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Title:

Operation Directions for Agency Services Operated by Securities Firms Engaged by Customers to Invest Their Securities Trading Balances  CH

Amended Date: 2015.03.31
Article 1     These Directions are established pursuant to the requirements under the Financial Supervisory Commission order no. Financial-Supervisory-Securities-Zi-10300522233 dated January 21, 2015.
Article 2     Where a securities firm operates agency services engaged by customers to invest their securities trading balances (the "Services"), it shall follow securities and exchange laws and regulations, these Directions, and relevant rules, regulations, public notices and letters of the Taiwan Stock Exchange Corporation (hereinafter referred to as "TWSE") and GreTai Securities Market (hereinafter referred to as "GTSM").
Article 3     A securities firm to operate the Services shall meet the conditions and qualifications indicated below, file an application with the TWSE accompanied by the minutes of the board meeting which approves such operation and the certificates and related documents which prove additional operating bond has been paid, be confirmed qualified, and be reported to the competent authority for recordation, before it may conduct such business.
  1. Type of the securities firm: it shall be an integrated securities firm conducting securities brokerage, underwriting and dealing business at the same time;
  2. Self-owned capital adequacy ratio: the self-owned capital adequacy ratio reported before the application shall be more than 150%;
  3. Credit rating: it shall obtain a long-term credit rating of at least twBBB from Taiwan Rating Corporation, BBB (twn) above from Fitch Australia Pty Ltd, Taiwan Branch, Baa2.tw above from Moody's Cooperation, BBB from Fitch Ratings Ltd., BBB above from Standard & Poor's Corp., or Baa2 above from Moody's Investors Service.
  4. Legal compliance:
    1. Has not been subject to the penalties under Article 66, Subparagraph 1 of the Securities and Exchange Act or Article 100, Paragraph 1, Subparagraph 1 of the Futures Trading Act in the last three months.
    2. Has not been subject to the penalties under Article 66, Subparagraph 2 of the Securities and Exchange Act or Article 100, Paragraph 1, Subparagraph 2 of the Futures Trading Act in the last six months.
    3. Has not been subject to an order of business suspension by the competent authority in the past year.
    4. Has not been subject to revocation or nullification of the business permit by the competent authority in the last two years.
    5. Not been subject to an order of suspension of or restriction on trading by the TWSE, GTSM and Taiwan Futures Exchange pursuant to their operating rules or business regulations in the past year.
    If the securities firm not complying with Subparagraph 4 of the paragraph above has specifically mitigated the breach as acknowledged by the competent authority, it may be exempted from the restriction of the subparagraph.
Article 4     The securities firm operating the Services shall establish an internal control system.
    The internal control system in the above paragraph shall specify the operating procedures, hierarchy of responsibility, and account management matters for operating the Services.
Article 5     Associated persons operating the Services shall hold the qualifications under the "Regulations Governing Responsible Persons and Associated Persons of Securities Firms" established and promulgated by the competent authority.
Article 6     The securities firm which operates the Services shall sign a letter of authorization with the customer, the investment trust and the bank or the trader in the repo transaction of government bonds, before its acceptance of such engagement.
    The letter of authorization stipulated in the above paragraph shall stipulate the following terms:
  1. The investment object for which the funds are utilized.
  2. No investment judgment may be involved in the execution by the securities firm according to the contract of a fund transfer instruction from the costumer; the risk and benefit from the utilization of the funds shall be afforded and enjoyed by the customer itself. The securities firm may not agree on the allocation of profit and loss in the investment of the funds with the customer.
  3. The investment objects, investment amounts, investment sequences and the order in which funds are to be utilized, as specified by the customer in advance.
  4. Matters authorized by the customer as in Article 10, Paragraph 3 and Article 11, Paragraph 1.
  5. The investment period in which the securities firm conducts repo transactions of government bonds on behalf of the customer.
  6. The securities firm conducting repo transactions of government bonds with its own dealing position with the customer shall obtain written consent from the investor by way of a special agreement and disclose to the customer the average interest rate of the repurchase agreement at the trading day attached to the business department announced by the GTSM, before the end of the month following the trading day.
