Amendments


Title： Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings(2014.06.16)
Date：
Article 4       Any enterprise that simultaneously operates underwriting, trading for its own account, and brokerage or intermediary services may apply for approval as a qualified issuer of call (put) warrants. Where the enterprise is a foreign institution, the board of directors shall first issue a letter of approval or an undertaking guaranteeing performance of obligations, after which an application shall be submitted to the TWSE in the foreign institution's name by its branch institution within the territory of the ROC or by a branch institution established within the territory of the ROC by a subsidiary that is directly or indirectly fully-owned. Any enterprise operated by the aforementioned subsidiary or branch institution within the ROC shall also conform to the above provisions.
    An issuer applying for approval as a qualified issuer of call (put) warrants shall conform to each of the following:
  1. Its equity, based on the CPA audited and attested parent company only financial report or individual financial report, as the case may be, for the most recent period, shall be at least NT$3 billion; for a foreign institution or a branch institution established within the territory of the ROC by a subsidiary which is either directly or indirectly fully-owned, the parent company's equity shall be in conformance with the preceding standard and its branch entity within the ROC shall additionally have a net worth of at least NT$150 million.
  2. The net worth stated on the CPA audited and attested parent company only financial report or individual financial report, as the case may be, for the most recent period is not lower than the paid-in capital.
  3. If the enterprise is a domestic institution, its CPA audited and attested parent company only financial report or individual financial report for the most recent period must show no accumulated deficit and comply with the requirements of Articles 13, 14, 16, 18, 18-1, and 19.
  4. If the enterprise is a foreign institution, it shall have a credit rating of a particular grade issued by a credit rating institution approved or recognized by the competent authority.
  5. Its regulatory capital adequacy ratio shall have been no less than 200 percent for the half-year preceding the date of application; where the issuer is a foreign institution, the same standard shall apply for its head office.
  6. It shall set out a strategy for offsetting foreseeable risks.
    Where the issuer entrusts a foreign institution with hedging operations or where the issuer is a foreign institution, that institution shall first obtain a letter of approval from the competent authorities governing foreign exchange operations before submitting an application to the TWSE.
    Where the foreign issuer is issuing through a branch institution established in the territory of the ROC by a subsidiary which is either directly or indirectly fully-owned, that branch institution in the ROC shall be designated to carry out matters related to issuance, exercise of warrant rights, and proper disclosure, and the provisions of Article 5 or Article 7, paragraph 2 of these Rules may not be applied.
Article 5       Where an issuer does not conform to the standards set forth in Article 1, subparagraph 1, but has equity of at least NT$1 billion, it shall execute an agreement with a financial institution which, according to both the laws of its country of registration and its own articles of incorporation, may act as a guarantor; the issuer shall, at the time of application for listing of call (put) warrants, execute an unconditional and irrevocable guaranty agreement with that guarantor institution, which will act as joint guarantor to ensure the issuer's performance of the call (put) warrants listing agreement for the given issue; however, the guarantor institution shall conform to the standards set forth in paragraph 2, subparagraphs 1, 2, and 4 of the preceding article.
    The amount of the guaranty under the guaranty agreement referred to in the preceding paragraph shall be a sum equal to at least (the total shares of the call (put) warrants issue) × (the strike price [or strike index]) × (20 percent of the multiplier).
Article 7       The term "credit rating of a particular grade" in Article 4, paragraph 2, subparagraph 3, and Article 6 means a rating of twBB- or above obtained from Taiwan Ratings Corporation, or BB- (twn) or above from Fitch Ratings Limited, Taiwan Branch, or Ba3.tw or above from Moody's Investors Service, or Ba3 or above from Moody's Investors Service, BB- or above from Standard and Poor's, or BB- or above from Fitch Inc.
    Where the issuer or the risk-management institution is a foreign institution or the subsidiary of an ROC financial holding company, it may obtain a credit rating as a group holding company, and the holding company may provide an unconditional and irrevocable guaranty, however, the credit rating of the holding company shall still conform to the standards set forth in the preceding paragraph.
