TAIWAN Law and Practice Contributed by: Robin Chang, Sarah Wu and Eddie Hsiung, Lee & Li
securities investment consulting enterprises (SICEs) are permitted to offer online securities investment consulting services through automated tools utilising algorithms (“Robo-Adviser Services”). SICEs are obli - gated to adhere to specific regulations, including the following: (i) conducting periodic reviews of the algo - rithm; (ii) completing relevant know-your-customer procedures before providing advice; (iii) establishing a special committee to supervise the adequacy of the Robo-Adviser Services; and (iv) informing customers of precautions before utilising Robo-Adviser Services. For the purpose of “rebalancing transactions” by robo- advisers, the FSC relaxed certain restrictions in 2021. This enables the execution of rebalancing transactions based on pre-agreed investment portfolios between the robo-adviser and its clients, involving securities investment trust funds or offshore funds (approved by or registered with the FSC), subject to the follow - ing conditions: (a) following the pre-agreed funds list with the client (up to 30 funds); and (b) aggregation of the absolute value of the change in the investment proportion for each portfolio, not exceeding 60%. In March 2024, the FSC revised laws and regulations to promote automation and improve efficiency for securities firms, removing the previous ban on using computer systems to execute robo-adviser rebalanc - ing transactions for clients. Cryptocurrency Cryptocurrency with the nature of securities (ie, secu - rity tokens) is subject to the rules and regulations gov - erning security token offerings (STOs), while crypto - currency without the nature of securities is subject to anti-money laundering related regulations. Please see 2.14 Impact of AML and Sanctions Rules , 6.1 Permissible Trading Platforms , 10.3 Classification of Blockchain Assets and 10.4 Regulation of “Issuers” of Blockchain Assets . 2.3 Compensation Models Please see below our understanding of the basic com - pensation models that may be adopted by certain fin - tech industry players: • Peer-to-peer lending: Charges by platform operator for matching the lenders and borrowers.
• E-payment: Charges from contracted merchants for carrying out the transactions. • Robo-adviser: The SICEs charge consulting fees for rendering online securities investment con - sulting services through automated tools utilising algorithms. • Cryptocurrency: Depending on the business models adopted, exchanges/platform operators would require the handling fees or other charges for transactions/orders matched, or earn bid-ask spread. 2.4 Variations Between the Regulation of Fintech and Legacy Players There is no single set of regulations governing fin - tech industry participants. Whether and which specific financial laws and regulations will apply would depend on the business models, the products/services and even the operations of the industry players. 2.5 Regulatory Sandbox Taiwan has implemented a regulatory sandbox frame - work. The Fintech Development and Innovation and Experiment Act (the “Sandbox Act”) was enacted on 31 January 2018 and came into effect on 30 April 2018. This regulatory sandbox serves as a testing ground for new fintech applications. Under the Sandbox Act, applicants, whether entities or individuals, must obtain approval from the FSC before entering the sandbox for experimentation. Throughout the experimental period, certain legal requirements, such as FSC licensing and specific liability exemptions, may be waived. Upon completion of the approved experiments, the FSC reviews the results. If the results are favourable, the FSC might contemplate revising current financial laws and regulations that impede the adoption of innova - tive financial practices in practical scenarios. Never - theless, contingent upon the outcome of the FSC’s evaluation, the entity or individual from the sandbox could still be obligated to seek pertinent licences or approvals for the formal undertaking of activities pre -
viously implemented in the sandbox. 2.6 Jurisdiction of Regulators
In Taiwan, the FSC is the government entity respon - sible for overseeing and regulating all financial prod -
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