Taiwan’s Financial Supervisory Commission (FSC) has announced that professional investors can now invest in foreign virtual asset exchange-traded funds (ETFs) through a re-entrustment method. This decision opens the door for various categories of professional investors. These investors include institutions, high-net-worth investment firms and high-asset individuals. FSC allows only professional investors to engage with foreign virtual asset ETFs. It aims to provide a more comprehensive array of investment options to professional investors, enhancing the re-entrustment business of securities firms.
In collaboration with the Securities Business Association of the Republic of China, the FSC analyzed the relatively high risks of investing in foreign virtual asset ETFs. For this reason, the commission has suggested that only qualified investors be allowed to invest in these securities. It does so since virtual assets are sophisticated products with enormous price volatility and possible risks involved.
Risk Warning Letters Mandatory for Clients Investing in ETFs.
In order to support this initiative even more, the FSC has provided the following strategic steps. Firstly, securities firms need to set up a product appropriateness system for virtual asset ETFs. This system should receive board approval and should not allow any purchase without evaluating the professional knowledge of the clients and their experience in investing. In this way, firms can guarantee that clients get acquainted with the risk and other features of the products they invest in.
Furthermore, all other clients are required to complete the risk warning letter before making their first investment. This requirement enhances transparency and risk analysis in any investment process that an organization may undertake. Furthermore, securities firms were required to give clients specific product information concerning virtual asset ETFs before the first investment.
This is also true for the regular education and training sessions. Securities firms must conduct these programs for their staff, ensuring they possess comprehensive knowledge about virtual assets and related products. This investment in employee education ultimately enhances client service and satisfaction.
As for the future, the Financial Supervisory Authority will closely observe the implementation of these re-entrustment regulations. The objective is to enhance the effectiveness of the regulation to safeguard investor’s interests.
