Illegal Cross-Border Business Activities

In Jan 2014, SFC issued the circular "Regulatory Compliance regarding Cross-border Business Activities", which warned that before conducting any cross-border business activities, a licensed corporation should make proper enquiry as to how the law of the other jurisdiction applies to the particular activity. Activities which are likely to be regulated under the laws or regulations of other jurisdictions may include:

• solicitation of opening of client accounts
• signing of account agreements or mandates
• marketing or selling of investment products
• entering into transactions of investment products
• giving investment advice

Para 12.1 of the Code of Conduct provides that a licensed person should comply with, and implement and maintain measures appropriate to ensuring compliance with the law and relevant regulatory requirements (including those requirements in other jurisdictions).

As announced in 14 Feb 2020, SFC reprimanded and fined Capital Global Management Limited (CGML) $1.5 million for its failures to ensure compliance with applicable laws and regulations in distributing investment funds and offering investment advice in Taiwan, and to adequately supervise the business activities of its representatives to ensure such compliance.

In August 2015, the Prosecution Office of the Taipei District Court fined the former owners of CGML for distribution of offshore investment funds and offer of investment advice in Taiwan from 2005 to 2014 without obtaining prior approval, in contravention of Taiwan’s Securities Investment Trust and Consulting Act.

Article 16 of the Act provides that "No person may, itself or as an agent, engage within the Republic of China in the public offer, sale, or investment consultancy of offshore funds without first obtaining approval from the Competent Authority or effective registration upon filing with the Competent Authority." The Competent Authority is the Financial Supervisory Commission R.O.C. (Taiwan).

SFC found that CGML's licensed representatives operated and performed sales functions and distributed investment products to clients in Taiwan between July 2014 and April 2015.

I don't understand why a LC would have the fantasy that its SFC licence is an "international driving permit" to let it conduct cross-border business in other jurisdictions. A compliance professional should always question why an overseas-based employee needs a SFC licence, unless she/he wants to be an itinerant professional or temporary licensed representative.