This website uses cookies to improve your browsing experience. By continuing to use this website you agree to our use of cookies. For more information on our use of cookies, click here to review the Cookies Policy.。
RULES ON USE OF SECURITIES INVESTMENT TRUST FUND ASSETS AS LOAN COLLATERAL
Carol Wu
In an order dated 9 August 2004, the Financial Supervisory Commission stated that under Arti-cle 12 of the Regulations Governing Securities Investment Trust Funds, a securities investment trust enterprise (SITE) may use the assets of a securities investment trust fund that it manages as collateral for raising a loan. But it must comply with the following requirements:
The purpose of the loan must be to cover a shortfall in funds for the redemption of bene-ficiary certificates, in response to the grounds for delayed redemption set out in the proviso to Article 22 of the Regulations, or as stipu-lated in the section of the securities investment trust agreement on redemption of beneficiary certificates of very high value.
The sum borrowed may not exceed the short-fall in the redemption price.
During the life of the loan, the 2% redemption fee payable by a beneficiary requesting re-demption should be added to the assets of the securities investment trust fund.
The loan should be raised with the SITE as borrower and the trust fund assets as collateral. Interest costs should be borne by the SITE, and the loan agreement should stipulate that the funds borrowed should be paid directly into the special account of the securities in-vestment trust fund.
During the life of the loan, the SITE should announce the arrangement of the loan in the manner prescribed in the securities investment trust agreement.
