The resignation last week of Andy Chang, president and chief executive of Taiwan’s Cathay Securities Investment Trust, underscores the risk of contravening a regulation that bars related-party transactions.
Chang quit to take responsibility because Cathay Securities’ mutual funds bought shares in local chipmaker AIchip Technologies. The problem: Kuo Ming-jian, a director of Cathay Securities, was also an independent director of AIchip.
This means the two firms are deemed to be related parties under the Financial Supervisory Commission’s regulations; funds managed by the investment company are prohibited from trading shares of such related parties.
Local news media unearthed the issue in late June, leading to Kuo’s resignation from Cathay Securities. He remains a director at AIchip.
Cathay Securities failed to report his dual roles to its internal compliance department, parent company Cathay Financial Holdings said in a statement on July 7 announcing Chang’s resignation, and naming Eddie Cheng, a senior vice president, as acting president.
The statement quoted Chang as saying that he resigned due to “inadequate oversight” on the AIchip share purchases.
A spokesperson for Cathay Securities responded to questions from Asia Asset Management with the same statement without providing any further comment.
