Financial regulation

Regulatory bodies

Which bodies regulate the provision of fintech products and services?

In Taiwan, the Financial Supervisory Commission (FSC) is the government body regulating all financial products and services. There are four bureaux established under the FSC: the Banking Bureau (BB), the Securities and Futures Bureau (SFB), the Insurance Bureau (IB) and the Financial Examination Bureau (EB) (collectively the Bureaux). Each of the BB, SFB and IB is separately responsible for regulating the banking, securities and insurance indus­tries. The EB is in charge of financial inspection and audits of financial institutions regulated by the FSC. Currently, none of the four bureaux has been specifically designated to regulate fintech products and services. Therefore, it should depend on the nature of such products and services to determine which bureau would be the body regulating the relevant fintech products or services.

As to the mechanism of the regulatory sandbox, the FSC is the competent authority; nonetheless, if the tested fintech product and service relates to the regulatory regime of other competent authorities (such as the Central Bank), the opinion of these relevant authority will also be consulted by the FSC.

Regulated activities

Which activities trigger a licensing requirement in your jurisdiction?

In Taiwan, conducting finance-related activities generally requires a licence from the FSC. These activities include the following, without limitation.

  • Securities-related activities: securities underwriting, securities brokerage, securities dealing (ie, proprietary trading), securities investment trust (ie, asset management) and securities investment consulting.
  • General consulting business, such as acting as financial advisers or agents to arrange investments or bring about merger or acquisition deals, does not require any licence. In addition, acting as principal in an investment deal does not require any licence (except for if a foreign investor should need a foreign investment approval and investment in regulated industries needs special approvals).
  • Bank-related activities:
    • lending: lending activities do not fall within the business to be exclusively conducted by a local licensed bank. However, as no financing company may be registered in Taiwan, it is currently not possible for an entity to register as a financing company to carry on lending activities in Taiwan;
    • factoring and invoice, discounting and secondary market loan trading;
    • deposit taking;
    • foreign exchange trading;
    • remittance; and
    • electronic payment, credit cards and electronic stored-value cards.
Consumer lending

Is consumer lending regulated in your jurisdiction?

A local licensed bank may carry on consumer lending activities. Although lending activities do not fall within the business to be exclusively conducted by a local licensed bank, carrying out lending activities as one of a company’s registered business activities is still not permitted in Taiwan.

Secondary market loan trading

Are there restrictions on trading loans in the secondary market in your jurisdiction?

The general principle under Taiwan’s Civil Code is that any receivable is assignable unless (1) the nature of the receivable does not permit this transfer; (2) the parties to the loan have agreed that the receivable shall not be transferred; or (3) the receivable, in nature, is not legally attachable. The receivables under loan, subject to (2) above, are generally transferable. However, a bank is subject to stricter rules that, generally, loans that remain performing cannot be transferred by a bank, with some limited exceptions (such as for the purpose of securitisation). For this reason, Taiwan does not currently have an active secondary loan market.

Collective investment schemes

Describe the regulatory regime for collective investment schemes and whether fintech companies providing alternative finance products or services would fall within its scope.

Local 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 to eligible investors and within five days after the payment of the subscription price for initial invest­ment offering, a report on the private placement shall be filed with the FSC or the institution designated by the FSC. Generally, the total number of qualified non-institutional investors under a private place­ment shall not exceed 99. 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 there exist certain qualifications for the shareholders of a SITE. A fintech company, which is not a SITE, will not be able to raise funds as a SITE does.

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, which does not have the nature of a securi­ties investment trust fund, will not be allowed to be offered in Taiwan.

Alternative investment funds

Are managers of alternative investment funds regulated?

Currently, only securities investment funds, real property trust funds and futures trust funds (which focus on investment in futures and deriv­atives) are permitted in Taiwan (except that SITEs and securities firms are now permitted to set up a subsidiary to act as the general partner of a private equity fund under the structure of limited partnership). These funds may only be offered and managed by FSC-licensed entities, such as SITEs, banks or futures trust enterprises. A fintech company, which is not a SITE, a bank or a future trust enterprise, will not be allowed to manage these funds in Taiwan.

Peer-to-peer and marketplace lending

Describe any specific regulation of peer-to-peer or marketplace lending in your jurisdiction.

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), the self-disciplinary organisation of the banking industry, has promulgated the 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 matters:

  • providing fund custodian services;
  • providing cash-flow services;
  • providing credit review and rating services;
  • extending facility by a bank to the customer (ie, the people-to-business model);
  • advertising and marketing activities; and
  • providing credit document custody services.
Crowdfunding

Describe any specific regulation of crowdfunding in your jurisdiction.

Equity-based crowdfunding

The following two ways of fundraising are generally known as the equity-based crowdfunding platforms in Taiwan. These 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 capital raising.

