The Financial Supervisory Commission (FSC) yesterday reiterated its intention to strictly review foreign-registered companies seeking primary listings in Taiwan after China Crystal New Material Holdings Co (中國晶體新材料控股) filed an appeal against its application being rejected last month.
The commission on May 30 barred the Cayman Islands-registered mica powder producer’s bid to trade shares under the F-stock group on the GRETAI Securities Market (GTSM) on concerns that Chinese capital exceeds the 30 percent limit and Chinese investors have substantial control in the company.
“The F-stock group is intended to attract Taiwanese investors overseas, particularly in China,” so they can raise funds to meet expansion needs and help invigorate local capital markets, the commission said.
The China-based firm won listing approval from GRETAI Securities Market in April, but was told later by the commission’s securities bureau to turn in more documents and was roundly denied the application.
According to a prospectus filed by China Crystal to the GTSM, China Crystal chairman Dai Jialong (戴加龍), who owns a 46.23 percent stake in the company, was listed as a Philippine national, leading the GTSM to use the general review process to vet and approve the application.
However, the GTSM reconsidered its position after learning that Dai was a Chinese citizen before changing nationalities and decided to treat China Crystal as a Chinese-invested entity, the commission said.
China Crystal has called on the administrative court to void the rejection on grounds that securities officials have misused power by judging major shareholders’ nationality based on their ancestry, not their citizenship.
The company said the nation has never announced that it would review listing applications in this manner, and the inconsistent policy stance among different agencies may jeopardize the government’s credibility.
Currently, the F-stock group has 37 firms and several chairpersons have Chinese origins, China Crystal said, adding that it is not international practice to judge people by their ancestry.
In response, the commission defended different procedures for foreign and Chinese companies, saying the practice has been in place since the launch of the F-stock group in 2008.
Under current regulations, only foreign incorporated companies in which Chinese investors own no more than a 30 percent stake are eligible to have its listing application considered under a general review process.
In the case-by-case review process, a China-based company must prove that Taiwanese investors will have a final say in the company’s operations.
The commission is considering easing rules governing Chinese capital and investors, but all firms and their accounts as well as lawyers must comply with the current restrictions prior to policy change.
The commission said China Crystal’s petition would be forwarded to the Cabinet for review.
If the Cabinet upholds the commission’s decision, China Crystal will be eligible to file an administrative lawsuit against the commission, it said.
Additional reporting by CNA
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