Banking Bureau, Financial Supervisory Commission, R.O.C.: Laws and Regulations Retrieving System of the Banking Bureau

Regulations Governing the Public Offering or Private Placement of REIT and REAT Beneficiary Securities by a Trustee

Article 6 amended and promulgated 3 June 2004 per Order No. Tai-Tsai-Rong-(IV)- 0934000453 of the Ministry of Finance.

Article 1
These Regulations are adopted pursuant to Article 6, paragraph 1, and Article 29, paragraph 1, of the Real Estate Securitization Act ("the Act").

Article 2
These Regulations apply to the public offering or private placement of real estate investment trust (REIT) beneficiary securities or real estate asset trust (REAT) beneficiary securities ("beneficiary securities") by a trustee; for matters not provided for in these Regulations, the provisions of other acts and regulations shall apply.

Article 3
A trustee shall submit an application form to the Competent Authority for approval to publicly offer beneficiary securities.

A trustee shall submit an application or registration form to the Competent Authority for approval or effective registration, respectively, to privately place beneficiary securities.

"Public offering" means the act of publicly offering beneficiary securities to unspecified persons.

"Private placement" means the act of offering beneficiary securities to specified persons.

"Application for approval" means the Competent Authority reviews the relevant documents provided by a trustee, and grants approval if no irregular circumstances are discovered.

"Effective registration" means a trustee duly prepares all the relevant documents and files them with the Competent Authority for registration; its case becomes effective within a prescribed number of business days from the date on which the Competent Authority receives the registration documentation, except where the registration documents are incomplete or the required information is not fully provided, and protection of the public interest requires supplementation or clarification or the filing is rejected by the Competent Authority.

Application approval or effective registration for public offering or private placement of beneficiary securities by a trustee may not be used for advertisement purpose to guarantee the authenticity of application matters or the documents or to guarantee profitability of the beneficiary securities.

Article 4
The public offering or private placement of REIT beneficiary securities by a trustee may commence only after the trustee has filled out the application or registration form and submitted it together with the following documentation in triplicate to the Competent Authority to apply for approval or effective registration:
1. REIT plan.
2. REIT contract.
3. Comparison table showing the similarities and differences between the REIT contract and the standard contract template.
4. Prospectus or investment memorandum.
5. Documentation verifying that the operations and management personnel of the REIT fund are in compliance with the provisions of the Competent Authority.
6. Name, documentation of qualifications, and written statement of consent to be appointed, of the trust supervisor, where one is appointed.
7. Minutes of the meeting at which the board of directors of the trustee resolved to publicly offer or privately place the REIT beneficiary securities. When a trustee is a foreign institution, it may substitute documents signed by an authorized unit, or an authorized employee, of its head office.
8. Written statement explaining the methods of managing and disposing of the trust property. Where a real estate management institution is appointed to manage or dispose of trust property, its appointment agreement or other evidentiary documentation.
9. Case examination forms filled out by the trustee and reviewed by a certified public accountant (CPA) or lawyer.
10. Written legal opinion of a lawyer.
11. Documentation verifying that consent has been obtained from the Central Bank of China (“Central Bank”) if a trustee intends to publicly offer or privately place overseas a REIT fund investing in domestic real estate.
12. Documentation verifying that the trustee is in compliance with the provisions of Article 4, paragraph 2, of the Act.
13. Documentation verifying that the real estate management institution meets the requirements established by the Trust Association of R.O.C.
14. Experts who issues opinions required by Article 8, paragraph 1, subparagraph 5 of the Act shall issue a written statement that he/she is not a related party or substantive related party, as defined in the Statement of Financial Accounting Standards No. 6, of the trustee or real estate owner, and issue a written opinion stating that the trust property already generates a stable income.
15. Written appraisal report issued by the professional appraiser in accordance with Article 22 of the Act (not required where the investment objects are undetermined or for a private placement).
16. The professional appraiser in the preceding paragraph and its appraisers shall issue a written statement that they are not related parties or substantive related parties, as defined in the Statement of Financial Accounting Standards No. 6, of the transacting parties (not required if there is no requirement under the preceding subparagraph).
17. Written statement issued by the trustee that the originator is not an interested party of the trustee (not required where the investment objects are undetermined).
18. Evidentiary documentation issued by the originator of consent to transfer the real estate or real estate-related rights (not required if there is no requirement under the preceding subparagraph).
19. Written statements issued by the trustee and the real estate management institution regarding whether they have been subject to any disposition by a competent authority for a respective industry for violation of any act, regulation, or related provisions and ordered to cease any major business operations, in whole or in part, within the past 3 years.
20. Credit enhancement contract signed between the trustee and the credit enhancement institution pursuant to Article 43 of the Act, and certified by a lawyer (if such a contract exists).
21. Other documentation as required by the Competent Authority.

