The Committee would like to thank the Taiwan government for its continued efforts in developing the asset management industry, as well as enacting laws and regulations that encourage innovation and fair competition. These measures have helped expand the range of investment options available to investors and strengthen the confidence of foreign enterprises to invest in the market.

As Taiwan’s aspiration to become an asset management center in Asia remains a key policy priority, the government should take into account Taiwan’s unique economic structure, placing equal emphasis on both retaining domestic capital within the island and attracting global investors. On behalf of American asset management companies operating in Taiwan, the Committee hereby provides the following recommendations for consideration:

Suggestion 1: Enhance operating efficiency for asset managers registering offshore funds in Taiwan and the activities of SITE-employed individual asset managers.

1.1   Accelerate the review and approval timeline for offshore mutual fund registrations. International asset management firms generally regard Taiwan’s regulatory approval timelines as the longest in Asia. For example, offshore-fund registration in Taiwan under the UCITS (Undertakings for Collective Investment in Transferable Securities) regulatory framework, which constitute a large share of offshore funds’ assets under management (AUM) in this market, generally takes about five months and sometimes can extend to 7-12 months.

        In Hong Kong, in contrast, the Securities and Futures Commission’s process of approving a standard UCITS fund for retail distribution typically takes about two months, with an expedited track of 15 days available for qualifying standard products. For the Monetary Authority of Singapore, the standard review period is 7-21 days, with a maximum of 28 days. Both jurisdictions operate under clearly defined and transparent review timelines.

        In Taiwan, in the absence of a clearly defined review timetable, products are also required to comply with additional investment restrictions (such as investment limits on high-yield bonds and Rule 144A securities, as well as restrictions on permitted derivative types and their investment limits), which does not commonly occur in Hong Kong or Singapore. For example, even for filings subject to the accelerated 45-business-day registration, the application must first undergo substantive review by multiple authorities. As a result, the overall process still takes approximately three to four months.

        An overly lengthy and unpredictable review process, together with the imposition of excessive investment restrictions, creates challenges for international asset managers in pursuing business opportunities and reduces the allocation of resources to the Taiwan market. Especially given the large increase in the number of exchange-traded funds (ETFs) available in the market, it is essential to be able to quickly introduce distinctive and innovative offshore fund products to attract investor interest, provide the benefit of diversification, and meet market demand. Otherwise, Taiwan investors and intermediation will look to offshore markets like Hong Kong or Singapore where the approval timeline is shorter and more innovative products may be available, leading to unregulated capital outflows and limiting the development of Taiwan’s capital markets.

        To build a principles-based, fair, and efficient financial market that can compete with major asset management hubs in Asia and attract greater participation from foreign investors, the Committee recommends that the Securities and Futures Bureau (SFB) align the review timeline with those of Hong Kong and Singapore. Also, for funds that comply with EU UCITS standards, a more effective accelerated review process should be adopted, along with adoption of global product-opening policies consistent with other major financial markets in the Asian region.

1.2   Relax qualification requirements for the concurrent appointment of individual SITE employed discretionary investment managers. Under current rules, SITE-employed individuals serving as discretionary investment managers must meet additional criteria to also serve as fund managers. Under Jin Guan Zhen Tou Zi Letter No. 1130386274 dated December 30, 2024, even if a manager has more than two years of experience managing discretionary investment accounts of the same or similar asset class, the individual must still have at least one year of experience managing a mutual fund to qualify. This requirement deviates from international practice and limits the career development of discretionary investment managers.

In this regard, the Committee respectfully recommends that the SFB remove the requirement for a discretionary investment manager to have a minimum of one year of experience managing a mutual fund (or serving as a co-manager of assets of the same or similar nature) before being qualified to serve as the fund manager of a mutual fund of the same type. This change would align with international market practice and would allow experienced discretionary investment managers to manage mutual funds of a similar nature.

Furthermore, a fund manager of a balanced or multi-asset fund may also manage other balanced or multi-asset funds, and a manager of a fund of funds may also manage other funds of the same type. However, whether funds are considered to be of the “same type” is currently determined based on whether they are actively or passively managed and whether their investment strategy is equity- or fixed income-oriented. As a result, when a manager of a balanced or multi-asset fund seeks to manage a fund of funds, it is permitted only if the underlying assets of both funds follow a similar equity or fixed income approach.

