Digital markets, funding and payment servicesi Collective investment schemeLocal funds (securities investment trust funds)
The most common form of collective investment scheme in Taiwan is securities investment trust funds, which may be offered to the general public or privately placed to specified persons. Public offering of a securities investment trust fund needs prior approval or effective registration with the FSC or the institution designated by the FSC. No prior approval is required for a private placement of a securities investment trust fund; however, it can only be placed with eligible investors and within five days after the payment of the subscription price for initial investment offering. A report on the private placement should be filed with the FSC or the institution designated by the FSC. Under current laws and regulations, public offering and private placement of securities investment trust funds may only be conducted by FSC-licensed securities investment trust enterprises (SITEs). Currently, the paid-in capital of a SITE should not be lower than NT$300 million, and certain qualifications exist for the shareholders of a SITE. A fintech company that is not a SITE will not be able to raise funds in the same way as a SITE.Offshore funds
Offshore funds with the nature of a securities investment trust fund may also be publicly offered (subject to FSC prior approval) or privately placed (subject to post-filing with the FSC or its designated institution) to Taiwan investors, subject to certain qualifications and conditions. An offshore fintech company that does not have the nature of a securities investment trust fund will not be able to be offered in Taiwan.ii Crowdfunding
The following two ways of fundraising are generally known as the equity-based crowdfunding platforms in Taiwan. Such ways of crowdfunding are exempted from the prior approval or effective registration normally required under the Securities and Exchange Act (SEA).The 'Go Incubation Board for Startup and Acceleration Firms' of the Taipei Exchange
The Taipei Exchange (TPEx), one of the two securities exchanges in Taiwan, established the Go Incubation Board for Startup and Acceleration Firms (GISA) in 2014 for the purpose of assisting innovative and creative small non-public companies in raising capital. The regulations governing the GISA were amended in December 2018. A company with innovative or creative ideas with potential for development is qualified to apply for GISA registration with TPEx. After TPEx approves the application, the company will start receiving counselling services from TPEx regarding accounting, internal control, marketing and legal affairs. After the counselling period, there is another TPEx review to examine, among other things, the company's management teams, the role of board of directors, accounting and internal control systems, and the reasonableness and feasibility of the plan for capital raising, and, if the TPEx deems it appropriate, the company may raise capital on the GISA. The amount raised by the company through the GISA may not exceed NT$30 million unless otherwise approved. In addition, an investor's annual maximum amount of investment through the GISA should not exceed NT$150,000, except for angel investors defined by TPEx or wealthy individuals with assets exceeding an amount set by TPEx and having professional knowledge regarding financial products or trading experience.Equity-based crowdfunding on the platforms of securities firms
A securities firm may also establish a crowdfunding platform and conduct equity crowdfunding business. Currently, a company with paid-in capital of less than NT$50 million may enter into a contract with a qualified securities firm to raise funds through the crowdfunding platform maintained by such securities firm, provided that the total amount of funds raised by such company through all securities firms' crowdfunding platforms may not exceed NT$30 million in a year. The amount of investment made by an investor on a securities firm's platform may not exceed NT$50,000 for each subscription, and may not exceed NT$100,000 in aggregate in a year, except for angel investors as defined in the relevant regulations.iii Peer-to-peer lending
While, to date, there are no laws or regulations specifically regulating or governing peer-to-peer lending, the Bankers Association of the Republic of China (the Bankers Association) has promulgated a Self-Disciplinary Rules of Business Cooperation between Member Banks of Bankers Association and Peer-to-Peer Lending Operators (the P2P Self-Disciplinary Rules), and such P2P Self-Disciplinary Rules have been filed with the FSC for record.
According to the P2P Self-Disciplinary Rules, banks may work together with the peer-to-peer lending operators on the following businesses:
- a bank providing a fund custodian service;
- a bank providing a cash flow service;
- a bank providing credit review and rating services;
- a bank extending a facility to the customer (i.e., the P2B model);
- advertising and marketing activities; and
- a bank providing a credit document custody service.
The general principle under Taiwan's Civil Code is that any receivable is assignable unless:
- the nature of the receivable does not permit such transfer;
- the parties to the loan have agreed that the receivable shall not be transferred; or
- the receivable, in nature, is not legally attachable.
Receivables under loans, subject to (b) above, are generally transferable; however, a bank is subject to stricter rules that, in general, loans that continue to perform cannot be transferred by a bank except for limited exceptions (such as for the purpose of securitisation). For this reason, Taiwan does not currently have an active secondary loan market.v Payment services
Traditionally, payments by wire transfer can only be made through a licensed bank. Payments via cheques and credit cards are also run through banks. Non-banks engaging in credit card-related business and issuance of electronic stored-value cards should also obtain approval from the FSC. In 2015, the Act Governing Electronic Payment Institutions (the E-Payment Act) was enacted. This E-Payment Act regulates the activities of an electronic payment institution, acting in the capacity of an intermediary between payers and recipients to engage, principally, in:
- collecting and making payments for real transactions as an agent;
- accepting deposits of funds as stored value funds; and
- transferring funds between e-payment accounts.
According to the E-Payment Act, an electronic payment institution should obtain approval from the FSC unless it engages only in (a) above and the total balance of funds collected and paid and kept by it as an agent does not exceed the specific amount set by the FSC.