Article 8       Where any of the following conditions apply to an issuer, the TWSE may withhold approval for qualification; however, if the circumstance set forth in subparagraph 4 applies to an issuer, but the issuer has shown concrete improvement in the circumstances, and the competent authority has recognized the improvement, the issuer may be exempted from the restriction thereunder：
  1. The issuer has made incomplete submission of required application documents, and failed to supplement those documents by the deadline prescribed by the TWSE.
  2. The particulars of the issuer's application do not conform to laws and regulations, or contain false and misleading presentations.
  3. There is an instance of major default by the issuer which has yet to be settled, or less than 4 years have elapsed since settlement of the default.
  4. Non-conformance by the issuer with any of subparagraphs 2 to 5 of Article 38, paragraph 1 of the Standards Governing the Establishment of Securities Firms, or any similar circumstances in cases where the issuer is a foreign institution.
  5. The issuer lacks appropriate mechanisms for risk management.
  6. The issuer has been incapable of meeting obligations in connection with any previous issue of call (put) warrants.
  7. The issuer has been incapable of carrying out issuance in conformance with relevant TWSE regulations governing call (put) warrants within the previous year and unable to achieve conformance within the period of time prescribed by the TWSE.
  8. Preparation of the issuer's financial reports does not conform with generally accepted accounting principles or its internal control system is not capable of functioning effectively.
  9. The issuer has violated Article 6 of the Issuance Rules, or review of matters requiring disclosure show threat of serious influence to its financial condition.
  10. There are serious equity disputes or violation of regulations sufficient to affect financial operations of the issuer that have not been resolved or rectified.
  11. Where there is factual evidence of irregular circumstances in the issuer's finances or operations.
  12. There is nonconformance with provisions of these Rules relating to the issuer's financial status.
    When any circumstance set forth in the subparagraphs below occurs after an issuer obtains qualification approval, its issuance of call (put) warrants shall be suspended, and resumed only after such circumstances are rectified. The issuance of any warrants already approved but not yet issued shall be suspended, and the suspension shall be reported to the competent authority; the validity of any call (put) warrants already issued shall not be affected. This paragraph shall also apply when the issuer is a foreign institution and the circumstances of any subparagraph herein exist with respect to its head office.
  1. The issuer does not simultaneously operate underwriting, trading for its own accounts, and brokerage or intermediary services.
  2. The latest financial report, audited and attested or reviewed by a CPA, fails to conform with the standards of Article 4, paragraph 2, subparagraphs 1 and 2, provided that this shall not apply where there is non-conformance with the standards of Article 4, paragraph 2, subparagraph 1, but the measures provided in Article 5 are followed.
  3. The issuer's regulatory capital adequacy ratio falls below 150 percent, or remains below 200 percent for a period of 3 consecutive months.
  4. In the case of an issuer that is a foreign institution, the issuer's credit rating fails to achieve the minimum prescribed standard.
     If any of the events listed in the subparagraphs below occurs after an issuer has obtained qualification approval, the issuer shall be restricted from applying for issuance of call (put) warrants for 1 year. The issuance of warrants already approved but not yet issued shall be suspended, and the suspension shall be reported to the competent authority for recordation. However, the validity of call (put) warrants already issued shall not be affected.
  1. The issuer is ranked in Level 5 for the most recent year, or in Level 4 for the most recent 2 years, in the assessment conducted pursuant to the Operational Guidelines for Assessment of Securities Firms Risk Management System.
  2. The issuer has violated Article 17, paragraph 1 herein or provisions of the TWSE Operation Directions Governing Liquidity Providers of Call (Put) Warrants, and it has been sanctioned within the most recent year by the TWSE or the GreTai Securities Market by imposition of penalties in a cumulative amount of NT$300,000 or more or by restriction of application for issuance of call (put) warrants two times.
  3. The issuer has been restricted by the TWSE from applying for issuance of call (put) warrants because of an irregularity in the quotation system of its call (put) warrant liquidity provider in the current year, and it still has failed to take corrective action.
     Directions for handling irregularities in the quotation system of a call (put) warrant liquidity provider shall be separately prescribed by the TWSE.
     The TWSE may report an issuer in writing to the competent authority for recordation if the issuer fails to issue any call (put) warrants for 1 year or more, or if the issuer has been under suspension from call (put) warrants issuance pursuant to paragraph 2 for 1 year or more and still fails to take corrective action.
