The Financial Supervisory Commission (FSC) is mulling changes to rules governing tender offers, aiming to help safeguard investors’ interests by placing more responsibilities on financial institutions involved in the process.
Under the planned changes, certified financial consulting, brokerages and accounting firms must provide funding confirmation documents to support their recommendations that prospective buyers have the ability to meet payment obligations.
The confirmation would hold companies involved in auditing liable for losses to investors resulting from incomplete tender offers, the commission told a news conference yesterday.
For depository banks, a performance guarantee must be provided, the commission said.
These measures add a layer of protection for investors by holding companies liable for consequences stemming from inadequacies in due diligence and auditing efforts, such as punitive damages from civil lawsuits.
Investors might also pull their shares out of a tender offer before a prospective buyer fulfills the obligated payment amount in full, the commission said.
“Investors might mitigate their risk exposure by selling their sales in the event that the tender offer runs into difficulties,” Securities and Futures Bureau Deputy Director-General Wang Yung-hsin (王詠心) said.
The proposed amendments are based on guidelines in the UK and US, and do not require institutions to furnish deposits or performance bonds to process tender offers, Wang said.
Although confirmations do not hold the same level of responsibilities as bank guarantees, they still bring significant consequences for financial services providers if violations are found, she said.
Wang said that the timetable for tender offers might not be changed or extended except in extraordinary circumstances, such as natural disasters and war.
“These changes will undoubtedly raise compliance costs for businesses,” FSC Vice Chairman Kuei Hsien-nung (桂先農) said, adding that the commission hopes to address rising concerns left in the wake of a botched NT$4.86 billion (US154.62 million) tender offer to acquire a 25.71 percent stake in XPEC Entertainment Inc (樂陞科技).
XPEC shareholders said they have incurred losses of about NT$2.8 billion after Bai Chi Gan Tou Digital Entertainment Co (百尺竿頭) pulled out of the deal and refused to furnish payment, which sent share prices on a sharp dive.
XPEC shares tumbled to NT$37 on Monday from as high as NT$110 in June, with losses for XPEC shareholders amounting to more than NT$10 billion, local media reported.
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