After the Financial Supervisory Commission (“FSC”) issued Order Jin-Guan-Zheng-Tou-Zi No. 1100364865 on November 18, 2021, permitting securities investment consulting enterprises to provide securities investment consulting services using automated tools, the FSC issued another order on March 6 of this year, Order Jin-Guan-Zheng-Chuan-Zi No. 1130380965, announcing the implementation of the amendments of Article 37 of the Regulations Governing Securities Firms and Article 18 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms, in an effort to simplify the execution of automatic rebalancing trades.

When an investment portfolio built on recommendations from automated tools (i.e., robo-advisors) of a securities investment consulting enterprise appointed by a customer needs adjustment due to different performances of the assets, which may cause the portfolio to achieve the preset target or deviate from the originally stipulated asset proportions, the enterprise must execute automatic rebalancing trades as agreed. This is necessary to align with the customer's risk tolerance or to maintain the originally agreed-upon investment targets and proportions.

However, according to the previous version of Article 37 of the Regulations Governing Securities Firms and Article 18 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms, securities firms, responsible persons, and associated persons shall not process an application for subscription, trade, or settlement of securities from a person who is not the customer or not an agent with a power of attorney from the customer. Therefore, in practice, before executing automatic rebalancing trades, customer consent must be obtained, causing inconvenience for securities investment consulting enterprises, securities firms, and customers. To address this issue, the FSC has amended the regulations to stipulate that if the securities investment consulting enterprise, the customer, and the securities firm have signed a three-party agreement regarding robo-advisory services, the securities firm no longer needs to obtain the customer's consent and can accept automatic rebalancing trades executed automatically for the customer through computer system provided by the securities investment consulting enterprise. These amendments are expected to facilitate the promotion of robo-advisory services, foster financial innovation, and advance inclusive finance.

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