Article 8-1        In the case of an issuer that is a foreign institution, after obtaining qualification from the competent authority as an issuer of call (put) warrants, the issuer shall each year provide a written report to the TWSE, with relevant documentation attached, within 3 days after receiving its credit rating from the credit rating institution, and shall do the same at any time during the intervening periods when there is a change in its credit rating.
Article 9       After the issuer receives approval as a qualified issuer of call (put) warrants and wishes to apply to the TWSE for listing of a planned call (put) warrants issue, the issuer shall apply to the TWSE with an Application for Listing of Call (Put) Warrants (Attachment 2) filled out in full and with the required documents attached. Following TWSE approval of the issuer's issuance plan, the TWSE will immediately issue a letter of approval, with a copy to the competent authority, provided that depending on the issuer's financial and business condition, the status of the underlying securities or the underlying index, the number of call (put) warrants already listed on the market with identical or similar types of underlying securities and their expiration dates and distributions, the TWSE may withhold approval, limit the number of warrants to be listed, or impose other conditions.
    For listed warrants, in the event that the outstanding issuance units reach 80 percent or more of the actual total number of issuance units, the issuer may apply to the TWSE for a follow-on issue of call (put) warrants. The application shall be made within 2 business days from the next business day following the date of the event's occurrence but at least 10 business days before the last trading day for the warrants. The term "actual total number of issuance units," as used above, means the number arrived at by adding the total number of issuance units of the initial issue and the number of issuance units of each subsequent follow-on issue together and then deducting the accumulated number of issuance units cancelled and exercised.
    After receiving a TWSE approval letter and submitting a copy to the competent authority, the issuer may entrust an underwriter with underwriting of the issue or it may sell the warrants itself, and shall provide a prospectus to the subscribers. But this provision shall not apply to a follow-on issuance of call (put) warrants.
    The guidelines for information to be published in public offering prospectuses will be adopted by the TWSE in accordance with Article 13 of the Issuance Rules and shall take force upon ratification by the competent authority.
Article 10       An application for TWSE listing approval for an issue of call (put) warrants shall conform to each of the following conditions:
  1. The issue shall comprise 5 million to 50 million issuance units. The price per issuance unit shall be not less than NT$0.6. For non-index warrants, the issuer itself determines the number of shares (or units) or baskets thereof represented by one issuance unit, within a range that is from one issuance unit representing one share (one unit) or basket thereof to 100 issuance units representing one share (one unit) or basket thereof. For index warrants, the issuer itself determines the index points represented by each issuance unit; one index point corresponds to NT$1. In the case of a follow-on issue of call (put) warrants, the price per issuance unit shall be the closing price on the date of the application for follow-on issue, and the number of shares (or units) or basket thereof represented per issuance unit shall be the newest multiplier.
  2. Period of validity: Calculated from the date of listing, the period of validity shall be from 6 months to 2 years, inclusive; for issuance of callable bull contracts or callable bear contracts, the period of validity shall be from 3 months to 2 years, inclusive. In the case of a follow-on issue of call (put) warrants, the period of validity shall be calculated from the date of listing of the follow-on issue to the expiration date of the warrants.
  3. Restriction on total issuance volume of the underlying represented by a warrant:
    1. When the underlying security is a domestic stock, the total number of shares of the underlying security represented by the domestic warrant issuance units of the call (put) warrants and the shares of the same underlying security represented by other existing call (put) warrants already listed on the TWSE may not exceed 22 percent of the total number of outstanding shares of the domestic issuing company after deduction of each of the following types of shareholdings. Where the issuer and any of its overseas subsidiaries (whose warrant issuing operations are guaranteed or secured by the mother company) issue offshore call (put) warrants for which the underlying security is a domestic stock, the total number of shares of the underlying security represented by the issuance units of the offshore call (put) warrants, combined with the number of the same underlying securities represented by other existing call (put) warrants issued overseas, may not exceed three percent of the total number of outstanding shares of the issuing company after deduction of each of the following types of shareholdings:
      1. The total percentage of shares held by directors and supervisors under statutory shareholding ratio requirements.
      2. Already pledged securities.
      3. The number of centrally deposited shares mandatory for newly listed companies.
      4. Shares already repurchased under the Rules Governing Share Repurchase by TWSE Listed and GTSM Listed Companies and not yet cancelled.
