UBS resumes structured note sales in Taiwan

UBS is the first foreign investment bank in Taiwan to resume its sale of structured notes to professional investors. After heavy losses on NT$40 billion (US$1.24 billion) of notes linked to Lehman Brothers, the island’s regulatory regime was revamped extensively and new rules introduced on August 23.

Subscription to the structured notes, called ‘UBS zero-coupon bull equity-linked notes’ and linked to a steel manufacturing company listed on the New York Stock Exchange, closed in early November, say bankers.

Under the new regime governing the sale of offshore structured notes, a foreign investment bank that wants to issue a product must have a branch or a subsidiary in Taiwan. In the UBS offering, the bank’s Taipei branch – which has a domestic trust licence – is acting as the de facto distributor of the product to professional investors. Under Taiwanese regulations, banks invest clients’ money offshore while acting as their trustee. The Taiwan Depository & Clearing Corp states that the issuer is “UBS AG, acting through its London branch”.

In Taiwan, a professional investor is defined either as an institution that has total assets of more than NT$50 million, or an individual with assets of more than NT$30 million.

Another of the new rules governing the sale of offshore structured products requires that any products sold to individual investors not deemed ‘professional investors’ be pre-approved by various industry associations.

A spokesperson at the Trust Association based in Taipei, says Taiwan’s financial regulator, the Financial Supervisory Commission, has not yet confirmed detailed implementation rules for such an approval system.

 

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