A company with innovative or creative ideas with the potential for development is qualified to apply for GISA registration with the TPEx. After the TPEx approves the application, the company will first start receiving counselling services from the 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 raising capital, and if the TPEx deems 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 in the case of angel investors defined by the TPEx or wealthy individuals with assets exceeding an amount set by the TPEx and with 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 the securities firm, provided that the total amount of funds raised by the company through all securities firms’ crowd­funding platforms in a year may not exceed NT$30 million. 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 in the case of angel investors as defined in the relevant regulations.

Non-equity-based crowdfunding

In 2013, the TPEx established the ‘Gofunding Zone’ on its official website. This mechanism allows the non-equity-based crowdfunding platform operators, once approved by the TPEx, to post information regarding their proposals and projects on the Gofunding Zone. However, in May 2018, the TPEx announced that owing to the significant developments in the crowdfunding business, the phased task of the TPEx to support this busi­ness had been completed, and, thus, it decided to close the Gofunding Zone and annulled relevant rules.

Invoice trading

Describe any specific regulation of invoice trading in your jurisdiction.

The general principle under Taiwan’s Civil Code is that any receivable is assignable unless (1) the nature of the receivable does not permit this transfer; (2) the parties to the loan have agreed that the receivable shall not be transferred; or (3) the receivable, in nature, is not legally attachable. The receivables under loan, subject to (2) above, are generally transferable. However, a bank is subject to stricter rules that, generally, loans that remain performing cannot be transferred by a bank, with some limited exceptions (such as for the purpose of securitisation).

In general, no company may carry out the activities of receivable transfer for business. Purchase of accounts receivable may only be conducted by a licensed bank.

Payment services

Are payment services regulated in your jurisdiction?

Yes. 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, pursuant to the Act Governing Issuance of Electronic Stored Value Cards (the E-Card Act).

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 (1) collecting and making payments for real transactions as an agent; (2) accepting deposits of funds as stored value funds; and (3) 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 (1) above and the total balance of funds collected, paid and kept by it as an agent does not exceed the specific amount set by the FSC.

In July 2019, the FSC announced a proposed amendment to the E-Payment Act. The amendment will merge the E-Payment Act and E-Card Act. In addition, according to the proposed amendment, if approved by the FSC, an electronic payment institution or non-electronic payment institution would be able to provide limited remittance services, which is currently a service exclusive to banks. With the expansion of the services that electronic payment institutions can provide, it is anticipated that this amendment will promote the development of the electronic payment market in Taiwan. The amendment to the E-Payment Act is expected to be discussed in the Legislative Yuan of Taiwan and will hopefully be passed in 2020.

Open banking

Are there any laws or regulations introduced to promote competition that require financial institutions to make customer or product data available to third parties?

While the FSC has the general power to request the provision of customer or product data by financial institutions to the FSC, in practice, the FSC's relevant regulations, directions or guidelines also require that financial institutions provide relevant customer and product data (such as data relating to credit extensions, credit cards and derivatives) to the Joint Credit Information Center (JCIC) for banks' use of credit check in terms of credit extension.

In addition, in response to support of 'open banking' from some industry experts and market players, the FSC has demanded that the Bankers Association set out relevant self-regulatory rules to implement the concept of open banking in Taiwan. The FSC did not wish to set out mandatory disclosure rules for banks and, instead, asked the self-regulatory organisation (ie, the Bankers Association) and the Financial Information Service Company to set out relevant rules and information security standards for banks to follow. The first stage of open banking was launched in late 2019, which allowed public product information to be searchable by third parties (ie, third-party service providers). According to relevant news reports, the newly appointed FSC chairperson, Mr Huang, announced that the second stage of open banking (which involves customer-related information) will be launched in 2020.

Insurance products

Do fintech companies that sell or market insurance products in your jurisdiction need to be regulated?

In Taiwan, selling insurance products will be considered conducting insurance business, which requires an insurance licence from the FSC. A fintech company is not permitted to sell any insurance products without an insurance licence from the FSC.

Credit references

Are there any restrictions on providing credit references or credit information services in your jurisdiction?

Yes. Pursuant to the Banking Act and relevant regulations, an entity collecting credit-related information from financial institutions, processing this information and maintaining the relevant database and providing credit-related information and records to financial institutions for credit-checking purposes must obtain prior approval from the FSC. Currently, the JCIC is the only FSC-authorised entity that offers these services. In practice, a bank would normally review the credit information or records provided by the JCIC as part of the bank’s credit investigation on an applicant for a credit extension.

If an entity does not offer these services, no FSC approval is required, but it will still be subject to the Personal Data Protection Act regarding its collection and use of any personal data.

Law stated date

Correct on:

Give the date on which the above content is accurate.

5 June 2020.