"Originator" in the preceding paragraph and Article 6 means the owner of the real estate in which the REIT fund is invested, or the owner of rights related to the real estate.

Article 5
The public offering or private placement of REAT beneficiary securities by a trustee may commence only after the trustee fills out the application or registration form, and submits it together with the following documentation in triplicate to the Competent Authority to apply for approval or effective registration:
1. REAT plan.
2. REAT contract.
3. Comparison table showing the similarities and differences between the REAT contract and a standard contract template.
4. Prospectus or investment memorandum.
5. Documentation verifying that the operations and management personnel of the REAT are in compliance with the provisions of the Competent Authority.
6. Name, documentation of qualifications, and written statement of consent to be appointed, of the trust supervisor, where one is appointed.
7. Minutes of the meeting at which the board of directors of the trustee resolved to publicly offer or privately place the REAT beneficiary securities. Where a trustee is a foreign institution, it may substitute documents signed by an authorized unit, or an authorized employee, of its head office.
8. Written statement explaining the methods of managing and disposing of the trust property. Where a real estate management institution is appointed to manage or dispose of trust property, the appointment agreement or other evidentiary documentation.
9. Trust property appraisal report.
10. Case review forms filled out by the trustee and reviewed by a CPA or lawyer.
11. Written legal opinion of a lawyer.
12. Documentation verifying that consent has been obtained from the Central Bank if a trustee intends to publicly offer or privately place overseas REAT beneficiary securities backed by investment in domestic real estate or real estate-related rights.
13. Documentation verifying that the trustee is in compliance with the provisions of Article 4, paragraph 2, of the Act.
14. Documentation verifying that the real estate management institution meets the requirements set by the Trust Association of R.O.C.
15. Documents required under Article 30, paragraphs 2 and 3, of the Act.
16. The expert issuing an opinion pursuant to Article 31, paragraph 1, subparagraph 9 of the Act shall issue a written statement that he/she is not a related party or substantive related party, as defined in the Statement of Financial Accounting Standards No. 6, of the trustor or trustee, and shall issue a written opinion stating that the trust property already generates a stable income.
17. The professional appraiser and its appraisers that issue the appraisal report in accordance with Article 34 of the Act shall issue a written statement that they are not related parties or substantive related parties, as defined in the Statement of Financial Accounting Standards No. 6, of the trustor or trustee.
18. Written statement issued by the trustee that the trustor is not an interested party of the trustee, or documentation verifying that the trustor is in compliance with the proviso of Article 35 of the Act.
19. Documentation issued by the trustor verifying consent to the placement of the real estate or real estate-related rights under trust.
20. Written statements issued by the trustee, real estate management institution, professional appraisers, and juristic-person trustor regarding whether they have been subject to any disposition by any competent authority for a respective industry for violation of any act, regulation, or related provisions and ordered to cease any major business operations, in whole or in part, within the past 3 years.
21. Credit enhancement contract pursuant to Article 43 of the Act that was signed and executed between the trustee and the credit enhancement institution, and certified by a lawyer (if such a contract exists).
22. Other documents as required by the Competent Authority.