      5. Shares with restrictions on listing or trading imposed by the competent authority.
    2. If the underlying security is a foreign stock, the combined total of the number of shares of the underlying security represented by domestic issuance units of the call (put) warrants and of the same underlying security represented by other existing call (put) warrants already listed on the TWSE may not exceed 15 percent of the total number of shares already issued by the issuer of the underlying securities.
    3. When the underlying security is an exchange-traded securities investment trust fund announced by the TWSE, the total number of shares of the underlying security represented by the issuance units of the call (put) warrants and the shares of the same underlying security represented by other existing call (put) warrants already listed on the TWSE, combined with those issued overseas by the issuer or its correspondent institution overseas and representing the same underlying, may not exceed the total number of beneficial interest units already issued by the fund, provided that this shall not affect the validity of any call (put) warrants already issued. When the underlying security is an offshore exchange-traded fund as announced by the TWSE, the total number of units of the underlying security represented by the issuance units of the call (put) warrants and the units of the same underlying represented by other existing call (put) warrants already listed on the TWSE may not exceed the total number of units of that fund offered and sold domestically within the ROC territory.
    4. If the underlying security is a foreign exchange-traded fund (ETF), the combined total of the number of beneficial units of the underlying security represented by the issuance units of the call (put) warrants and the number of beneficial units of the same underlying security represented by other existing call (put) warrants already listed on the TWSE may not exceed 50 percent of the total number of the beneficial units already issued.
    5. When the underlying security is Taiwan Depository Receipts, the total number of units of the underlying represented by the domestic issuance units of the call (put) warrants and the units of the same underlying represented by other existing call (put) warrants already listed on the TWSE may not exceed 22 percent of the already listed units of the receipts.
    6. If the underlying security is a foreign depositary receipt, the combined total of the number of units of the underlying security represented by the domestic issuance units of the call (put) warrants and the number of units of the same underlying security represented by other existing call (put) warrants already listed on the TWSE, may not exceed 15 percent of the total number of the depositary receipt units already listed on the TWSE.
  4. When the underlying security is an exchange-traded securities investment trust fund or offshore exchange-traded fund, if an authorization is required to be obtained, consent shall be obtained from the institution creating the fund's underlying index; for the underlying index, consent shall be obtained in advance from the institution creating the given underlying index. But this provision shall not apply to a follow-on issuance of call (put) warrants.
  5. The issuance plan shall contain the following terms and conditions:
    1. The issuance date and the period of validity.
    2. Detailed information on the underlying index, security, or basket of securities (when the underlying securities of the warrants issued are domestic stocks, if the financial statement of the most recent period audited or attested by a certified public accountant and shows losses on the stock, there shall also be a statement of the reason for issuing warrants based on the underlying securities; when the underlying security is a foreign stock or a foreign depositary receipt, there shall be a statement of the status of liquidity of the foreign stock or foreign depositary receipt).
    3. The type of call (put) warrant, the volume of issuance units and total value of the issue. In the case of a follow-on issue of call (put) warrants, the total number of units already issued shall additionally be specified.
    4. Terms of issuance (including issuance price, strike price or strike index, exercise period, and number of shares, beneficial units, depository receipt units, or index points represented per issuance unit). In the case of a follow-on issue of call (put) warrants, the strike price or strike index is the newest strike price or strike index for the warrants.
    5. The method by which the issuance price is calculated, including the price of the underlying security or underlying index, the strike price or strike index level, the period of validity, the interest rate, the rate of fluctuation of the underlying security and other elements used in the calculation, and a table of comparison with other warrants in the preceding year with the same listed security or index as the underlying security. In the case of an issue of callable bull contracts or callable bear contracts, the issuance price shall be calculated as the "difference between the price of the underlying security or underlying index and the strike price or strike index × multiplier + funding cost", wherein the funding cost shall be calculated as "funding cost annual rate × strike price or strike index × (days to maturity ÷ 365) × multiplier." But this provision shall not apply to a follow-on issue of call (put) warrants.
