The Company defined the "TCFHC Organizational Rules of Ethical Corporate Management Committee" in August 2016 and created the Ethical Corporate Management Committee that reported to the Board of Directors. The Board of Directors, however, approved in October 2023 the "TCFHC Organizational Rules of Sustainable Development Committee" to upgrade the Sustainable Development Committee to be a functional committee; the existing Ethical Corporate Management Committee became part of the Sustainable Development Committee to be exclusively responsible for ethical corporate management and the promotion of sustainable development for a normalized ethical corporate management system and fulfillment of sustainable development. 

The Board of Directors of the Company shall exercise the duty of care to urge the Company to prevent unethical conduct, always conduct reviews and continually make adjustments. The Sustainable Development Committee is established under the Board of Directors. It reports to the Board of Directors regularly (at least once a year) to ensure thorough implementation of its ethical corporate management policies.

The Company’s Sustainable Development Committee is a designated unit to promote ethical corporate management; its chair is the Chair of the Board of Directors and all of the five independent directors serve as its members. The Committee is meant to help incorporate ethics and moral values as part of the Company’s business strategy and to define applicable measures against frauds that ensure ethical corporate management, to define the ethical corporate policy and supervise over related implementation items, to promote and coordinate the communication and training of ethical policies, to plan the whistle-blowing system, and to ensure effective implementation as required under the regulatory system.

The Company shall report to the Sustainable Development Committee at least once a year on its implementation status of ethical management, measures taken, and results of investigations on reported cases. Reported 3 times in 2023 Note: In February and August, the content of report included 5 aspects, which were the formulation of ethical management policies and programs, actions for implementing ethical management (including an overview of education and training), the operation of the whistleblowing system, reinforcing information disclosure, and other important information that helped the Committee to understand the operation of the Company’s ethical management. In addition, the effectiveness of the whistle-blowing system and how reported cases were addressed were examined in May.

The Company shall establish effective accounting systems and internal control systems for business activities possibly at a higher risk of being involved in unethical conduct and conduct reviews regularly to ensure that the design and enforcement of the systems are showing results. Auditing Department of the Board of Directors will also include the system compliance in the preceding paragraph in the audit items and prepare audit reports. The Company shall regularly report on the results of implementation of improvement of any deficiency to the Audit Committee and the Board of Directors.

Implement Ethical Management

In order to push ahead with the effective implementation of ethical management and comply with regulations governing business conducts, including the "Financial Holding Company Act", "Company Act", "Securities and Exchange Act", "Business Entity Accounting Act", and "Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies", the Company has stipulated of its own bylaws of Ethical Corporate Management Best Practice Principles, and Procedures for Ethical Management and Guidelines for Conduct as ethical management policies for the Company to comply with by referring to the "Anti-Corruption Act", "Government Procurement Act", and "Act on Recusal of Public Servants Due to Conflicts of Interest". The Company has these policies aim to prohibit the provision or acceptance of improper benefits, political donations, donations or sponsorship, anti-corruption, and bribery, prohibition of insider trading, agreement of confidentiality, avoidance of conflicting interests, avoidance of transactions with unethical operators, manage business activities ethically, prohibition of unfair competition acts, handling of reports related to unethical conducts and internal promotion, establishment of reward and punishment systems, reporting mechanisms, disciplinary actions, integration of ethical management policies with employee performance evaluations, and other measures. In addition, the Company has established the "Employee Service and Code of Conduct Guidelines", "Measures of Whistleblowing", and "Guidelines for Handling Reported Cases," and clearly stated its ethical management-related regulations and practices on its official website, annual reports, and external documents to promote and prevent unethical conducts.

The Company has formulated regulations such as the "Human Rights Policy" and the "Employee Service and Code of Conduct Guidelines" to regulate all employees. In case any managers or employees violates the code of conduct, the Company will report to the Review and Evaluation Committee in accordance with the "Employee Rewards and Discipline Guideline" and "Employee Performance Evaluation Guidelines". The severity of the violation will be considered to determine the corresponding disciplinary action and the grade for the year-end performance. For severe violations, the labor contract will be terminated in accordance with relevant regulations. The disciplinary actions or results for year-end performance evaluation mentioned above will affect the employee’s annual reward in accordance with the "Regulations on the Distribution of Performance Bonuses" to ensure effective implementation of internal code of conduct.

In order to further fulfill commitment to ethical management, the Company stipulated "Declaration on the Compliance of Ethical Management by Directors and Senior Management" and has since received a total of 111 signed declarations from all directors and senior management of the Company and its subsidiaries in 2023, attaining a 100% of signing rate. Furthermore, 100% of the employees of the Company and TCB signed the "Statement of Employee Code of Conduct". All subsidiaries report the status of compliance with the Ethical Corporate Management Best Practice Principles to their respective Board of Directors every year. The status of compliance with the Ethical Corporate Management Best Practice Principles in 2023 was all reported to the respective Board of Directors.

