Newsletter
The Financial Supervisory Commission Introduces New Rules to Allow Professional Investors to Invest in Overseas Virtual Asset ETFs via Sub-brokerage
To provide investors with diverse product options and enhance the momentum of sub-brokerage business for Taiwanese securities firms, the Financial Supervisory Commission ("FSC") adopted the recommendations of the Taiwan Securities Association ("TSA") and announced new rules allowing professional investors in Taiwan to invest in overseas virtual asset ETFs via sub-brokerage on September 30, 2024. The FSC introduced five new rules and supporting measures.
Summary of the FSC's new rules and supporting measures is as follows:
1. Investor Eligibility: Considering the complex nature and significant price volatility of virtual assets, the investment risk associated with virtual asset ETFs is relatively high. Hence, principals who are eligible to invest in overseas virtual asset ETFs via sub-brokerage are limited to professional investors. Professional investors include "professional institutional investors," "high net worth juristic person investors," "high asset customers," "juristic persons or funds classified as professional investors," and "natural persons classified as professional investors."
2. Enhanced "Know-Your-Customer" procedures: A securities firm shall establish an appropriate product suitability system for virtual asset ETFs and shall submit such product suitability system to the board of directors for approval. In addition, prior to a principal's initial purchase, a securities firm shall assess whether the principal has sufficient professional knowledge and investment experience in virtual assets and related products to ascertain whether the product is suitable for sub-brokerage trading by the principal.
3. Signing of risk disclosure statement: Unless the principal is a professional institutional investor, a securities firm may accept orders from the principal only after the principal signs a risk disclosure statement.
4. Provision of product information: Except for professional institutional investors, a securities firm shall provide product information related to virtual asset ETFs prior to the principal's initial purchase.
5. Regular educational training: A securities firm shall organize educational training on virtual assets and related products for its employees regularly to ensure they fully understand such products.
As the cryptocurrency business flourishes, according to news reports, spot virtual currency ETFs have been listed on exchanges in the United States, Canada, Hong Kong, and Australia. In April of this year, the TSA proposed the rule to, subject to certain conditions, allow sub-brokerage business in overseas virtual asset ETFs and was accepted by the FSC. The FSC also stated that it would continue to monitor the development of sub-brokerage business of securities firms, improve relevant regulations to ensure the interests of investors and enhance the competitiveness of securities firms.
Lee and Li has established a "Capital Markets Practice Group." If you have any questions regarding investing in overseas virtual asset ETFs via sub-brokerage, please feel free to contact the experts in the Group.