The Securities and Futures Commission (SFC, 證期會) has decided to lower the listing requirements for fund companies in a move designed to encourage mergers within the mutual fund industry.
The relaxation of the regulations on fund companies' fund size and performance will facilitate their listing on the OTC.
Until now, the difficulty of valuing unlisted fund companies has been the biggest hurdle preventing merger negotiations in the fund industry, finance analysts said.
"The OTC listing requirements for fund companies set in July, 1998 were too strict," said Lin Tzong-yeong (
Ever since their implementation, the regulations have been strongly criticized by the fund industry for setting requirements that were too difficult to meet.
Currently, only one fund company out of a total of 32 is listed on the OTC, and that one was listed before the regulations were implemented.
"Under these strict requirements, none of the securities investment trust companies have ever qualified for a listing on the OTC market," Lin said.
In response, Lin said the SFC would ease the requirements to enable fund companies to qualify and become listed in the near future.
According to the current listing requirements promulgated by the SFC, any fund company applying to be listed on the OTC market must have at least three equity funds issued for more than three years each. The monthly average value of the net assets of a company's equity funds must also be no less than either NT$40 billion over the last two years, NT$30 billion over the last three years, or NT$20 billion over the last five years.
Yuanta SITC (
According to the regulations, a fund company applying for listing must also have at least one bond fund issued for more than two years. The monthly average value of the net assets of all its bond funds must be no less than NT$10 billion over the last two years.
The regulations also set requirements for fund performance. When applying for a listing, a fund company cannot have more than half of its funds losing money, where the unit price in a fund is less than the issue price.
Furthermore, except for the index fund, whose performance mirrors that of the TAIEX, the average annual return of all funds issued by a fund company must be higher than the Bank of Taiwan's (
National SITC (
As well as easing listing requirements, and as a consequence the ability to value companies, the SFC is hoping the revised restrictions will help the fund industry to consolidate.
"After more fund companies have listed, the SFC will then promote merger activity in the fund industry," said Lin
Merger talks among several companies have already taken place in the last several months, but the question of a company's value remains contentious.
A number of foreign and domestic investment groups showed interest in Kwang Hua SITC (
Following their listing on the OTC, market quotes for fund companies would become available. Merger negotiations with or between companies such as Kwang Hua SITC would then become much easier, analysts said.
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