Since the investment operations of balanced funds, multi-asset funds, and funds of funds are primarily driven by asset allocation strategies, with these strategies are often managed by the same investment teams within international asset management firms, the Committee urges the SFB, when determining whether funds are of the same type, to allow managers of balanced or multi-asset funds, as well as discretionary investment managers, to serve as fund managers of funds of funds without requiring an additional assessment based on whether the underlying assets are equity- or fixed income-oriented.

Suggestion 2: Exempt active bond exchange-traded funds from the securities transaction tax.

According to Article 2-1 of the Securities Transaction Tax Act, the securities transaction tax on ETF units (beneficial certificates) of listed or over-the-counter (OTC) ETFs primarily invested in bonds has been suspended for the period from January 1, 2017, to December 31, 2026.  The tax suspension has served to promote development of the passive bond-type ETF market.

At the end of 2024, the FSC amended the “Regulations Governing Securities Investment Trust Funds” to allow securities investment trust enterprises (SITEs) to issue active ETFs listed on the stock exchange or OTC market. Given that active bond-type ETFs, like passive bond-type ETFs, are listed and primarily invest in bonds, the Committee believes that the two product types should be afforded equal treatment under the securities transaction tax regime, irrespective of differences in structure or classification. However, current regulations do not extend the same tax exemption to active bond-type ETFs, even though promoting development of the active ETF market has been a key policy objective of the FSC and is integral to establishing Taiwan as a hub for asset management in Asia.

The regulatory inconsistency in which products with similar underlying characteristics are subject to different tax treatment is likely to constrain growth of the active bond-type ETF market, while also limiting investor access to a broader range of fixed-income investment products. To strengthen the competitiveness of Taiwan’s ETF market, the Committee recommends that active bond-type ETFs be granted the same securities transaction tax exemption as their passive counterparts. The Committee also suggests that the definition of bond-type ETFs under the Securities Transaction Tax Act should align with the definition of those under the Regulations Governing Securities Investment Trust Funds.

Suggestion 3: Remove the restriction on investment in non-investment-grade offshore bond funds through investment-linked policies.

According to the “Regulations Governing Investment-Linked Insurance,” policyholders are allowed to invest in various investment targets through investment-linked policies (ILPs). However, based on the revised “Guidelines Governing the Custodians of Special Accounts for Investment-Linked Insurance and Investment Targets,” as of July 1, 2023, ILPs are prohibited from linking to offshore non-investment-grade bond funds (NGBFs), formerly known as high-yield bond funds.

This restriction limits the range of investment options available to policyholders and diverges from international regulatory practice. As Taiwan appears to be the only jurisdiction among the major markets prohibiting ILPs from linking to NGBFs, the Committee recommends that the FSC reassess the necessity of this restriction and lift it based on risk-return classification standards, or adopt a phased approach allowing ILPs to link to lower-risk global or developed-market NGBFs while maintaining restrictions on emerging market exposure.

In major markets, NGBFs are available to retail investors and provide diversified exposure across issuers. Relaxing the rules would support the FSC’s efforts to position Taiwan as an asset management center in Asia, enhance market competitiveness, and enhance policyholders’ ability to allocate risk appropriately.

With respect to the phased approach, the Committee provides the following specific suggestions:

3.1   Amend Article 8-2 of the “Guidelines Governing the Custodians of Special Accounts for Investment-Linked Insurance and Investment Targets.” Article 8-2 governs the investment targets linked to investment-linked insurance products that are beneficiary certificates of securities investment trust funds or offshore funds under Article 14, Paragraph 1 of these Regulations, and provides that:

• • Insurers that entrust a business approved by the competent authority to manage and operate the assets of the special account, in accordance with Article 5, Paragraph 1, Subparagraph 2 of these Regulations, may invest in non-investment-grade bond funds and emerging market bond funds. The total investment shall not exceed 20%, and the proportion invested in non-investment-grade bond funds shall not exceed 10%.
  • Investment-linked insurance products linked to investment targets other than those specified in the preceding paragraph shall not invest in non-investment-grade bond funds or emerging market bond funds.

