Jan
13
FSC hoping to curb tax evasion through the buying of ETFs
The Securities and Futures Bureau (證期局) of the FSC said there is typically a flurry of ETF buying prior to an ex-right or ex-dividend date, as traders unload securities ahead of an anticipated price decline.
Once a security goes ex-dividend, there is usually a surge in ETF selling, the bureau said.
It said that recently the pattern has been particularly pronounced.
The Securities and Futures Bureau said it suspects that investors are swing trading ETF products to exploit differences in tax rules between securities and ETFs, with the intent to avoid a levy on gains in securities transactions.
A Securities and Futures Bureau official said that it has requested a review of rules governing the trading of ETFs and issued a formal notice to brokerages and other dealers in the finance sector.
The FSC has emphasized that if an investor displays behavior that suggests tax avoidance or money laundering, brokerages are authorized to refuse the right of the investor to purchase or retain an ETF product.
The FSC has asked brokerages and other businesses in the investment sector to conduct a careful assessment of their clients trading in ETFs, according to the official.
The value of stocks tends to plummet after its ex-dividend date, which results in investors eager to give up their annual dividend and sell off their securities prior to the date.
In its latest big-data analysis on securities transactions, the FSC said it had found that traders sold nearly NT$300 billion in securities in the 60 days before an ex-dividend date in 2014, the highest amount in recent years.
In the 20 days and 10 days ahead of an ex-dividend date, traders sold over NT$161.5 billion and NT$125.9 billion in securities — also setting new records, according to the commission.
Who’s Who
In the report, Taiwan’s main finance sector regulator released other data including the demographics behind transactions on the Taiwan Stock Exchange.
According to the FSC report, the most active traders on TAIEX in 2014 were those aged 41 to 50, and 51 to 60, who accounted for 27.4 percent and 30.7 percent, respectively, of the total transaction volume. Meanwhile, traders between the ages of 20 and 30 accounted for only 4.5 percent of total volume in Taiwan.
This trend extended to transactions of ETF products. The FSC reported that ETF trading activity was greatest among investors between 41 and 60 years old.
Young investors in ETF products, or those under 40 years old, accounted for only 20 percent of total annual transaction volume.
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