The documents set out in Article 30, paragraph 2, of the Act, as required under subparagraph 15 of the preceding paragraph, may be replaced by a written undertaking that the trustee, immediately upon the completion of the public offering or private placement of the beneficiary securities, will obtain the relevant documentation verifying the cancellation of the trust property mortgage. Upon completion of the public offering or private placement, the trustee shall submit related documentation verifying that the trust property mortgage is already cancelled, together with the documentation required by Article 17, subparagraph 3, or Article 18, subparagraph 5, by letter to the Competent Authority for recordation.

In addition to the documents listed in paragraph 1, a trustee that publicly offers REAT beneficiary securities shall also submit the following documents in triplicate:
1. Assessment report issued by the underwriter of the securities.
2. Credit rating report of the beneficiary securities issued by a credit rating institution under Article 44 of the Act.

The specific content and work procedures required under subparagraph 1 of the preceding paragraph shall be drafted by the Taiwan Securities Association and submitted to the competent securities authority for approval.

Article 6
In addition to information required under Articles 10 and 33 of the Act, REIT and REAT contracts shall also stipulate the following matters:
1. The total number of holders of the beneficiary securities shall be not less than 50 persons for a minimum of 335 days of each fiscal year, with each natural person, juristic person, trust, and trust contract deemed one person; provided, this restriction does not apply where any of the following circumstances exists:
(1) The beneficiary securities are all privately placed, and none of the holders is a natural person, a REIT originator or REAT trustor, or an interested party thereof, or an affiliated enterprise as defined by the Company Act, or a related party or substantive related party as defined in the Statement of Financial Accounting Standards No. 6, except where the REAT trustor holds the securities for the purpose of credit enhancement in accordance with the REAT plan.
(2) The senior securities of debt-type REAT beneficiary securities are issued by public offering, and the aggregate amount of the beneficiary securities of all tranches held by independent professional investors is not less than one-half of the total issue amount, after subtracting the total amount of the beneficiary securities held by the trustor for the purpose of credit enhancement in accordance with the REAT plan.
2. The total amount of REIT beneficiary securities held by any five persons may not reach one-half or more of the total issuance amount of the beneficiary securities; provided, this restriction does not apply for holders that are independent professional investors.
3. The total amount of the senior REAT beneficiary securities held by any 5 persons may not reach one-half or more of the total issue amount of the senior beneficiary securities; provided, this restriction does not apply for holders that are independent professional investors.
4. A trustee shall notify a beneficiary securities holder whose holdings are not in compliance with the preceding three subparagraphs to transfer beneficiary securities within 1 month to comply with regulations. A holder that has not made the transfer within the prescribed time period may not exercise his/her/its beneficiary voting rights, and the trustee may not distribute any further trust interest to that holder; provided, this restriction does not apply where a securities underwriter fails to comply with subparagraph 1 as a result of holding of beneficiary securities on a firm commitment basis.
5. An originator that holds beneficiary securities as a result of the assignment of real estate or real estate-related rights shall place those beneficiary securities in centralized custody with a centralized securities depository enterprise established with the approval of the Competent Authority, and may not remove from custody, transfer, or pledge those beneficiary securities within one year from the date on which they were first held.

"Independent professional investor" in the preceding paragraph means a juristic person or institution under Article 13, paragraph 1, subparagraph 1 of the Act, or a fund under Article 13, paragraph 1, subparagraph 2 of the Act; and not an REIT originator or REAT trustor, or an interested party thereof, or an affiliated enterprise as defined in the Company Act, or a related party or substantive related party as defined in the Statement of Financial Accounting Standards No. 6.

Article 7
A trust supervisor who is a natural person shall meet one of the following qualifications:
1. Has previously held the position of assistant manager or above or an equivalent level position at the head office of a real estate management institution or financial institution, and possesses not less than 5 years of real estate or trust business experience, and an excellent performance record.
2. Has obtained a CPA, lawyer, or real estate appraiser license, and has not less than 5 years of practical work experience.
3. Has taught architecture, civil engineering, land administration, management, finance, accounting, law, or trust related courses at the junior college level or higher, domestically or abroad, for not less than 5 years.
4. Has not less than 2 years of experience in an administrative management position at a real estate or trust related business, and has previously served as a civil servant of not less than intermediate level 9, or an equivalent level position.
5. Possess other experience sufficiently evidencing the ability to effectively execute the official duties of trust supervisor and protect the rights and interests of beneficiaries.

