New regulations on suspension of book building of Taiwan depositary receipts

The Taiwan Securities Association (TSA) has promulgated a new regulation under Paragraph 4, Article 24 of the Regulations Governing Underwriting or Resale of Securities by Underwriters, which requires a lead underwriter to provide the TSA with an evaluation report detailing any irregularities in the stock prices of the underlying shares of Taiwan depositary receipts (TDRs). Such an evaluation report must contain an evaluation for the three-month period prior to the date of the initial public offering of the TDRs that the lead underwriter reported to the TSA. The purpose of the new regulation is to prevent any adverse impact on investors in Taiwan from irregularities in the stock prices of the underlying shares of TDRs before book building.

In this regard, the TSA also promulgated a new provision under Paragraph 3, Article 48 of the Self-Regulations Governing Offering and Issuance of Securities by Issuers Advised by Underwriters. This provision requires an underwriter to suspend book building if there is any irregularity in the stock prices of the underlying shares of TDRs during the three-month period prior to the date of the initial public offering of the reported TDRs.

Furthermore, an underwriter must submit an evaluation report on the pricing day by 12:00 noon detailing any irregularities in the stock prices of the underlying shares of TDRs during the period between the respective dates on which the underwriter files applications to the Taiwan Stock Exchange (TWSE), the GreTai Securities Market (GTSM) and the TSA, respectively, and the date prior to the pricing date of TDRs to the TWSE, GTSM and the TSA. The underwriter must also send a carbon copy to the Securities and Futures Bureau.

Whether there is any irregularity in stock prices must be determined in accordance with the TWSE's Principles for Publishing or Notifying Trading Information and Operating Procedure.

For further information on this topic please contact Lihuei Mao or Ying-chen Chen at Lee and Li Attorneys at Law by telephone (+886 2 2715 3300), fax (+886 2 2713 3966) or email ([email protected] or [email protected]).