Newsletter
RULES FOR JOINT MARKETING BY FINANCIAL HOLDING COM-PANIES AND THEIR SUBSIDI-ARIES
The greatest advantage in establishing a financial holding company lies in integrating the resources of related financial businesses in order to create economies of scale in the provision of financial services. For this reason, how to employ joint marketing activities with their subsidiaries to derive the greatest benefit for the group has been a major focus of attention for financial holding companies since the Financial Holding Company Law came into effect.
The Ministry of Finance (MOF) originally in-tended to entrust the various financial service industry associations with the task of jointly de-vising rules for the cross-sector operations of financial holding companies. However, the scope and content of the proposed rules that emerged from consultations among the relevant associations were far removed from those en-visaged by the MOF. Furthermore, a number of financial holding companies have begun opera-tions, and the delay in developing the guidelines made it difficult for them to integrate their op-erations in practice. In view of this, on 11 March 2002 the MOF issued an order imposing detailed rules on joint marketing activities by financial holding companies and their subsidiaries, to provide a legal framework for the integrated operations.
According to the MOF order, specialist business counters may be set up on the business premises of a subsidiary of a financial holding company to conduct business belonging to another financial sector. However, such specialist business counters must be separate from the counters conducting the normal business of the subsidiary, and both must be clearly marked. The scope of business that may be conducted by a securities specialist business counter includes: (i) account opening for securities or futures brokerage business; (ii) agency for introduction, sale and redemption of ROC-based funds; (iii) provision of online ordering terminals to allow investors to place orders with securities and futures broker-age; and (iv) receipt of documents for stock af-fairs agency. The permitted scope of business of an insurance specialist business counter includes: (i) introduction of insurance products authorized for sale by the MOF; (ii) appraisal and policy issuance for insurance products authorized by the MOF for direct sale; and (iii) the receipt of documents for insurance-related business. For banking specialist business counters, the per-mitted scope of business includes: (i) deposit account opening; (ii) introduction of credit card account opening, and the holding of cards for collection by customers; (iii) provision of auto-mated service facilities; (iv) receipt of tax or changes utilities and other similar payments; and (v) receipt of documents for the ordinary busi-ness of the banking institution concerned.
To protect personal privacy, MOF also explicitly requires that when a financial holding company and its subsidiary share customer information for joint marketing purposes, their use of such in-formation must comply with the relevant provi-sions of the Computer Processing Personal Data Protection Law and the Self-Regulatory Code for Financial Holding Companies and Their Sub-sidiaries. Additionally, when disclosing, trans-ferring or jointly using customer data other than basic customer details—such as account data, credit data, investment data or insurance data—such data may be used only after entering into an written agreement with the customer or obtaining the customer's explicit written consent.
Now that the MOF order has taken effect, fi-nancial holding companies and their subsidiaries may make full, joint use of their personnel, data, and mutual operational support, to the extent allowed by the order. This should have a posi-tive effect in encouraging the establishment of financial holding companies and the integration of the financial services sector.