    The Committee recommends that this provision be revised to provide that:

  • Investment-linked insurance products linked to investment targets other than those specified in the preceding paragraph shall not invest in emerging market non-investment-grade bond funds or emerging market bond funds.
  • Insurers that entrust a business approved by the competent authority to manage and operate the assets of the special account, in accordance with Article 5, Paragraph 1, Subparagraph 2 of these Regulations, may invest in emerging market non-investment-grade bond funds and emerging market bond funds. The total investment shall not exceed 20%, and the proportion invested in emerging market non-investment-grade bond funds shall not exceed 10%.

Suggestion 4: Relax restrictions on personal trading and on information and communication devices.

4.1   Loosen regulations on the use of mobile phones and other information and communication devices. Securities investment trust and consulting professionals, particularly investment managers, are subject to stringent restrictions on the use of mobile phones and other information and communication devices. Such restrictions are not common in major international asset management markets. Within the foreign asset management industry in Taiwan, industry participants report difficulties in arranging for overseas investment and research professionals to be seconded to Taiwan, as prospective candidates often decline such assignments due to Taiwan’s restrictive regulatory approach to communication device usage. These restrictions have become a serious impediment to both talent mobility and the ability of firms to attract and retain senior investment professionals, reducing Taiwan’s competitiveness as a regional asset management hub and discouraging international firms from expanding their presence.

        The Committee recommends the revision of relevant regulations governing the use of communication devices so as to allow such matters to be managed through firms’ internal control and compliance frameworks, supported by appropriate supervisory oversight.

4.2   Relax personal trading regulations applicable to managers not involved in Taiwan equity transactions. Investment managers are subject to stringent personal trading restrictions. Specifically, regardless of the type of assets they manage, all investment managers (including their related parties) are prohibited from trading a particular Taiwan-listed equity during any period in which a securities investment trust fund managed by their affiliated management company holds such equity.

        These restrictions are intended to prevent improper conduct, including copy trading (replicating trades based on privileged knowledge of fund activity) and manipulation of Taiwan-listed equities, which could adversely affect the orderly operation of Taiwan’s securities market. However, where investment managers are not involved in Taiwan equity investment activities, the application of the same restrictions may not be necessary to achieve this objective, provided that appropriate information barriers and control mechanisms are in place to prevent conflicts of interest or misuse of information.

        Accordingly, the Committee recommends amendment of the relevant personal trading restrictions to exclude investment managers not involved in Taiwan equity trading from the scope of such restrictions, subject to the establishment of robust internal control mechanisms.

Suggestion 5: Enhance incentives under the Offshore Fund Deep Cultivation Program.

5.1   Combine Deep Cultivation Program incentives in the same application for offshore fund registration. Under current FSC regulations governing the Offshore Fund Deep Cultivation Program (DCP), incentives cannot be applied concurrently within the same offshore fund registration application and must instead be utilized separately, even when an offshore fund institution is eligible for multiple incentive measures. This restriction limits the program’s ability to achieve its objective of facilitating the rapid introduction of new products and expanding investor choice.

        The Committee therefore suggests that the FSC allow offshore fund institutions to determine how to apply multiple qualifying incentive measures, whether separately or in combination within the same offshore fund registration application, without restriction.

        For example, an offshore fund institution could simultaneously apply Article 4-4 (eligibility for new types of offshore funds) and Article 4-6 (fast-track review mechanism) of the DCP, making it possible for a new type of offshore fund (or an offshore fund exempt from standard investment restrictions) to benefit from an accelerated review process. Such flexibility would encourage offshore fund institutions to expand their activities in Taiwan, accelerate time to market for new products, and support the development of foreign-funded enterprises in Taiwan.

5.2   Provide additional or cumulative incentives for offshore fund institutions that maintain continuous participation in the DCP for four consecutive years. Where an offshore fund institution has obtained formal recognition status under FSC rules for three consecutive years, it may apply in the following year for a two-year recognition validity period. The Committee understands the FSC’s intention to reduce the administrative burden of annual reapplication. Nevertheless, the Committee considers that institutions that continue to demonstrate a strong commitment to the Taiwan market and voluntarily maintain annual reporting should be further incentivized.

        In this regard, the Committee recommends that the FSC grant additional and cumulative incentive measures to offshore fund institutions that continue to actively participate in the DCP and apply for recognition on an annual basis, in addition to the existing two-year validity benefit. Such incentives would reinforce long-term participation and strengthen market commitment.