FSC Strengthens KY Company Supervision

Taiwan’s Financial Supervisory Commission (FSC) intends to strengthen the supervision mechanism for foreign registered Taiwanese companies listed on the Taiwan Stock Exchange (aka KY stocks).  At a recent meeting of the Legislative Yuan’s Finance Committee, FSC provided a written report to the Legislative Yuan indicating that it plans to introduce to legislators its measures for monitoring the management of so-called “KY inventory”.
In the report, FSC stated that it has requested the Taiwan Stock Exchange to propose relevant measures to strengthen supervision, which request includes seven measures covering three aspects, namely corporate governance, expert supervision, and supervisory agency.  According to the report, one of the new measures is that CPAs must inspect the financial statements of foreign registered companies every six months rather than merely conducting the current annual inspection.
For the first aspect, “corporate governance,” there are two measures. 1. Strengthening the functions of the audit committee: independent directors are requested to supervise the implementation of the company’s internal controls, capital loans, and endorsements.  2. Strengthening information disclosure - companies are encouraged to hold more conference calls, and to recommend that the chairman or independent directors participate in the conference calls.
For the second aspect, “strengthening expert supervision,” FSC stated that the “underwriters” will visit the company in person every year, interview directors and independent directors, and attend board meetings or review the minutes of the meetings, in order to gain an understanding of the company’s financial status and operations.
For the third aspect, “supervisory agency,” FSC pointed out that the Taiwan Stock Exchange and the Taipei Exchange will expand external information collection channels of corporate credit to immediately obtain the complete information affecting a company’s financial business.
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