Regulations on Banks Conducting Family Office Advisory Business

Regulations on Banks Conducting Family Office Advisory Business

Provisions and Explanations

1. To facilitate banks in providing family wealth management, family business succession, and family governance services required by high-net-worth clients and their family members, this regulation is hereby promulgated pursuant to Article 5, Paragraph 1, Item 8 of the Regulations Governing the Management of Financial Products and Services Applicable to High-Net-Worth Clients (hereinafter referred to as "these Regulations"), hereby approving banks to conduct family office advisory business.

This regulation is promulgated based on the above provisions.

2. Banks applying to conduct family office advisory business shall meet the following conditions:
   (1) Approved by the Financial Supervisory Commission (hereinafter referred to as "the Commission") to conduct high-net-worth client business pursuant to these Regulations.
   (2) Approved by the Commission to trial family office-related business pursuant to the Operational Principles for Financial Institutions Applying to Enter Local Asset Management Special Zones for Trial Business, for at least one year.

3. This item stipulates the qualification conditions for banks applying to conduct this business.

4. Considering that family office advisory business involves high customization and professionalism, banks conducting this business must possess corresponding professional talent, service resources, and internal control mechanisms, and establish management and risk control mechanisms for cooperation with third-party institutions. Therefore, it is appropriate to require banks that have conducted trials in special zones for a certain period and accumulated relevant experience to apply. The Commission will comprehensively consider the bank's trial benefits, internal control processes, risk control situations, customer complaint disputes and their handling, professional talent and resource allocation, and third-party cooperation control mechanisms as the basis for approval, to promote the steady development of this business.

5. The family office advisory business referred to in Item 1 refers to the following services provided by banks to assist high-net-worth clients and their family members in achieving wealth succession, sustainable enterprise development, and family governance:
   (1) Integrated services provided within existing financial businesses operated by the bank, including financial product investment and financing, trust services, insurance services, etc.
   (2) Advisory, planning, or recommendation services involving family wealth management, family business succession, and family governance, including family office establishment and charter formulation consultation, inheritance and estate consultation, succession system consultation, charity事业 consultation, education and training program consultation, wealth management consultation (including legal, tax, and risk management), etc. (3) For businesses that require approval from specific competent authorities or must be handled by other professional institutions according to law, the bank shall cooperate with third-party institutions, and the third-party institutions shall handle them within the scope of legal regulations.

This item stipulates the scope of services for banks conducting family office advisory business. Considering the diverse service needs of family office clients, covering wealth management and succession, family business succession, family governance, charity planning, family member cultivation, and related professional services such as law and tax, not all services fall within the professional scope of banks or businesses they are legally permitted to conduct. Therefore, based on the form of bank services, they are roughly divided into three levels: integrated planning of the bank's existing financial business, advisory services provided by the bank for family succession needs, and services provided in cooperation with third-party professional institutions, to meet diverse customer needs and clarify the actual business boundaries between banks and third-party institutions.

4. The family members of high-net-worth clients referred to in Item 1 are not limited to those possessing the qualification of high-net-worth clients stipulated in Article 3, Paragraph 1 of these Regulations, but the relevant regulations regarding sales targets in these Regulations shall be implemented.

Considering that customers' needs for family office services are usually planned around the "family" as a whole, the service targets may include family members who do not possess the qualification of high-net-worth clients in addition to high-net-worth clients. Therefore, it is clarified that when banks provide family office-related services, their family members do not need to possess high-net-worth client qualifications. To protect customer rights and interests, if banks provide specific financial products or services to individual family members, they must still confirm that they meet the qualifications and relevant requirements for sales targets according to the laws and regulations applicable to those financial products or services.

5. Banks conducting family office advisory business shall establish internal control systems and risk control measures, and shall strictly abide by the following regulations:
   (1) Information Confidentiality: Banks shall strictly abide by the obligation of confidentiality of customer data, shall not use it for other improper or illegal purposes, and shall establish internal information control processes and systems to ensure the confidentiality of relevant information and prevent improper misuse.
   (2) Prevention of Conflicts of Interest: Banks shall not allow their own interests, those of affiliated enterprises, or third-party institutions to affect professional judgment or induce improperly.
   (3) Qualifications of Practitioners: If banks conduct this business involving other relevant regulations, both the bank and its practitioners must obtain relevant licenses or qualifications approved for conduct.

This item regulates the internal control systems and risk control measures banks should establish when conducting family office advisory business.