Juristic persons holding the position of trust supervisor shall be confined to real estate management institutions and trust enterprises.

A trust supervisor may not be an interested party, staff member, or employee of the trustee, or be the trustor of the REAT.

A trustee that manages and disposes of trust property itself shall appoint a trust supervisor.

Article 8
The expert that issues expert opinions under Article 8, paragraph 1, subparagraph 5 and Article 31, paragraph 1, subparagraph 9 of the Act shall be a professional appraiser or CPA.

Article 9
A trustee that publicly offers REAT beneficiary securities shall engage a securities underwriter to sell the full amount of the securities on a firm commitment basis, unless otherwise provided by act or regulation.

If any of the circumstances in Article 26, paragraph 1, subparagraphs 1 to 8 of the Regulations Governing Securities Firms exists between a securities underwriter referred to in the preceding paragraph and the trustor, that securities underwriter may not be the lead underwriter of REAT beneficiary securities issued by the trustee.

Article 10
When the Competent Authority reviews documentation under Article 4 or Article 5, after examining the trustee's qualifications and the completeness of its submitted documentation, it shall contact the central competent authority of the respective industry to issue a written opinion that the public offering or private placement of beneficiary securities does not violate any act or regulation under its jurisdiction and that it is feasible. Where the beneficiary securities are publicly offered, the Competent Authority shall also consult the competent securities authority for approval.

A trustee that publicly offers a closed-end REIT fund or REAT beneficiary securities shall, prior to approval by the Competent Authority, obtain a consent letter for exchange listing or OTC listing issued by the Taiwan Stock Exchange Corporation or Gretai Securities Market, respectively; provided, this restriction shall not apply to a trustee that intends to publicly offer beneficiary securities overseas.

Article 11
A registration filing by a trustee under Article 4 or 5 becomes effective 12 business days from the date the Competent Authority receives the written opinion issued by the competent authority of the respective industry under paragraph 1 of the preceding Article.

If the registration documents submitted by the trustee are incomplete or the required information is not fully provided, and it submits supplementation in full of its own accord prior to being notified by the Competent Authority of the suspension of effective registration, the registration becomes effective when the effective registration period set out in the preceding paragraph has elapsed, counting from the date on which the Competent Authority receives the supplementary documentation.

Article 12
The Competent Authority may suspend effective registration of a private placement of beneficiary securities by a trustee under any of the following circumstances:
1. Where the registration documentation is incomplete or the required information is not fully provided.
2. Where the Competent Authority considers suspension necessary to protect the public interest.

Article 13
Beginning on the date a trustee is served notice of the suspension of effective registration, it may submit supplementation based on the cause of the suspension, and apply to lift the suspension; if the Competent Authority does not again notify the trustee to submit supplementation, or reject its case, the registration becomes effective when the effective registration period set out in Article 11, paragraph 1, has elapsed, counting from the date on which the Competent Authority receives the supplementary documentation.

When a trustee's filing for effective registration is suspended by the Competent Authority under the preceding Article and the trustee does not apply to lift the suspension in accordance with the preceding paragraph within 12 business days from service of the written notice of suspension, or if it has applied to lift the suspension but the original reasons for the suspension still exist, the Competent Authority may reject its case.

Article 14
For a public offering of beneficiary securities by a trustee, when a material change in the trustee's financial or business situation or any change in the content of its application documentation that has a material effect on the price of the securities occurs during the period from the filing until the approval of its application with the Competent Authority, in addition to disclosing the changes to the public within 2 days of the actual date of their occurrence and filing a report with the Competent Authority and the competent securities authority, the trustee shall also submit an expert opinion regarding the nature of the occurrence; an REAT shall additionally request that the securities underwriter file a report with the Competent Authority and the competent securities authority stating the impact of such occurrences on the current REAT plan.

