Mon, Dec 07, 2020 page16

• FSC to crack down on offshore firms

  FRAUD CASE REACTION: From next year, public accountants must audit the financial statements of foreign-registered companies every six months as opposed to annually

  • By Chen Cheng-hui / Staff reporter
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  The Financial Supervisory Commission (FSC) plans to strictly supervise foreign-registered Taiwanese companies listed on the Taiwan Stock Exchange after Tony Huang (黃文烈), the former chairman of Cayman Islands-registered Pharmally International Holding Co (康友製藥), was indicted for allegedly colluding with Chinese businesspeople to falsify accounts and financial statements.

  In a written report to the Legislative Yuan, the commission said that it is scheduled to brief lawmakers on its measures to supervise the management of so-called “KY stocks” at a meeting of the legislature’s Finance Committee today.

  KY stocks refer to overseas Taiwanese businesses with a primary listing on the nation’s main board.

  

  A Financial Supervisory Commission sign is pictured in an undated photograph in New Taipei City.

  Photo: Kelson Wang, Taipei Times

  The Taiwan Stock Exchange on Aug. 18 suspended trading of Pharmally shares pending the company’s second-quarter financial statement and the results of the investigation into Huang, who disappeared on Aug. 6 and is reportedly in Singapore.

  “The commission has asked the Taiwan Stock Exchange to propose relevant strengthening measures,” the FSC said in the report. “That includes the implementation of seven measures derived from three aspects: corporate governance, expert supervision and supervisory agency.”

  Among the new measures is a requirement that certified public accountants inspect foreign-registered companies’ financial statements every six months beginning next year, as opposed to the current annual inspection, the report said.

  To expand the scale of Taiwan’s capital markets, promote the internationalization of domestic capital markets and advance the diversification of financial products, the government in 2008 began to encourage overseas Taiwanese businesses to seek a primary listing in Taiwan, the report said.

  Taiwan’s campaign to attract investors and explore potential opportunities has seen the number of KY companies reach 110 as of the end of October — 77 on the Taiwan Stock Exchange and 33 listed on the Taipei Exchange.

  The Taiwan Stock Exchange once touted the listing policy as an opportunity for overseas Taiwanese businesses to consider business upgrades, channel development, long-term corporate sustainability and improve brand recognition.

  The commission plans to bolster its corporate governance mechanism by enhancing the function of listed companies’ audit committees and improving information disclosure, the report said.

  For instance, independent directors are asked to monitor implementation of their company’s internal controls and lending practices, while companies are encouraged to hold more conference calls with investors, and their chairpersons or independent directors are advised to attend the conference in person, it said.

  As for expert supervision, the commission said that equity underwriters should visit the companies every year to meet with board directors and independent directors, as well as attend board meetings or review the minutes of the meetings every year for two years to better understand the company’s financial status and operations.

  Meanwhile, the report said that the Taiwan Stock Exchange and the Taipei Exchange need to collect further corporate credit information and immediately grasp information that affects a company’s financial situation.
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