    6. Issuance of capped call or put warrants (or callable bull or bear contracts) shall, in addition to the provisions of the preceding five items, comply with the following requirements:
      1. For a capped call warrant or capped put warrant, the day on which the closing price of the underlying securities or the closing index of the underlying index reaches the capped call (or put) price or index is deemed the warrant's last trading day; such warrants reach maturity on the second business day thereafter, and without exception the automatic cash settlement performance method is adopted based on the closing price of the underlying securities or the closing index of the underlying index on the last trading day of the warrant; the aforementioned conditions shall be printed in conspicuous typeface. The capped call price or index level shall be set at no less than 150 percent of the strike price or strike index; the capped put price or index level shall be set at no more than 50 percent of the strike price or strike index. In the case of a follow-on issue of call (put) warrants, the capped call (or put) price or index is the newest capped call (or put) price or index for the warrants.
      2. For a callable bull contract or callable bear contract, the day on which the closing price of the underlying securities or the closing index of the underlying index reaches the knock-out price or index is deemed the contract's last trading day. Such contract reaches maturity on the second business day thereafter, and the automatic cash settlement performance method is adopted based on the simple arithmetic mean trade price of the underlying securities or the simple arithmetic mean of the underlying index on the first business day following the last trading day of the contract. If there is no trade price for the underlying security, the base auction price for the opening of trading of the underlying security on the expiration date of the contracts shall be used. If the trading of underlying security is halted or suspended on the first business day following the last trading day of the contracts or on the expiry date, the closing price of the underlying security on the last trading day of the contracts shall be used. The aforementioned conditions shall be printed in conspicuous typeface. The bull/bear contract knock-out price or index level shall be set within a range between the closing price of the underlying securities or the closing index of the underlying index and the strike price or the strike index (inclusive thereof), and the bull contract or index knock-out price or index level shall be set at no more than 90 percent of the closing price of the underlying securities or the closing index of the underlying index, or the bear contract or index knock-out price or index level shall be set at no less than 110 percent of the closing price of the underlying securities or the closing index of the underlying index. The issuer shall also set reset conditions. Any adjustment from resetting of the bull/bear contract strike price and knock-out price, or of the bull/bear contract strike index and knock-out index level, shall take effect from the first day of TWSE listing, and the price or index level thereof shall still be required to conform with the requirements set out above. In the case of a follow-on issue of call (put) warrants, the knock-out price or index is the newest knock-out price or index for the warrants, and the issuer shall not set reset conditions.
    7. Detailed information on the guarantor and the guaranty agreement or collateral.
    8. Items that shall be included in the issuance plan in accordance with Article 8 of the TWSE Directions for Call (Put) Warrant Liquidity Provider Operations.
    9. Procedures for exercising the option and the terms for cancellation of already-exercised call (put) warrants.
    10. Strategies for offsetting foreseeable risks.
    11. The policy of the issuer regarding adjustment of the strike price of the call (put) warrant and related items along with the distribution of dividends and bonuses, increases or decreases in capitalization, stock splits or consolidations, and handling of other related matters by the issuing company of the underlying securities, or the distribution of dividends and handling of other matters by the securities investment trust enterprise in relation to the underlying exchange-traded securities investment trust fund or by the offshore fund management institution or its designated institution in relation to the underlying offshore exchange-traded fund. Where the issuer does not make such adjustments in accordance with the TWSE reference formula, that fact shall be noted in bold lettering in the issuance prospectus. If the underlying is a foreign security, the issuer shall itself determine the formula for adjustment.
    12. Methods of handling when there is a merger by the company issuing the underlying securities, or alteration in the stock trading method, halt of trading, suspension of sale, or de-listing; or when there is delisting when the securities investment trust enterprise of the underlying exchange-traded securities investment trust fund undergoes dissolution or bankruptcy, or its approval is revoked; or when the beneficial certificates, fund shares, or investment units of the underlying offshore exchange traded fund are delisted by public announcement of the TWSE; or when the index provider announces suspension of the compilation of the underlying index.
    13. Methods of handling market listing of the call (put) warrants, or suspension of trading, de-listing or halt of trading of the warrants by the TWSE.
