Taiwanese Regulator Sanctions Cathay SITE for Conflict of Interest

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Taiwanese Regulator Sanctions Cathay SITE for Conflict of Interest

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Taiwan’s Financial Supervisory Commission (FSC) has penalized Cathay Securities Investment Trust (Cathay SITE), the asset management arm of Cathay Financial Holding, for breaching conflict-of-interest regulations. The company faces a NT$1.2 million fine and a one-year prohibition from applying to launch new offshore securities investment trust funds. This restriction also extends to serving as a general agent for offshore funds and expanding overseas investments for six months.

The sanctions stem from an internal control lapse that allowed eight mutual funds and discretionary accounts managed by Cathay SITE to hold shares in Alchip Technologies Ltd. for approximately eight months. This became a conflict of interest because Kuo Ming-jian, who was then chairman of Cathay United Bank and also a director of Cathay SITE, was simultaneously serving as an independent director for Alchip Technologies. Under Taiwan’s regulations, if an investment trust company director also holds a directorship in another company, that company is considered a related party, and the investment trust’s funds are barred from trading its stocks.

Cathay SITE failed to report Kuo’s outside role to its internal compliance system, and the information was not adequately passed on despite Kuo disclosing his Alchip directorship to Cathay Financial and Cathay United Bank. Upon discovering the issue, Cathay SITE liquidated all noncompliant holdings in early 2026. The breach necessitated recalculating the net asset values of the affected funds and resulted in Cathay SITE paying approximately NT$490 million (US$15.3 million) in compensation to about 50,500 investors. Losses in discretionary investment accounts also amounted to about NT$454 million.

The incident prompted an on-site inspection by the FSC at Cathay SITE starting in June 2026, which later expanded to other Cathay Financial subsidiaries. Cathay Financial has since stated it will prohibit senior executives at its subsidiaries from taking external positions unless essential for business operations. In July 2026, Andy Chang, then president and CEO of Cathay Securities Investment Trust, resigned to take responsibility for the oversight.

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