In Tatung’s controversial shareholders’ meeting at the end of June, the family-controlled management overstepped its power and self-interpreted the laws to block its opponents’ voting rights. As a result, not only did the Ministry of Economic Affairs reject the company’s registration of new board directors, but the Financial Supervisory Commission (FSC) also reported the matter to judiciary authorities, saying the company had committed a breach of trust.
Soon after, Jko Fintech last month relaunched its investment product Tuofu Bao, which, as expected, attracted NT$150 million (US$5.1 million) from 5,000 investors on its first day.
The financial technology company claimed its product complied with the law and had regulatory approval, which the FSC denied. In the end, Jko Fintech had to suspend the service, because it is the commission, not the company, that has the final say.
Jko Fintech touted Tuofu Bao as its answer to Alibaba Group’s Yuebao, which has attracted massive deposits from Chinese consumers to become the largest money market fund in China. Tuofu Bao would have allowed users of Jko Fintech’s e-payment platform, Jkopay, to invest cash online in the Jko Multi-Asset Fund, which is managed by Jko Fintech affiliate Jko Asset Management.
The company has been promoting Tuofu Bao since 2018, saying it would offer better returns than traditional deposits. Last month was the third time Jko Fintech has unsuccessfully attempted to bring the service to market.
What raised eyebrows at the FSC were the company’s claims that the investment service would offer an “expected return of 1.2 to 2.5 percent,” although the company said that it was not guaranteeing annual returns. The commission also took issue with the company’s other claims that Tuofu Bao faces no legal issues and that it does not require FSC approval.
Jko Fintech committed the same mistake as Tatung. Whether in the electronics industry or the financial sector, the interpretation of regulations should not be made by a company itself, but by the authority that has jurisdiction over it.
However, no one can deny that the launch of Tuofu Bao has prompted debate over the government’s ability to strike a balance between timely approval of new financial products and services and exercising appropriate government supervision.
As more companies are creating fintech innovation plans to diversify their financial services, improve efficiency and promote inclusive finance, they are stepping into the payment, financing, asset management, investment, cross-border remittance and insurance businesses that have long been dominated by traditional financial institutions, while at the same time bringing new challenges to regulators in terms of legal supervision, market stability and information security.
In a July 23 Facebook post, the central bank said that while regulators encourage innovation, they need to keep rules up to date to prevent firms from exploiting loopholes, ensure financial stability and fair market competition, and protect consumers’ rights.
The central bank also said that it is necessary to cultivate greater cooperation and coordination between local and international regulators to enhance supervision.
Over the past few years, the government has pushed for fintech development and to establish an environment where financial innovation can thrive.
It is unknown whether the central bank’s Facebook post is related to the FSC’s dispute with Jko Fintech over Tuofu Bao, but its message is clear and important: A balance should be struck between innovation and risk control to protect the rights and interests of all parties.
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