    14. Terms stipulating that upon expiration of the period of validity, for call (put) warrants with domestic securities or a domestic index as the underlying, there is exercise value if the simple arithmetic mean trade price of the underlying securities during the 60 minutes before market close or the simple arithmetic mean value of the underlying index during the 30 minutes before market close is higher (lower) than the strike price or strike index of the call (put) warrant. If there is no trade price for the underlying securities during the 60 minutes before market close, then the calculation shall be based on the most recent trade price. If the circumstance under Article 58-3, paragraph 5 of the TWSE Operating Rules exists, the calculation shall also incorporate the trade price or index from during the postponement period. For call (put) warrants with foreign securities or a foreign index as the underlying, there is exercise value if the most recent closing price of the underlying securities or the most recent closing value of the underlying index is higher (lower) than the strike price or strike index of the call (put) warrant. Where the terms of exercise require cash settlement, the warrant holder shall be deemed to have exercised the warrant and to have given notice to that effect.
    15. Terms stipulating that the warrant issuer may not substitute another warrant with a period of validity longer than that of the original warrant, or any other security, for the originally issued warrant.
    16. Procedures for delivery and payment when the warrant holder exercises the option.
    17. Terms stipulating that where settlement after exercise of the option referred to in the preceding paragraph shall be done in cash, the cash settlement amount shall be calculated based on the closing price of the underlying securities or the closing level of the underlying index on the exercise date. If the exercise date is the expiration date of the warrants, the cash settlement amount shall be calculated on the basis of the simple arithmetic mean trade price of the underlying securities during the 60 minutes prior to market close, or the simple arithmetic mean value of the underlying index during the 30 minutes prior to market close. If there is no trade price for the underlying securities during the 60 minutes prior to market close, then the calculation shall be based on the most recent trade price. If the circumstance under Article 58-3, paragraph 5 of the TWSE Operating Rules exists, the calculation shall also incorporate the trade price or index from during the postponement period. However, when the underlying asset is a foreign security or foreign index, the provisions of the TWSE Guidelines for the Exercise of Call (Put) Warrants shall be followed.
    18. Terms stipulating the methods for handling distribution of securities centrally deposited in the Taiwan Depository and Clearing Corporation account where the issuer fails to perform its delivery of the underlying securities or the cash price differential within the prescribed time period.
    19. Clarification of whether or not there are plans for a reverse issue of call (put) warrants against the same underlying securities or underlying index within the coming 3 months.
    20. Source of data and method of disclosure for the halt of trading, suspension of trading, or delisting, of foreign underlying securities by the securities exchange on which the security is traded, or for the suspension of compilation of foreign underlying foreign index as announced by the index provider.
  6. Domestic call (put) warrants for which the underlying assets are foreign securities or foreign indexes may not be of the knock-out type, and investors may not apply for exercise of such warrants until the maturity date.
  7. When an issuer issues domestic call (put) warrants for which the underlying assets are foreign securities or foreign indexes, it shall disclose, from the applied-for issue date through the maturity date of the warrants, on its company website and the TWSE-designated information reporting website, the up-to-date trading information of the underlying securities or indexes and the public announcements made by the issuing companies of the underlying securities. When such public announcement occurs during the trading hours [of the TWSE], the warrant issuer shall immediately enter the information; when such public announcement occurs during the non-trading hours [of the TWSE], the warrant issuer shall enter the information prior to the beginning of trading hours on the next business day following the occurrence. The warrant issuer shall enter the following information publicly announced by the issuing companies of the underlying securities:
    1. The annual and semi-annual consolidated financial reports (where the consolidated financial reports are not required, enter the individual financial reports), and the first-quarter and third-quarter financial reports prepared in accordance with the laws and regulations of the issuing company's home country or country of listing.
    2. Public announcement of dividend distribution for the current fiscal year; proposal of the dividend distribution has been passed by the board of directors and ratified at the shareholders meeting.
    3. Public announcement of acquisition or disposal of assets.
    4. Public announcement of the record date fixed for distribution of dividends, bonuses, or other benefits.
    5. Material information published by the issuing company in accordance with the laws and regulations of its home country or country of listing.
    6. Other matters that are required to be publicly announced under the rules of the TWSE.
Article 12       Where any of the following conditions apply, the TWSE may withhold approval for an application for market listing of a projected issue of call (put) warrants:
  1. The required application documents submitted by the issuer are incomplete, and it has failed to supplement the required documents by the deadline prescribed by the TWSE.
