The Financial Supervisory Commission (“FSC”) amended the “Regulations Governing the Offering and Issuance of Securities by Securities Issuers” (the “Domestic IPO Regulations”) and the “Regulations Governing the Offering and Issuance of Securities by Foreign Issuers” (the “Foreign IPO Regulations”) on October 27, 2014, allowing the FSC to assign to the TWSE or the GTSM (as the case may be) the review of an initial public offering or the issuance of shares for cash pursuant to an initial listing of shares on the TWSE or the GTSM.
The above amendments are part of the FSC’s effort to streamline review of various financial products to facilitate activities in the capital markets. Prior to the amendment, the IPO process of domestic and foreign issuers was composed of (1) listing application, (2) initial public offering of shares (“Public Offering”), and (3) issuance of shares for cash pursuant to an initial listing (“Initial Cash Issuance”). The listing application was reviewed by the listing organization (TWSE or GTSM), and the Public Offering and Initial Cash Issuance applications were reviewed by the FSC. While all three applications were similar in nature, there were subtle differences in the scope of review, causing duplicate efforts in the preparation of the application materials, and multiple reviews of essentially the same material.
The FSC stated in its press release that the purposes of the amendments are to provide uniformity in the review standard and to enhance administrative efficiency of reviews. After the FSC’s assigning of its reviewing obligations of Public Offering and Initial Cash Issuance, the entire IPO process will be reviewed by either the TWSE or the GTSM. The FSC also stated in its press release that if the review by the TWSE or the GTSM involves illegal or inappropriate matters, the FSC may still terminate reviews by the TWSE or the GTSM, and revert back to the current approval system. In addition, the FSC retains the authority to revoke the share issuance registration afterward if the registration of the securities is in violation of the public interest.
One matter worth noting is that the amendments only allow the FSC to assign review of Public Offering and Initial Cash Issuance to the relevant listing organization and the FSC retains the reviewing authority of any subsequent issuance of shares for cash.
In addition, the FSC also amended other matters of the Domestic IPO Regulations and the Foreign IPO Regulations to strengthen and improve the capital market structure in Taiwan, including:
In order to facilitate and improve foreign issuers’ compliance with Taiwan securities laws, the sponsoring underwriter of the foreign issuer applying for primary listing in Taiwan shall be engaged to assist in the foreign issuer’s compliance in the year of listing and 2 fiscal years thereafter (a total of 3 consecutive years).
In order to prevent undercutting among underwriters and the provision of rebates by underwriters, the FSC now requires domestic issuers to issue an undertaking stipulating that the issuer will not receive rebates from underwriters in any form.
After the amendments, the often mentioned issue of duplicate reviewing in the IPO review process likely will be resolved after a single reviewing organization is tasked with the authority to review all stages of the IPO process. The supporting documentation required likely will also be reduced, which in turn may reduce the time required for reviewing an IPO application.