In addition to operating with the spirit of ethical management, the Company also needs to conduct an integrity management assessment before establishing business relationships with external partners to avoid transactions with dishonest operators, and incorporate the ethical management policy into the terms of the contract to implement the concept of ethical management.

In 2023, except for TCS, whose former trader made illegitimate profits by purchasing convertible corporate bonds at high prices and selling them at low prices, subject to a fine of NT$720 thousand and 1 corrective action imposed by the FSC, no subsidiaries of the Group was found with violations of integrity management or major impacts, and no corruption, fraud, bribery, insider trading, money laundering, discrimination, violation of customer privacy, anti-competitive behavior, anti-trusts, monopoly, market manipulation, improper political contributions, improper charitable donations and sponsorship violating the Code of Conduct; the amount of related legal proceedings and penalties was 0.

Ethical Management Educational Trainings

The Group has added elements and rules of ethical management to the "Guidelines of Service and Conducts by Employees" and the "Supplier Management Policy". The purpose is to require employees not directly or indirectly provide, promise, demand or accept any inappropriate benefit or engage in any other unethical behavior in the process of conducting a business activity or performing a duty.

In order to let all employees understand the importance of ethical management, the Group holds ongoing ethical management related educational trainings every year and requires all employees undergo the training.

Whistleblowing System

In order to prevent unlawful conduct and promote sound operations, protect whistleblowers, and support the whistleblowing mechanism, the Company established the "Measures for Whistleblowing" and "Guidelines for Handling Reported Cases". The measures and guidelines rule that if any employee with the Company or its subsidiaries is found to have provided, received, promised, or requested any illegitimate benefits in order to receive or maintain benefits, or to have engaged in any conduct that may break integrity or entrusted compulsory, or to have been suspected for committing crime or fraud, or violating financial related regulations, anyone can raise such a case through designated email address on the website or internal hotline. All incidents reported through the whistleblowing channels are recorded properly and handled with careful follow-up by the Company.

After the Company receives a reported case, the Auditing Department of the Board of Directors or the designated dedicated unit will investigate according to the types of cases. If the person handling the reported case discovers that they have a personal interest in the reported matter, they should voluntarily recuse themselves. If the investigation reveals a material violation or potential material damage to the Company or its subsidiaries, a report must be promptly prepared and inform the Company’s independent directors in writing. In the event of a material contingency or illegal case, it shall be proactively reported or tipped off to the relevant authorities.

For all reported cases are addressed and investigated, their investigation findings and related documentation shall be recorded for preservation. Investigation findings shall be submitted to the Sustainable Development Committee for future reference, and the reported cases, how they are addressed, and subsequent reflection upon improvement measures shall be reported to the Board of Directors. If the person being reported is a director, supervisor, or a vice president-equivalent or a higher-ranking managerial officer of the Company and its subsidiaries, the Company’s independent directors shall be informed first. For whistle-blowing concerning a vice president-equivalent or higher-ranking managerial officer, the investigation shall be carried out by the Auditing Department under the Board of Directors. When subsidiaries are involved, on the other hand, it is to be handed for investigation to the specific subsidiary or a responsible unit with no conflict of interest and with independence in the exercise of its functions as designated by the Auditing Department under the Board of Directors. If necessary, the Auditing Department under the Board of Directors may embark on an investigation unilaterally. In case of related evidence of unethical or illegal acts, it shall be reported to the Board of Directors; If the reported person is personnel of the Company’s General Auditor or Auditing Department of the Board, he/she will be investigated by the Legal Compliance Department or responsible unit with independent functions designated by the Legal Compliance Department.

Except in cases where the whistleblower cannot be contacted, the whistleblower will be informed of the investigation results in writing or by other means within 30 days after the investigation is completed. If the audit report meets the requirements for reporting to the competent authority, it shall be submitted to the competent authority within 2 months from the end date of the audit for declarations.

The whistleblower’s identity shall be kept confidential, and no information that may be used to identify that person shall be disclosed. The whistleblower shall not be terminated, dismissed, downgraded/relocated, given a reduction in pay, impairment to any entitlement under the law, contract or customs, or other unfavorable disposition due to the reported case.

If the tip-off case is found to be true, the Company or its subsidiaries will resort to relevant punitive measures against those who are reported or involved and the whistleblower will be rewarded according to the seriousness of the case. If the internal personnel make false reports or malicious accusations, they shall be disciplined, hoping to strengthen and embed the corporate culture of ethics and transparency.

Status of Handling Reported Cases in 2023

In 2023, the Group did not harm the rights and interests of whistleblowers or impose adverse sanctions. In 2023, 22 cases in total reported through the whistle-blowing mailbox of the Group were addressed. Except for 2 of them with some 

of the items reported being investigated by the law enforcement unit whose investigation was discontinued to facilitate and focus on judicial investigation findings as required, investigation reports had been completed for the remainder and the cases were closed; 1 of the cases was found to be partially true and 19 untruthful and no major violations were discovered. The investigation results of the reported cases received in 2023 have been reported to the Sustainable Development Committee according to the "Measures for Whistleblowing" for record keeping.