Yuanta and Uni-President fined for ‘misleading’ Taiwan ETF adverts #NewsMarket

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Taiwan’s Financial Supervisory Commission has fined Yuanta Funds and Uni-President Asset Management for using unsuitable advertising in the promotion of their high-dividend exchange traded funds, which broke fundraising records earlier this year.

Yuanta Funds, Taiwan’s largest local ETF issuer, has been fined NT$900,000 ($27,864) for the inappropriate advertisement of its Yuanta Funds’ Taiwan Value High Dividend ETF, according to an announcement from the FSC’s Securities and Futures Bureau.

The SFB found that the text or information used to promote the Yuanta high-dividend ETF had the effect of “misleading investors” into believing that their investments were “capital guaranteed” or that they could receive “guaranteed returns”, and also promoted monthly dividend payouts.

The Yuanta Taiwan Value High Dividend ETF raised about NT$170bn in five days in March, smashing the previous onshore ETF fundraising record by a factor of more than five.

This article was previously published by Ignites Asia, a title owned by the FT Group.

The ETF was promoted as a way to provide a “monthly dividend payout” with phrases such as “passive income is not a dream, increase your salary every month” and claims that the product was “designed to meet monthly cash flow needs”.

The regulator also said the size of the warning text required on the ETF’s advertisements was unsatisfactory.

Yuanta Funds has also collaborated with financial key opinion leaders through videos highlighting the Yuanta Taiwan Value High Dividend ETF’s ability to provide fixed dividend payments and increase retirement income, according to the SFB.

Other inappropriate phrases used in ETF advertisements included “interest falls like rain” and “get NT$50,000 a month for retirement”.

Uni-President AM was also fined NT$600,000 for inappropriate promotion of its UPAMC Taiwan High Dividend Momentum ETF, which raised NT$53.1bn raised in early March in its initial fundraising.

The SFB found that Uni-President AM misled investors into believing that their investments were “capital guaranteed” or that they could receive “guaranteed returns” through advertisements on official websites, social media platforms, collaboration videos with financial KOLs and seminars with financial experts.

The regulator listed the inappropriate phrases used by Uni-President AM in advertisements in an official document; they included “creating an uninterrupted cash flow” and “providing automatic salary increase”.

“The advertisements used the backtesting result of the ETF’s underlying index to calculate the capital gain or dividend payout, emphasising that investing in the ETF can bring high interest rates and growth,” the SFB said.

The two Taiwan equities high-dividend ETFs were the most successful ETF launches in the onshore market, prompting regulators to warn of a “herding effect” in the overheated ETF market.

Chu Yueh-Chung, assistant professor at the department of finance of the Southern Taiwan University of Science and Technology, told Ignites Asia earlier this year that fund houses have been engaging in “completely unscrupulous” marketing activities.

The huge advertising campaigns have even convinced some local retail investors to take out loans and pull money out of fixed deposits to invest in high-dividend ETFs.

In May, the Securities Investment Trust and Consulting Association published an updated code of conduct for asset managers’ advertising and business activities.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.