The Executive Yuan passed a draft amendment to Article 93-1 of the Act Governing the Relations Between the People of the Taiwan Area and the Mainland Area (the "Act") in September 2018 ("Draft Amendment"). In October, the Legislative Yuan resolved to submit the Draft Amendment to the Internal Administration Committee for its review. The Draft Amendment aims to deter Chinese investors from investing in Taiwan's securities without obtaining prior approval from the competent authorities; hence an amendment to the penalties for such illegal investment activities is proposed.
The most important provision of the Draft Amendment is Paragraph 1 of Article 93-1, where the maximum administrative fine for investing in Taiwan without obtaining prior approval from the competent authorities in accordance with Paragraph 1, Article 73 of the Act would be raised from NT$600,000 to NT$25,000,000. The Draft Amendment also proposes to amend Paragraphs 2 to 4 of Article 93-1, where the maximum administrative fine for failing to make filings for reinvestment, fund verification, or other matters in accordance with Paragraphs 3 and 4 of Article 73 of the Act would be raised from NT$300,000 to NT$2,500,000. Furthermore, if the amount of profit generated by a Chinese investor from an aforementioned illegal investment in Taiwan exceeds the statutory maximum amount of the relevant administrative fines, Paragraph 2, Article 18 of the Administrative Penalty Act would permit the government authorities to impose a fine of up to the amount of the illegal gains without being subject to such statutory maximum amount.
In addition to increasing the cap on the relevant fines, the Draft Amendment also proposes to reduce the minimum administrative fines from NT$120,000 to NT$50,000 for a violation of Paragraph 1, Article 73 of the Act, and from NT$60,000 to NT$50,000 for a violation of Paragraphs 3 and 4, Article 73 of the Act, in order to cope with violations in cases of small-scale investments pursuant to the principle of proportionality and to offer more flexibility in terms of law enforcement. Furthermore, the Draft Amendment contemplates to enact Paragraph 6 of Article 93-1 to permit the competent authorities to exempt violators committing minor violations from fines at their discretion, on a case-by-case basis, if the violators are able to rectify the violations within a specified time period.
The reason for the Draft Amendment stems from the various cases where Chinese investors invested in Taiwan without obtaining the approvals from the competent authorities, thereby affecting Taiwan’s market order, while the current cap on administrative fines in this regard is too low to deter such violations. Therefore, in order to effectively deter illegal investments from Chinese investors, it is necessary to increase the cap on the relevant administrative fines.