| 1 |
Compliance Directions Governing the Conduct of Non-Discretionary Money Trust Business by Trust Enterprises
11 May 2004
Letter Ref. Tai-Tsai-Rong-(IV)-0934000375 of the Ministry of Finance
Subject: With respect to money trust business conducted by trust enterprises, please be advised of and notify all Association members to comply with the matters in Points 1 and 2 of the Statement below; the Association is also asked to comply with the matters in Point 3 below.
Statement:
1.A trust enterprise shall comply with the following matters when conducting non-discretionary money trust business:
(1) Fees that a trust enterprise charges a trading counterpart for providing non-discretionary money trust services are in the nature of trust remuneration and shall be stipulated in the trust agreement, as required by Article 19, paragraph 1, subparagraph 9 of the Trust Enterprise Act.
(2) When a trust enterprise utilizes a non-discretionary money trust to purchase securities, if it is not a securities dealer, and if the issuance and trading of such securities on the domestic market are prohibited by law, the trust enterprise may not engage in the practice of first buying the securities with it own funds and then selling them to the trustor by means of the non-discretionary money trust. In addition, with respect to a trust in which the trust enterprise does not have the power to decide the utilization of trust assets, although the restrictions set out in Article 25, paragraph 1 of the Trust Enterprise Act do not apply, if any circumstances set out in that article exists, the trust enterprise shall fully disclose to the trustor that such circumstance set out in Article 25 of the Trust Enterprise Act applies to the trust.
(3) When a trust enterprise utilizes a non-discretionary money trust to purchase linked notes where involving participation in any spot commodity or index or other contract deriving from domestic stock prices or related to the futures exchange, the notes may be linked only to those underlyings that may be linked to in trading of structured notes by securities firms.
2.When a trust enterprise carries on money trusts in which it has the power to decide the utilization of the trust assets (including semi-discretionary and discretionary money trusts), any discount on the service fees or handling fees that trading counterparts are charged shall be treated as a reduction in the trustor's transaction cost.
3.Please take the initiative to check whether the advertisements or news published or released by trust enterprises in the media are in compliance with the 12 August 2003 Letter of the Ministry of Finance (Ref. Tai-Tsai-Rong-(IV)-0924000680) as well as the provisions of Article 24 of the Duties and Relevant Code of Conduct of Trust Enterprises, and please adopt self-regulatory rules for the following matters for compliance by trust enterprises:
(1) Disclosure of information on trust remuneration charged by trust enterprises for the provision of non-discretionary money trust services.
(2) The basic risk profile to be disclosed to clients when a trust enterprise operates non-discretionary money trusts in which the money is to be invested in linked notes or structured notes. |