Securities Firms Can Lend Securities to Foreign Investors
On Aug. 18, the Financial Supervisory Commission (FSC) announced that securities brokers could lend securities to overseas Chinese and foreign nationals offshore (both individuals and corporate entities). In borrowing the securities, those foreign investors would not be subject to the restrictions contained in paragraph 1, item 2 of Article 21 of the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals. It is expected that this change in the law will increase flexibility in the operation of foreign capital and attract foreign investment in Taiwan’s securities market.
This loosening of restrictions appears to represent an important compliment to the FSC’s June 12th promulgation, under the authorization of Article 60 of the Securities and Exchange Act, of Regulations Governing Borrowing or Lending Money in Connection with Securities Business by Securities Firms, that opens up the lending of money by securities firms, and to the FSC’s August 11th promulgation of Regulations Governing Securities Lending by Securities Firms, that allowing securities firms to engage in the lending of securities at their place of business.
The FSC noted that following the change, securities firms will become trading platforms that can provide margin purchases or short selling for securities transactions, act as agent in margin purchases or short sales for securities transactions, or offer short-term financing needed by investors for the settlement of securities purchased.
It is expected that the FSC will also permit securities firms to accept commissions from clients so that they may act as depository for client’s funds or invest the clients’ funds, so as to maintain the amount of trading in the market. For the purposes of maintain trading order in the securities market, however, publicly listed company insiders will not be allowed to engage in securities borrowing. Further, the FTC will also place reasonable restrictions on the qualifications of securities firms engaging in the lending of securities or money.
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