  2. The particulars of the issuer's application do not conform to laws and regulations, or the issuer has made false and misleading presentations in the application.
  3. The issuer or an affiliated company of the issuer has, during the month preceding application, released information or predictions relating to the price of the underlying securities or the underlying index of its projected warrants issue.
  4. When the underlying security of the projected issue of warrants is a domestic stock, and the issuer or its directors, supervisors, managers, employees, or shareholders hold 10 percent or more of the issuer's shares, or any of the above hold 10 percent or more of the shares of another company, and are at the same time a director, supervisor, manager, or shareholder with a stake of 10 percent or more in the issuing company of the underlying security or any of the issuing companies of the basket of underlying listed securities. But this provision shall not apply to a follow-on issue of call (put) warrants.
  5. The issuer's CPA audited and attested or CPA reviewed financial report for the most recent period is not in compliance with the standards of Article 4, paragraph 2, subparagraphs 1 and 2, provided that this shall not apply where there is non-conformance with the standards of Article 4, paragraph 2, subparagraph 1, but the measures provided in Article 5 are followed.
  6. When the combined total of the issue price of the currently listed, GTSM listed, and GTSM contract-based call (put) warrants issued domestically by the issuer whose term of validity has not yet expired, and the call (put) warrants issued overseas whose term of validity has not yet expired, and the projected issue of call (put) warrants, together with the amount of the guarantee or the assets provided as collateral for the overseas subsidiary's offshore call (put) warrant issuing business is subject to any of the following conditions:
    1. For a domestic issuer:
      1. For an issuer assessed under the Operation Directions for Securities Firm Risk Management Assessment Systems and given a level 1 rating, when its combined total exceeds 70 percent of its net eligible regulatory capital.
      2. For an issuer assessed under the Operation Directions for Securities Firm Risk Management Assessment Systems and given a level 2 rating, when its combined total exceeds 60 percent of its net eligible regulatory capital.
      3. For an issuer assessed under the Operation Directions for Securities Firm Risk Management Assessment Systems and given a level 3 rating, when its combined total exceeds 40 percent of its net eligible regulatory capital.
      4. For an issuer assessed under the Operation Directions for Securities Firm Risk Management Assessment Systems and given a level 4 rating, when its combined total exceeds 30 percent of its net eligible regulatory capital.
      5. For an issuer that has not been assessed under the Operation Directions for Securities Firm Risk Management Assessment Systems, when its combined total exceeds 40 percent of its net eligible regulatory capital.
    2. For a foreign issuer:
      1. The issuer's credit rating is a Taiwan Ratings Corporation Class A rating or above, a Fitch Ratings Limited, Taiwan Branch rating of A (twn) or above, a Moody's Investors Service rating of A.tw or above, a Moody's Investors Service Class A rating or above, a Standard & Poor's Corp. Class A rating or above, or a Fitch Inc. Class A rating or above, and the combined total exceeds 60 percent of its eligible net regulatory capital adequacy requirement.
      2. The issuer's credit rating is a Taiwan Ratings Corporation Class BBB- rating or above, a Fitch Ratings Limited, Taiwan Branch rating of BBB- (twn) or above, a Moody's Investors Service rating of Baa1.tw, Baa2.tw, Baa3.tw or above, a Moody's Investors Service Class Baa1, Baa2, Baa3 rating or above, a Standard & Poor's Corp. Class BBB- rating or above, or A Fitch Inc. Class BBB- or above, and the combined total exceeds 50 percent of its eligible net regulatory capital adequacy requirement.
      3. The issuer's credit rating is a Taiwan Ratings Corporation Class BB+ rating or above, a Fitch Ratings Limited, Taiwan Branch rating of BB+ (twn) or above, a Moody's Investors Service rating of Ba1.tw or above, a Moody's Investors Service Class Ba1 rating or above, a Standard & Poor's Corp. Class BB+ rating or above, or a Fitch Inc. Class BB+ or above, and the combined total exceeds 30 percent of its eligible net regulatory capital adequacy requirement.
