11 March, 2016
The Financial Supervisory Commission (FSC) has amended the Rules Governing Offshore Funds on 13 October 2015 to incorporate a requirement that, in order to be qualified to register new funds in Taiwan, an offshore fund house and/or its affiliate(s) must "contribute" to the development of onshore asset management in Taiwan. There are six options for meeting such contribution requirement which are:
- having established a Taiwan licensed Securities Investment Trust Enterprise (SITE) which SITE has more than NT$5 billion (approximately US$160 million) in assets under management;
- having established a Securities Investment Consulting Enterprise (SICE) which SICE has more than NT$3.5 billion (approximately US$112 million) in assets under management;
- having outsourced the management of at least NT$3.5 billion (approximately US$112 million) in assets to Taiwan licensed asset manager;
- the amount of assets under management of the relevant offshore fund house (AUM) invested in Taiwan SITE managed funds (i.e. domestic mutual funds) reaches NT$5 billion (approximately US$160 million);
- the amount of AUM for which a Taiwan SICE acts as advisor reaches NT$14 billion (approximately US$448 million); or
- the offshore fund house donates an amount equal to 0.01% of average monthly AUM held by Taiwan investors in its Taiwan registered funds into a dedicated education fund.
Which of the above six criteria will apply to a given offshore fund house will depend on (i) whether or not the offshore fund house has a presence in Taiwan and (ii) whether or not the offshore fund house’s Taiwan originated AUM is less or more than NT$50 billion (approximately US$1.6 billion US Dollars).
As a further step in the implementation of the above “contribution to the Taiwan asset management industry” requirement for registering new offshore funds, the FSC has added an item to its offshore funds Q&As specifying the period’s over which various the above tests will be measured.
For example, the amount of each offshore fund house’s Taiwan sourced AUM based on which cash contributions for training are to be calculated is to be determined using the simple average of (i) such AUM as of the end of each month during the prior fiscal year as at the time of the relevant fund application and (ii) the amounts outsourced to Taiwan SITE/SICE for management/advice or invested in Taiwan funds are to be measured based on the simple average of such amounts at the end of each of the 12 months immediately preceding the month in which the relevant application is filed.
This new requirement will become effective on 15 October 2016 and will apply to any fund approved after that date (without regard to when the relevant application is filed). Thus, if an application is submitted before 15 October 2016 but is approved after such date, the FSC would require the relevant fund manager to meet the requirement before issuing the approval. For funds applied for after 15 October 2016, the requirement must be met at the time the application is filed.
As regards the sixth option (i.e., donation), the FSC has designated the Securities and Futures Institute (SFI) to handle matters related to the Personnel Training and Industry Development Fund. However, the system for making the donation is not yet in place and relevant procedures are not yet released by the SFI/FSC.
By Thomas H. McGowan Of Russin & Vecchi
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