The Financial Supervisory Commission (FSC) on Tuesday fined Shinkong Insurance Co (新光產險) NT$4.5 million (US$158,200) for breaching regulations governing transactions between insurers and interested parties.
A financial examination showed that the property insurer sold about 10 million shares of Shinkong Textile Co (新光紡織) to a company that was ultimately controlled by family members of Shin Kong Investment Trust (新光投信) chairman Philip Wu (吳昕紘) via block trades in January 2018, a deal that contravened the Insurance Act (保險法), the FSC said.
Shinkong Insurance borrowed NT$400 million from the Wu family members to buy the Shinkong Textile shares, but four months later sold the shares to the same Wu family members at a similar price via another block trade, Insurance Bureau Deputy Director-General Wang Li-hui (王麗惠) told a news conference.
Photo courtesy of Shin Kong Financial Holding Co
“The interested-party transactions were aimed at helping the Wu family members boost their stake in Shinkong Textile, while avoiding supervision from Shinkong Insurance’s board of directors,” Wang said.
If Shinkong Insurance wanted to comply with the regulations governing transactions between insurers and interested parties, it had to notify its board members in advance, she said.
More than half of the members needed to approve the deal, with at least two-thirds of the board in attendance, she said.
Shinkong Insurance told the commission that neither its chairperson nor general manager knew about the matter, Wang said.
The commission found that it was a vice president of Shinkong Insurance who decided to sell the Shinkong Textile shares, but the person was not in charge of the insurer’s investment operations, which indicated that the insurer had poor internal controls, Wang said.
The vice president has retired, she said.
The FSC has banned Shinkong Insurance from trading securities of its interested parties in after-hours trading or in block trading for two years, she said.
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