      4. The issuer's credit rating is a Taiwan Ratings Corporation Class BB rating or above, a Fitch Ratings Limited, Taiwan Branch rating of BB (twn) or above, a Moody's Investors Service rating of Ba2.tw or above, a Moody's Investors Service Class Ba2 rating or above, a Standard & Poor's Corp. Class BB rating or above, or a Fitch Inc. Class BB rating or above, and the combined total exceeds 20 percent of its eligible net regulatory capital adequacy requirement.
      5. The issuer's credit rating is a Taiwan Ratings Corporation Class BB- rating or above, a Fitch Ratings Limited, Taiwan Branch rating of BB- (twn) or above, a Moody's Investors Service rating of Ba3.tw or above, a Moody's Investors Service Class Ba3 rating or above, a Standard & Poor's Corp. Class BB- rating or above, or a Fitch Inc. Class BB- rating or above, and the combined total exceeds 10 percent of its eligible net regulatory capital adequacy requirement.

    The above-mentioned eligible net regulatory capital adequacy requirement shall be calculated based on the methods set forth within the Rules Governing Securities Firms, for Taiwan issuers.
    If the issuer is a foreign institution, the aforesaid eligible net regulatory capital is calculated by (the allocated operating capital in the most recent financial reports of its branch(es) within the Republic of China or branch(es) established within the Republic of China by its wholly owned subsidiaries) x (net available funds multiplier).
  7. The issuer is a foreign institution, and at the time of application to issue call (put) warrants, the dollar amount of collateral supplied to provide a guarantee of performance, in a form such as certificates of deposit or government bonds pledged to the TWSE or a performance guaranty agreement issued by a financial institution, is less than 20 percent of the market value of the underlying securities represented by the non-matured listed or GTSM listed call (put) warrants (including the current issue). In addition, where a letter of undertaking stating that the premiums collected for the given issue of warrants will only be remitted into Taiwan after the expiration of the period of validity of the warrant or proof of an existing line of credit at a Taiwan bank in an amount equivalent to the premiums collected on the given issue have not been issued.
  8. There are irregular fluctuations in the price of the underlying security within the 3 months prior to the date of application, and a penalty has been imposed in accordance with the TWSE Rules Governing Implementation of the Stock Market Monitoring System.
  9. There is any other factor arising out of the nature of the enterprise or exceptional circumstances that may be deemed to adversely affect the applicant's performance of the option or the price of the underlying securities.
  10. There are any of the conditions set forth in Article 8, paragraph 1 of these Rules.
     When the circumstance set forth in Article 8, paragraph 1, subparagraph 4 applies to an issuer intending to conduct warrant business, apart from the condition that the period of any sanction imposed on the issuer to suspend its business must have expired, if the issuer has shown concrete improvement in the circumstances and the competent authority has recognized the improvement, or if the issuer fell under the subparagraph 4 circumstance for a reason other than conducting warrant business, the issuer may be exempted from restriction under the preceding paragraph.
Article 12-1        After an issuer has obtained competent authority approval as a qualified call (put) warrants issuer, the TWSE may assess and give ratings to the issuer and grant incentives. Rules governing issuer ratings and incentives will be separately adopted by the TWSE.
Article 12-2        An issuer may apply to cancel the non-outstanding issuance units when 1 month has elapsed after the initial listing of its call (put) warrants, but the remaining issuance units after cancellation may not be less than 10 percent of the total number of issuance units of the initial issue.
     With respect to call (put) warrants for which the underlying securities are domestic stocks or Taiwan depositary receipts (TDRs), under the circumstances that the total number of shares of the underlying security represented by the issuance units of the call (put) warrants reaches 20 percent or more of the total number of outstanding shares of the issuing company after deduction of all types of shareholdings set out in Article 10, subparagraph 3, or 20 percent or more of the listed units of TDRs, if, within 2 months before the expiration date of the warrants, the outstanding issuance units constitute less than 5 or 10 percent respectively of the actual total number of issuance units, the issuer shall, within 2 business days from the next business day following the date of the event's occurrence, apply for cancellation of issuance units of the warrants to the extent necessary until the outstanding issuance units constitute 20 percent or 30 percent respectively of the actual total number of issuance units. This provision does not apply, however, to warrants that are issued by an issuer pursuant to the rules governing ratings and incentives for issuers of call (put) warrants.
     The "actual total number of issuance units" referred to in the preceding paragraph shall be calculated pursuant to Article 9, paragraph 2.