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STO Introduction

In response to Fintech’s innovation, and as a means of improving the convenience of fund raising for innovative enterprises while helping them fulfill the diversified requirements of fund raising, the competent authority has defined and announced the Security Token Offerings (STO). These securities, which are initially open to any issuer with an amount of funds raised less than NT$30 million, are exempt from obtaining an effective registration with the issuing of securities according to Article 22, Section 1 of the Securities and Exchange Act. To maintain market stability and lead the industry towards positive development, by taking examples from other countries’ regulatory principles, the supervision framework has been set out as follows: Issuers are obligated to prepare prospectus, platform operators are required to apply for and acquire a special license, and a single-trading approach platform shall be adapted. Effective information security mechanisms shall be established and the issuer’s STO shall be approved under the regulatory structure to conduct price negotiation as a securities dealer. These securities dealers shall also urge responsibility on the issuer for any information disclosure. In addition, in consideration of the high technical content and high risk of STO, a tiered approach has been adapted and only professional investors are permitted to invest in STO fund-raising projects. In order to control further risk, a limit has been set on the number of natural persons from professional investors who wish to invest in STO fund-raising projects.

TPEx has been authorized by the competent authorities to formulate the “Taipei Exchange Rules Governing the Operation by Securities Firms of the Business of Proprietary Trading of Security Tokens” and other related regulations. The regulations are used to oversee the issuing and trading of STO, as well as the management rules regarding finances, internal control systems, and operators of the securities dealers operating in the business. The personnel concerned shall also comply with these regulations.