Taiwan Legal Update: Banking Act Amendments & Securities And Exchange Act Revised

Taiwan Legal Update: Banking Act Amendments & Securities And Exchange Act Revised

Maximum Penalty Raised to NTD$50 Million under Banking Act Amendments

Intending to strengthen the legal compliance of banking industry on the island, several legislators from the three biggest parties in the parliament and the Executive Yuan proposed the draft amendment to The Banking Act of The Republic of China. The amendment passed the third reading this week.

The focus of this revision is to have a comprehensive review of the upper limit of the penalty, with reference to the legislation of Germany, Japan and other countries, as well as the size of the domestic bank. The maximum penalty will be raised from NTD$10 million to NTD$50 million, in order to deter violation of the law. But on the other hand, the additional provision is added in the amendment as well. If the offences are slight or committed under pitiable circumstances, the punishment may be remitted. The authorities will have the discretion to adopt appropriate corrective measures.

On top of this, in order to strengthen the management of the credit card business and comply with the principle of legal certainty, the amendment also added the penalty clause for violators in credit card business; the credit card business institutions are regulated under the Banking Act from now on.

Also, in view of the aggressive global layout of banks, another provision approved in the third reading authorized the government or its authorized institutions may exchange information,  promote technical cooperation, assist in investigations, sign cooperation treaties or agreements with foreign governments, institutions or international organizations on the Principle of Reciprocity.

One of the proposed lawmakers, Ming-zong Zeng, pointed out that, by greatly increasing the amount of fine and penalties and expanding the supervisory authority of the government, the amendment aims to deter the illegality, and urged the banking industry to not to overlook importance to the internal control and legal compliance system and protect the rights of depositors. The Financial Supervision Commission has also assessed that the revision of the Banking Act will help strengthen the compliance of banks with laws and regulations, enhance the effectiveness of financial supervision, jointly combat transnational illegal activities, and maintain the order and security of transaction in Taiwan’s financial markets.


Securities and Exchange Act Revised to Strengthen Governance

For the purpose of boosting morale, retaining outstanding talents, implement corporate governance, and strengthen the management of the securities services and related institutions, the Executive Yuan proposed draft amendments to some provisions of the Securities Exchange Act. The legislators also proposed a draft to implement the financial supervision mechanism. Along with the revision of the Banking Act, the legislative department passed the third reading of the amendment to the Securities and Exchange Act to help the enterprises in retaining talents on the same day.

Where the buyback is for transferring shares to its employees, a public offering company may buy back its shares from the centralized securities exchange market or over-the-counter market without being subject to the provisions of paragraph 1 of Article 167 of the Company Act. The lawmakers allowed the shares bought back, also known as the treasury stock, to be transferred within five years(instead of three years regulated before the revision) from the date of the buyback.  Corresponding to the revised clause, the Securities and Exchange Act, therefore, stipulated shareholders holding more than 10% of the total shares, as well as their spouses, minor children, or shares held in the name of other persons shall not be sold during the buyback period.

Moreover, the amendment also doubled the administrative penalty limit for public offering companies from NTD$2.4 million to NTD$4.8 million. If the violation is minor, the competent authority may order the violator to take corrective measures within a prescribed period of time and may exempt it from punishment if it completes the corrective measures.

Another revision is that shareholders owning more than 10% of the total shares of any public offering company shall declare to the competent authority, which may prescribe rules governing internal control systems of companies or enterprises based on the authorization of the amended Securities and Exchange Act, in order to effectively manage a large number of acquisitions of equity and transaction and in line with the Principle of the Explicit Delegation.


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