to-peer lending, the Bankers Association of the Republic of China (the Bankers Association), the self-disciplinary organisation of the banking industry, has promulgated the Self-Disciplinary Rules of Business Cooperation between Member Banks of Bankers Association and Peer-to-Peer Lending Operators (the P2P Self-Disciplinary Rules) and such P2P Self-Disciplinary Rules have been filed with the FSC for record.

According to the P2P Self-Disciplinary Rules, banks may work together with the peer-to-peer lending operators on the following matters:

  • providing fund custodian services;
  • providing cash-flow services;
  • providing credit review and rating services;
  • extending facility by a bank to the customer (ie, the people-to-business model);
  • advertising and marketing activities; and
  • providing credit document custody se
    rvices.

Crowdfunding

Describe any specific regulation of crowdfunding in your jurisdiction.

Equity-based crowdfunding

The following two ways of fundraising are generally known as the equity-based crowdfunding platforms in Taiwan. These ways of crowd­funding are exempted from the prior approval or effective registration normally required under the Securities and Exchange Act (SEA).

 

The Go Incubation Board for Startup and Acceleration Firms of the Taipei Exchange

The Taipei Exchange (TPEx), one of the two securities exchanges in Taiwan, established the Go Incubation Board for Startup and Acceleration Firms (GISA) in 2014 for the purpose of assisting innovative and creative small non-public companies in capital raising.

A company with innovative or creative ideas with the potential for development is qualified to apply for GISA registration with the TPEx. After the TPEx approves the application, the company will first start receiving counselling services from the TPEx regarding accounting, internal control, marketing and legal affairs. After the counselling period,…

[ad_2]

Read More:First-step analysis: fintech regulation in Taiwan