The Financial Supervisory Commission (FSC) in Taiwan recently introduced new measures to govern the engagements of professional investors. With these regulations, they can invest in foreign crypto ETFs and other virtual assets through re-entrustment.
This decision is expected primarily to increase the diversification of investment opportunities. Secondarily it is done to help Taiwan’s securities firms strengthen their re-entrustment operations.
As a result of the high risks inherent in crypto ETFs. The FSC has limited this investment product to professional investors.
Professional Investors Limited to Foreign Crypto ETFs
The FSC has tightened rules for investing in virtual asset ETFs since it classified the investments as highly risky and volatile. These include institutional investors, high-net-worth individuals, legal entities, and other savvy high-asset clientele. This measure makes certain that only those investors with the right knowledge and experience in these investments are admitted.
These clients are required to prove their professional status before securities firms allow them to invest in crypto ETFs.
Besides, the firms have to consider the investors’ awareness of virtual assets and their previous experience. Through the implementation of these steps, the FSC strives to protect the investors and at the same time encourage responsible investment schemes.
However, the FSC noted that these investments are not open to individual retail investors. The emphasis remains on permitting only those who are competent enough to deal with the intricacies of the revamped virtual asset markets. This move aims at protecting inexperienced investors from exposure to highly risky virtual asset ETFs.
Strict Regulations for Securities Firms
Securities firms providing foreign virtual asset ETFs must establish a product suitability system. This system has to be endorsed by their board of directors. In addition to that, the system assesses what each client knows regarding virtual assets.
It also evaluates their experience in investing before they get to participate in these complex products. This requirement is meant to help the firms provide the right instruments to professional clients.
Furthermore, before making their first investment in virtual asset ETFs, firms must deliver product details of virtual assets in a form and manner understandable to non-institutional professional investors.
This way, investors are fully aware of the dangers and characteristics of the virtual asset ETFs they invest in. In addition, clients must complete a risk warning letter so that they do not claim ignorance when making their first investment.
The FSC also requires that securities firms provide their business personnel with continuing education and training on virtual assets and related products. This requirement helps make sure that people from the firms know the business, services, and products and are qualified to give their clients good counsel.
The commission will persevere in supervising the management of foreign virtual asset ETF investments by Taiwan’s securities firms. This element is aimed at maintaining order to follow new regulations adequately and protect shareholders’ rights. This is why the FSC wants to focus on the regulation and continue to improve the regulations if necessary.
