FSC Orders Cathay SITE to Investigate Potential Conflicts of Interest in Stakeholder Transactions

Following the resignation of Cathay SITE director Guo Ming-jian, the Financial Supervisory Commission (FSC) has ordered the firm to conduct a comprehensive audit of its fund investments. Concerns have emerged regarding whether Guo held undeclared directorships in other listed companies, which would violate regulations governing stakeholder transactions.

Previously, Cathay SITE reported a violation involving Alchip-KY. Although Guo served as an independent director at Alchip-KY since May 29, 2023, an internal oversight failure led the company to continue investing in Alchip-KY shares, a breach of conflict-of-interest rules. Cathay SITE reported the incident to the FSC in January, resulting in the recalculation of net asset values for eight funds and imminent administrative penalties.

FSC Securities and Futures Bureau Deputy Director-General Huang Hou-ming stated that under existing regulations, if a SITE director sits on the board of another company, the SITE is prohibited from investing in that entity. Following the revelation that Guo was appointed to the board of Universal Paper on May 27, 2024, the FSC has directed Cathay SITE to clarify all fund exposure to the paper manufacturer during the period of overlap.

Beyond current investigations, the FSC mandates that directors must report all external board appointments to their respective firms. The regulator emphasized that failure to maintain adequate internal controls could result in sanctions, including warnings or administrative fines ranging from NT$600,000 to NT$3 million under the Securities Investment Trust and Consulting Act. Regarding Guo’s role at Cathay United Bank, the Banking Bureau confirmed that the bank was properly notified of his external directorships and maintained no prohibited credit exposures.