Taiwan threatens jail terms for unlicensed offshore funds

Sep 3, 2009

The Taiwan regulator is tightening enforcements around the marketing activities of unregistered offshore providers on the island.

The Financial Supervisory Commission (FSC) in Taiwan is renewing its efforts to obstruct the marketing activities of unregistered offshore investment product providers on the island.

Offshore asset managers, investment advisors, independent financial advisors, and most recently, online fund sales platforms have always eyed the deep pockets of Taiwan's mass affluent and high-net-worth individuals. They are regularly spotted making trips to Taiwan, marketing their products and raising assets from investors there.

The sightings have been increasing in recent years, particularly since the global financial crisis, when asset raising efforts in the US and Europe were impeded. Increasing investor disputes and complaints against these offshore providers have prompted the FSC to step up efforts to put these executives in line.

The regulator is beginning a new campaign, warning investors not to invest with unlicensed providers. A full list of approved offshore products and offshore providers can be obtained through the websites of the Taiwan Securities Association, the Securities Investment Trust & Consulting Association of the R.O.C. and the Taiwan FundClear.

The FSC stresses that without clearing through its approval procedures and receiving an operating license from the regulator, any marketing or asset-raising activity these offshore advisors or fund houses conduct in Taiwan is deemed illegal. The FSC reminds unlicensed offshore providers that the only way to distribute overseas investment funds is through FSC-approved banks, brokerages, trusts, securities investment trusts enterprises (Site) and securities investment consulting enterprises (Sice).

Raising assets for unapproved offshore funds -- whether directly or indirectly as a representative -- could lead to a criminal jail term of up to five-years and a fine ranging from NT$10,000 ($304) to NT$500,000 ($15,197).

Unlicensed brokerages that violate the island's securities trading rules will receive jail terms of up to two years and a fine of up to NT$18,000 ($547).