Ministry plans to deregulate funds
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The Ministry of Finance yesterday disclosed a draft to deregulate the trust and banking industry on issuing mutual funds. According to the draft, the trust and banking industry will be able to issue mutual funds investing in almost all kinds of financial instruments, including stocks and bonds, gold, futures and real estate. Securities experts said the move will benefit the trust and banking sector. “It’s a positive direction for the banking sector,” said Doh Wu-lin (杜武林), vice president of E.Sun Commercial Bank (玉山銀行). “Following the issuance of mutual funds, it will help the banking sector on its task of integrated marketing,” Doh said. But another executive from the mutual fund industry said the new market opening will make future competition tough. “After the banking sector enters the mutual fund market, the market would be under fierce competition. However, consumers will be the big winners since there would more choices for them in the future,” said Sue Huang (黃淑君), vice president of Franklin Templeton Securities Investment Consulting. Taiwan has 40 local fund companies, managing assets of over NT$1 trillion. Currently only the securities investment trust companies are allowed to issue mutual funds — the banking sector has been barred from mutual funds for the past two decades. However, the banking sector could sell mutual funds issued by local or foreign fund companies. According to the draft, if the mutual fund invests more than 40 percent of its assets in securities or the total fund size exceeds NT$600 million, the mutual fund would have to be regulated under both the regulations of the Securities Exchange Law and the Trust Law. Investments below those guidelines would be regulated under the Trust Law only. Since the regulatory agency of the Trust Law is the Bureau of Monetary Affairs under the finance ministry, and the regulatory agency of the Securities Exchange Law is the Securities and Futures Commission, the bodies disagree on which agency should act as the regulatory body for the trust industry’s mutual funds. Once the finance ministry finalizes the investment guidelines, the trust and banking industry will be able to apply for the issuance of mutual funds accordingly. Following the disclosure of the draft, a 15-day grace period is required to offer outside comments. If there are no objections to the draft, the regulation would then be promulgated immediately after the waiting period. According to the draft, when the trust and banking industry decided to launch mutual funds, the application should be submitted to the association of the trust industry first and then transferred to the finance ministry for final approval. When the mutual fund is required to register under the Securities Exchange Law, another application should be filed to the securities regulator. Meanwhile the investment targets of the fund are limited to the following instruments: government bonds, financial bonds, listed stocks, corporate bonds, convertible bonds, gold and foreign exchange, futures and other derivative products, real estate, and other instruments approved by the finance ministry. The draft also stipulates that the ceiling of any mutual fund to invest in one listed company’s securities could not exceed 10 percent of the fund’s total net assets (in order to avoid concentrated risk). According to the ministry, upon the approval of the issuance of a mutual fund, the trust company should launch the fund within three months. If there is any reason to delay the process, the industry could apply for another three-month extension. |