Lexgroup Newsletter (Issue No. 315)

Date: Mar 2019

Criminal Code

1. Judicial Yuan Interpretation No.775

On 22 February 2019, the Judicial Yuan announced the Judicial Yuan Interpretation No.775.  We summarize the key points below::

(1) Article 47 of the Criminal Code, which provides that the principal punishment for a recidivist shall be increased without an exception, is against the balance principle of crime and punishment.  This Article shall be amended within 2 years, and before the amendment, the courts shall pursuant to the merits of this Interpretation consider whether to increase the punishment for a recidivist or not.

(2) Article 48 of the Criminal Code, which requires to revise the punishment on a  defendant when the fact of his/her being a recidivist is not found until provides that the defendant's punishment shall be revised and increased when he or she is found recidivist after the judgment has been finalized, is against the principle of non bis in idem.  This Article shall be void upon the announcement of this Interpretation.

(3) Article 477 of the Code of Criminal Procedure which provides the procedure for revising the punishment on a recidivist after the judgment is finalized shall be void concurrently with Article 48 of the Criminal Code above.

Reported by: David Tsai/ Paul Hsu

Banking

2. Self-Regulatory Rules for Banks to Conduct Business of Pledge on the Beneficial Rights of Specific Money Trust Where the Bank Itself Acts as the Trustee

On 18 February 2019, the Bankers Association of the R.O.C announced the "Self-Regulatory Rules for the Business of Pledge on the Beneficial Rights of Specific Money Trust Where the Bank Itself Acts as the Trustee" (the "Business"), under which beneficial rights of funds, bonds, etc. under non-discretionary monetary trust can be pledged to the same bank for further investment.  We summarize the key points below:

(1) Restrictions on the banks to conduct Business including, the scope of clients acceptable, the underlying of the beneficial rights qualified to be pledged and the loan to value ratio, etc.  If the funds borrowed with such pledge become trust asset for further investment, the beneficial rights of specific money trust incurred therefrom shall not be pledged to the same bank for further borrowing.

(2) The bank shall apply for an approval with the Financial Supervisory Commission (FSC) prior to its conducting of such Business. The period for the Business is three (3) years.  To renew the permit, the bank shall apply with the FSC six (6) months prior to expiration of the period, together with the submission of the operation results.

(3) When the bank conducts the Business, the perfection of the pledge and the exercise of the setoff shall be handled in accordance with the agreement signed by the borrower.  

(4) The bank shall establish the management mechanism in respect of the collateral maintenance ratio. 

(5) The bank shall make available to the clients the handling procedure and complaint channel for client disputes, set forth the internal management rules, and submit the relevant credit information in accordance with the rules of the Joint Credit Information Center. 

Reported by: Stacy Lo/ Ester Liu

3. Amendment to Regulations Governing Foreign Exchange Business of Banking Enterprises

On 15 February 2019, the Central Bank of the Republic of China (Taiwan) (CBC) announced the amendment to the "Regulations Governing Foreign Exchange Business of Banking Enterprises" to cope with the opening of internet-only banks.  We summarize the key points below:

(1) Specifying the qualifications for an internet-only bank to apply for the license to be a designated bank.

(2) Amending the term of "foreign currency ATM" to be "automatic service device" and stipulating the related matters to be followed.

(3) Amending the matters to be followed by the designated bank and Chunghwa Post for accepting customers' foreign exchange business through electronic or telecommunication devices.

(4) Deleting the requirement that foreign currency clearing banks shall establish systems for internal control and internal audit and system security and emergency incident management mechanisms.

Reported by: Stacy Lo/ Jack Tai

4. Amendment to Directions Governing Designated Banks Operating Foreign Exchange Businesses through Electronic or Communications Equipment

On 15 February 2019, the CBC announced the amendment to the Directions Governing Designated Banks Operating Foreign Exchange Businesses through Electronic or Communications Equipment.  We summarize the key points below:

(1) Expanding the scope of the online banking's foreign exchange business that the designated banks can operate without prior approval or by post reporting, including the same type of foreign exchange derivatives not involving the New Taiwan Dollars exchange rate nor being the first transaction.

