The Financial Supervisory Commission (FSC) is considering tightening its controls on financial services providers’ investments and it is planning to unveil its policy direction within the next two months, FSC Chairman Wellington Koo (顧立雄) said yesterday.
Koo’s statement came after lawmakers questioned the commission’s aim to have non-financial companies regulate investments in the financial sector, which they said might lead to undue influence over investees, in addition to a series of governance lapses.
FAT Group (樺福遠航集團), parent company of Far Eastern Air Transport Corp (遠東航空), last week secured enough votes to win five seats on COTA Commercial Bank’s (三信商銀) board of directors.
A number of real-estate developers have also amassed significant stakes in several financial holding companies, giving rise to market rumors of proxy fights over board seats in elections next year.
Investors who have been building their presence on the boards of multiple financial holding companies could lead to rule violations, including profiteering, contravention of non-compete clauses, compromising trade secret protection and affecting overall governance, Koo said during a question-and-answer session at the legislature.
“In my view, investors should limit their investments in the financial sector to a single company,” Koo said, adding that exceptions could be made for state-run companies whose major stakeholders are government departments and agencies, as well as foreign institutions and foreign sovereign funds that are not seeking board representation.
The influence exerted by government investments are aimed at ensuring the public interest, such as stabilizing the market and fostering key industries, while activities of foreign and sovereign funds are purely motivated by investment returns, Koo said.
Koo added that companies are free to invest in the financial sector as long as they obey the rules stipulating that they submit regulatory filings for stakeholdings of 5 percent and apply for the commission’s approval for stakeholdings of 10 percent.
“We aim to establish clear boundaries that properly separate industries and the financial sector,” Koo said, adding that the commission would glean from precedents set in other developed economies.
However, Democratic Progressive Party Legislator Chiang Yung-chang (江永昌) said that in the absence of tangible action taken by investors, the regulator’s concerns were unfounded.
Chinese Nationalist Party (KMT) Legislator William Tseng (曾銘宗), a former FSC chairman, said that while the issue remained largely unknown to him during his tenure, he supports Koo.
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