Article 15
Under any of the circumstances listed in the subparagraphs below, a trustee shall fill out an application and submit it together with the required documentation to the Competent Authority for approval before it may carry out a private placement of beneficiary securities:
1. The trustee is privately placing beneficiary securities for the first time.
2. Its previous application for approval or filing for effective registration for a public offering or private placement of beneficiary securities was rejected, denied approval, voided, or revoked by the Competent Authority or the competent securities authority.
3. The REAT beneficiary securities to be privately placed by the trustee have not been rated by a credit rating agency in accordance with Article 44 of the Act.
4. The trustee, real estate management institution, juristic person-trustor of the REAT, or the professional appraiser, has been subject to any disposition by a competent authority for a respective industry for violation of any act, regulation, or related provisions and ordered to cease any major business operations, in whole or in part, within the past 3 years.
5. The trustee is a trust enterprise established for less than 3 years.
6. Other circumstances where deemed necessary by the Competent Authority.

Article 16
Under any of the circumstances listed below, the Competent Authority may reject or deny approval of a case of public offering or private placement of beneficiary securities by a trustee:
1. Any matter in the application or registration filing violates an act or regulation or is false.
2. The application or registration filing documents are incomplete or the required information is not fully provided, and supplementation cannot be completed within the specified time limit.
3. The public offering of beneficiary securities does not comply with the review standards set by the Competent Authority.
4. The written opinion issued by the central competent authority of the respective industry indicates a violation of a relevant act or regulation, or unfeasibility.
5. The legal opinion issued by a lawyer indicates a violation of an act or regulation that would affect the public offering or private placement of the beneficiary securities.
6. Case examination tables reviewed by a CPA or lawyer indicate any violation of an act or regulation that would affect the public offering or private placement of the beneficiary securities.
7. The appraisal report issued by the securities underwriter does not clearly indicate the feasibility and reasonableness of the current REAT plan.
8. An expert has not issued a written opinion clearly indicating the appropriateness of the trust property pricing.
9. The content of the REIT investment plan does not conform to the risk diversification principle.
10. The appraisal report issued by a professional appraiser does not comply with Article 22, paragraph 3, of the Act.
11. The documentation and information provided by the REAT trustor regarding the trust property does not comply with Article 29, paragraph 3, of the Act.
12. The property rights transferred by the trustor under the REAT contract do not comply with Article 30 of the Act; provided, this restriction does not apply to those in compliance with Article 5, paragraph 2.
13. Where the application for public offering or private placement is made within 3 months from a date on which the trustee received notification from the Competent Authority of rejection, voidance or revocation of approval, or denial of approval, of an application or registration filing case, or its own voluntary withdrawal thereof.
14. Objective facts verify that the REIT plan or REAT plan cannot be carried out.
15. The trustee has committed a violation of relevant acts or regulations, where the circumstances were serious, or there are facts evidencing gross irregularities in its finances or business that have not been resolved or improved.
16. Where in any previous publicly offering or private placement of beneficiary securities by the trustee there has occurred any inability to pay principal, profit, interest, or other proceeds, where the circumstances were serious.
17. Any other noncompliance with the Act or related acts or regulations, or where the Competent Authority deems necessary to protect the public interest.

Article 17
After obtaining approval of an application for a public offering of beneficiary securities, the trustee shall proceed in accordance with the following provisions:
1. It shall begin the public offering and make a public announcement, and collect the payments from subscribers and purchasers and provide a prospectus, within 3 months from the date on which the approval letter is served; provided that prior to the expiration of that time period, those with legitimate reason may apply to the Competent Authority for an extension; an extension may not be longer than three months, and shall be limited to one time. The public offering shall be fully subscribed within 30 days after it begins.
2. Within 5 business days after the completion of the public offering, the trustee shall submit to the Competent Authority for recordation a written opinion issued by a lawyer stating that the current public offering has not been materially discrepant from the content of the REIT plan or REAT plan at the time the trustee applied to the Competent Authority for approval.
3. In addition to submitting the documentation required in the preceding subparagraph, a trustee that publicly offers REAT beneficiary securities shall also submit to the Competent Authority for recordation a written opinion issued by a lawyer stating that the registration of the trust property transfer has been completed and is free of defect.
4. The trustee shall deliver the beneficiary securities by the book entry method within 30 days from the date on which the public offering is completed.
5. A trustee that publicly offers REAT beneficiary securities may not remit proceeds from the public offering to the trustor before the trustor has completed the registration of the trust transfer.