(2) In conjunction with the expansion of the scope of business under the preceding paragraph, specifying the documentations that the designated banks shall collect for confirmation where the designated banks operate the foreign exchange receipts and disbursements or transactions through electronic or communications equipment in accordance with Paragraph 3 to 5, Article 5 of the Regulations Governing the Declaration of Foreign Exchange Receipts and Disbursements or Transactions which requires the banks to collect the documentations for confirmation.

(3) In response to the expansion of foreign exchange derivative business for online banking, requiring the operation procedures to be in line with the Regulations Governing Internal Operating Systems and Procedures for Banks Conducting Financial Derivatives Business and the Self-regulations for Banks Operating Financial Derivatives. 

(4) Stipulating that the designated banks shall report the online banking business involving foreign exchange on monthly basis for the purpose of supervision.

Reported by: Stacy Lo/ Eliza Lee

Securities and Exchange Act

5. Amendment to Regulations Governing Lending Funds and Making of Endorsements/Guarantees by Public Companies

The FSC announced on 19 February 2019 that the "Regulations Governing Lending of Funds and making of Endorsements/Guarantees by Public Companies" shortly. We summarize the key points below:

(1) For limitation on short-term lending to others by a public company with a paid-in capital of NT$1 billion or more, which joined the Leasing Association and declared to comply with the self-regulation, and has established risk management mechanism, the restrictions of 40% of the net asset value does not apply, provided that the lending must not exceed 100% of the net asset value.

(2) For the lending by a direct or indirect, wholly owned foreign subsidiary to its Taiwan parent, which is a public reporting company, the restriction of 40% of net asset value and one-year period do not apply. 

(3) For a public company having established an audit committee, the promulgation or amendment to the operating procedures of lending funds and making endorsement/guarantees to others shall be approved by the audit committee.

(4) For a public company having independent directors, any material violation in relation to lending funds or making endorsement/ guarantees shall be reported to the supervisor in writing, and such written report shall be provided to the independent directors as well along with the improvement plan. 

Reported by: Mike Lu/ Hsiyen Hsu

Fund

6. Amendments to Encouragement Plan for SITE and Incentive Plan for Offshore Funds

On 27 February 2019, the Financial Supervisory Commission (FSC) announced the amendments to the Encouragement Plan for Securities Investment Trust Enterprises (SITEs) and the Incentive Plan for Offshore Funds.  We summarize the key points below:

(1) In respect of Encouragement Plan for SITEs

Adding two favorable treatments for SITEs meeting the encouragement requirements, including: (1) launching a securities investment trust fund without being subject to restrictions under applicable laws and regulations; and (2) launching a feeder fund (ETF Feeder Fund) underlying to the ETF managed by the SITE (Master Fund) and the Master Fund is not limited to ETF of domestic component securities.  

In addition, certain new items have been added as indicators, including: "evaluation of investment and research capability", "training of personnel", and "other matters which can be considered having concrete contribution to operation and development of domestic assets management industry" (e.g. issuance of green funds that invest domestically).

(2) In respect of Incentive Plan for Offshore Funds

Adding a new favorable treatment that (1) within the one (1) year period, all of its offshore funds may invest in China securities for up to 40% of the net asset value of the offshore funds, or (2) on a permanent basis, a specific single offshore fund may invest in China securities for up to 40% of the net asset value of the offshore fund. 

In addition, the new item "increase of domestic assets scale” has been added as one of the indicators.

Reported by: Jeffrey Liu / Deborah Lee

Rental Housing

7. Mandatory and Prohibitory Provisions of Standard Contracts for Housing Sublease and the Mandatory and Prohibitory Agreed-on Provisions of Contract for Housing Sublease

On 23 February 2019, the Ministry of the Interior announced the "Mandatory and Prohibitory Provisions of Standard Contracts for Housing Sublease" and the "Mandatory and Prohibitory Agreed-on Provisions of Contracts for Housing Sublease", both of which will take effect on 1 June 2019.  We summarize the key points below:

(1) The contract shall specify the terms in respect of premises, term, rent, deposits, restrictions for the use of premises, early termination, and the return of the rental housing.

(2) The contract shall not specify that the advertisement is for reference only; nor shall it prohibit the lessee from registering its household at the premises, or exempt or release the landlord from the liability for defects. 

Reported by: Kangshen Liu/ Paul Hsu

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