6. When banks conduct family office advisory business in cooperation with third-party institutions as stipulated in Item 3, Paragraph 3, they shall establish internal control systems for the following matters:
   (1) Banks shall establish a review mechanism for cooperating third-party institutions and shall confirm that such institutions possess adequate qualification conditions.
   (2) Cooperation between banks and third-party institutions shall have clear division of responsibilities, dispute resolution, and personal data transmission and protection mechanisms.
   (3) Banks shall regularly review the relationship with third-party institutions and take appropriate measures or terminate cooperation when necessary.
   (4) Banks and third-party institutions may stipulate contracts according to their cooperation models; if involving the referral of customers or providing customer data to cooperating institutions, the contract shall stipulate customer data transmission and protection mechanisms, and confidentiality agreements shall be stipulated to protect the confidentiality of customer data or limit its use.

7. Considering that the scope of services for family office advisory business is diverse, and some services require cooperation with third-party professional institutions, to ensure that third-party institutions possess appropriate qualifications and service capabilities, and to properly manage risks arising from cooperation, Items 1 to 3 of this item clarify the control mechanisms banks should establish before, during, and after cooperation with third-party institutions.

8. Additionally, considering that the forms and types of cooperation between banks and third-party institutions vary, Item 4 of this item retains flexibility for banks to decide on contractual arrangements according to actual cooperation situations; however, for cases involving the referral of customers or providing customer data, to clarify the responsibilities of both parties regarding the use and management of customer data, it is explicitly stipulated that such matters must be regulated by contract, so that relevant rights and responsibilities have a basis for reference.

9. Banks conducting family office advisory business shall fully disclose the following matters to customers:
   (1) Fees borne by customers, including the timing of collection, calculation and collection methods, and shall not charge repeatedly for the same service item with third-party institutions. If fee sharing or transfer with third-party institutions is involved, it shall be fully disclosed.
   (2) The cooperative relationship between the bank and third-party institutions, and their respective service and responsibility scopes.
   (3) Complaint channels and dispute resolution mechanisms.

This item stipulates the matters banks conducting family office advisory business shall fully disclose to customers.

8. When banks conduct family office advisory business in cooperation with third-party institutions, and when disclosing, referring, or interactively using customer data, they shall first obtain the customer's written consent.

Considering that when banks conduct family office advisory business in cooperation with third-party institutions, it may involve providing customer data to third-party institutions, to protect customer data and their right to self-determination, referring to Article 6 of the Regulations on Financial Institutions Cooperating to Promote Other Businesses or Provide Related Services, it is explicitly stipulated that banks shall first obtain customer written consent before disclosing, referring, or interactively using customer data.

9. Banks conducting family office advisory business shall comply with the Financial Institutions Anti-Money Laundering Measures, the Implementation Measures for Internal Control and Audit Systems for Anti-Money Laundering and Combating the Financing of Terrorism for the Banking Industry and Other Financial Institutions Designated by the Commission, and relevant regulations stipulated by the Taiwan Bankers Association, to establish anti-money laundering and combating the financing of terrorism control mechanisms, and to implement customer due diligence, transaction monitoring, and high-risk customer management.

This item stipulates that banks conducting family office advisory business shall establish control mechanisms in accordance with relevant laws and regulations and self-regulatory norms for anti-money laundering and combating the financing of terrorism, to strengthen the identification and control of money laundering and terrorism financing risks.

10. Banks applying to conduct family office advisory business shall submit the following documents to the Commission for application:
    (1) Minutes of the Board of Directors' resolution; however, foreign banks' branches in Taiwan may issue a letter of consent from personnel authorized by the head office or regional headquarters.
    (2) Business plan (at least including the results of trial family office-related business in the special zone, business outlets for conducting this business, organizational structure and personnel allocation, items and content of services provided, operational processes, cooperation models with third-party institutions, and standards for determining customer qualifications).
    (3) Internal operational guidelines and control processes established to regulate information confidentiality, prevention of conflicts of interest, cooperation with third-party institutions, customer rights protection, dispute resolution mechanisms, anti-money laundering, and combating the financing of terrorism.
    (4) Statement of Compliance with Laws and Regulations.
    (5) Other documents required by the Commission to be submitted.

11. This item stipulates the documents banks applying to conduct family office advisory business shall submit, to confirm that the bank has established appropriate operational processes and internal control mechanisms for the matters listed in this regulation.

12. Banks shall provide a list of business outlets for conducting this business and explain that these outlets are equipped with sufficient professional talent and relevant resources.