Article 18
After obtaining an application approval or effective registration to privately place beneficiary securities, the trustee shall proceed in accordance with the following provisions:
1. It shall begin to collect payment and provide an investment memorandum to the subscribers or purchasers within 30 days from the date on which the notice of application approval or effective registration is served; provided that those with legitimate reason may file with the Competent Authority for an extension, which shall be limited to one time.
2. When collecting payments from subscribers or purchasers, it shall establish a dedicated bank account under the name of the trustee and the current REIT fund or REAT plan.
3. A trustee that privately places beneficiary securities and is not concurrently operated by a bank shall retain a financial institution to collect payments on its behalf, and shall enter into a payment collection agreement with the retained financial institution prior to beginning payment collection.
4. Within 15 days from the date on which payment has been completed, the trustee shall submit to the Competent Authority for recordation a proof of deposit certificate and a written opinion issued by a lawyer stating that the current private placement has not been materially discrepant from the content of the REIT plan or REAT plan at the time the trustee applied for approval or effective registration.
5. In addition to submitting the documentation required in the preceding paragraph, a trustee that privately places an REAT shall also submit to the Competent Authority for recordation a written opinion issued by a lawyer stating that the registration of trust property transfer is completed and is free of defect.
6. The trustee shall issue the beneficiary securities to the subscribers or purchasers within 30 days from the date on which the private placement is completed.
7. A trustee that privately places REAT beneficiary securities may not remit funds from the private placement to the trustor before the trustor has completed the registration of the trust transfer.

Article 19
A trustee that publicly offers or privately places in a foreign country beneficiary securities backed by investment in domestic real estate under Article 7, or Article 36 by mutatis mutandis application of Article 7, of the Act may apply for foreign exchange settlement of its investment capital and investment income.

An application for foreign exchange settlement under the preceding paragraph shall include documents verifying application approval or effective registration from the Competent Authority and the consent of the Central Bank, and be in compliance with applicable foreign exchange rules.

Article 20
Where any of the circumstances listed below is discovered during the period after the approval of a trustee’s application to publicly offer beneficiary securities and before the exchange listing or commencement of over-the-counter trading of the beneficiary securities, the Competent Authority may void or revoke its approval:
1. It has failed to complete the public offering and collect payments within the specified time period, in violation of Article 17, subparagraph 1.
2. The trustee has committed false, fraudulent, or other misleading acts in the course of publicly offering beneficiary securities, or its application documentation contains a falsehood or concealment.
3. Discovery that the trustee has violated applicable acts or regulations, where the circumstances are serious.
4. The trustee has externally issued false information or information inconsistent with its application documentation, with a material effect on the rights or interests of subscribers or purchasers or the price of the beneficiary securities.
5. Any violation of Article 14.
6. A material change has occurred in the trust property of the REAT, with a serious impact on the price or issuance conditions of the beneficiary securities.
7. Any other violation of these Regulations or the regulations of the Competent Authority, or of provisions regarding limitations or prohibitions of which the trustee was notified by the Competent Authority at the time the application was approved.

Where any of the circumstances in subparagraphs 2 to 7 of the preceding paragraph is found to exist after a trustee has obtained application approval or effective registration to privately place beneficiary securities, the Competent Authority may void or revoke the approval or effective registration.

Where the trustee has already collected payments at the time the application approval or effective registration is voided or revoked, it shall return those payments plus interest in accordance with law within 10 days from the date on which it received notification of voidance or revocation from the Competent Authority.

Article 21
After it publicly offers or privately places beneficiary securities, a trustee that intends to alter the REIT plan or REAT plan may do so only after applying to the Competent Authority for approval or effective registration in accordance with the procedures in effect at the time the public offering or private placement was carried out.

Article 22
The format and content of application and effective registration filings required under these Regulations shall be determined by the Competent Authority.

Article 23
These Regulations shall enter into force from the date of promulgation.