Following last minute deliberation in the Legislature, two new amendments were attached to the nation's Securities Exchange Law (
The first amendment would give brokers more discretion in trading on the behalf of their clients. The second allows listed firms to buy back their own shares in the open market.
Revision of the law's discretionary account statue (代客操作帳戶) gives brokers -- who are authorized by clients -- the power to buy and sell securities without the client's consent for individual transactions.
Customers often set broad guidelines in advance, such as limiting brokers to trade solely in blue chip stocks.
The treasury stock statute (
The purchased stock may be used for a variety of purposes, such as bonuses for management and employees or the acquisition of another company.
According to Lin Tzong-yeong (
Analysts estimate that, in the future, the discretionary account business could replace mutual funds and comprise 90 percent of the assets under the guardianship of securities investment trust companies.
Presently, more than NT$1 trillion is managed by the mutual fund industry.
Lin also noted that with the second measure, listed companies that buy back their own shares from the open market could then use them as bonuses for their employees.
The company could also buy back shares to decrease the number of their shares in the marketplace, thus possibly increasing the value of the remaining shares available in the public float.
It also could be used to improve the cross-holding relationship between a parent company and its subsidiary, improving their overall financial structure.
But there are some limitations on stock buy-backs.
According to the SFC, a listed company may buy back no more than 10 percent of its outstanding shares.
In addition, the company may only buy back shares when its stock is in decline.
For example, the company may buy shares when there has been a 15 percent drop over seven trading days or 20 percent drop over 50 trading days.
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