  7. Where a securities firm conducts repo transactions of government bonds or invest in money market funds and bond funds - quasi-money market funds on behalf of the customer, any request by the customer for early rescission, repurchase or conversion must be made only to the securities firm, and the securities firm shall keep the related records.
  8. Where a securities firm operates agency services for the customer to engage in repo transactions of government bonds or invest in money market funds and bond funds - quasi-s money market funds, the payments for the repo transactions of government bonds and the repurchase of the fund shall be first transferred to the securities firm's settlement account, and the securities firm shall remit to the savings account of the customer with the financial institutions appointed by the securities broker, on the same day after paying the settlement funds.
  9. The securities firm shall preserve records of the customer's trading in money market funds or bond funds - quasi-money market funds and the bond passbooks or certifcate of conditional trading of the objects of repo transactions of government bonds.
  10. The trade confirmation slips, delivery statements, settlement statements, bond passbooks or certifcates of conditional trading shall be monthly compiled and delivered to the customer by the securities firm conducting repo transactions of government bonds on behalf of the customer.
  11. The agreement on service fees between the securities firm and the customer.
  12. The effective period and period of validity of the contract and terms to deal with the modification and termination of the contract.
  13. Dispute resolution.
    The template of the letter of authorization in the first paragraph will be prepared by the Taiwan Securities Association.
Article 7     The Services may only be initiated after a brokerage account has been opened.
    Customers entrusting the securities firm to operate the Services must be customers who already have a trading account
    In performing the Services, the securities firm as engaged by the customer shall transfer the trading securities balances to the securities firm's settlement account. Where, prior to the transfer of funds from the settlement account to the customer's account opened with the financial institution designated by the securities dealer, the customer instructs the securities firm to make a transfer on its behalf on the same day, transfer of the customer's settlement balances must be completed on the same day with no retention, and the securities firm may not open other accounts in the name of itself or the customer.
    A securities firm may set its own limit on the amount of funds to be transferred with regard to the Services.
Article 8     The securities firm which operates the Services may request procedural service fee from the principal at a rate to be determined by the securities firm.
Article 9     Funds transferred by the securities firm to the relevant accounts in connection with the Services are to be used only for the purposes of repo transactions of government bonds, money market funds, and bond funds - quasi-money market funds, and may not be used for other purposes.
    Funds may only be transferred between accounts.
Article 10     Where the securities firm conducts a repo transaction of government bonds on behalf of the customer, the customer and the counterparty shall sign a repurchase/resale master agreement.
    The counterparty in the above paragraph shall be obtain a long-term credit rating of at least twBBB or short-term credit rating of twA2 from Taiwan Rating Corporation.
    The securities firm conducting repo transactions of government bonds on behalf of the customer shall obtain the customer's authorization to determine the individual trading conditions of the conditional transactions during the investment period on behalf of the customer.
    The securities firm conducting a repo transaction of government bonds on behalf of the customer shall follow the rules indicated below:
  1. The duration of the repo transaction shall be no longer than 180 days.
  2. The bonds obtained from the repo transactions may not be subject to outright sale to others anymore.
  3. The trading amount of a single repo transaction shall not exceed the market price of the traded bond by 110%.
  4. For delivery purposes, the subject government bond in a repo transaction shall be replaced by the bond passbook issued by the custodian designated by the counterparty of the trade or the certificate of conditionally traded book-entry central government bonds issued by the book-entry central government bonds clearing bank; such passbook or certificate shall be delivered to and kept by the securities firm.
    The securities firm shall stipulate the method of safekeeping trade confirmation slips, delivery statements, settlement statements, bond passbooks or certificates of conditional trading of conditional bond transactions in the internal control system.
Article 11     When the securities firm invests in money market funds and bond funds - quasi-money market funds and needs to use the seal of the securities firm as appearing in the letter of authorization in lieu of the customer's seal on the application documents of subscription, repurchase and conversion, the securities firm shall obtain the authorization of the customer.
    Where the securities firm makes the investment in the above paragraph, the funds may be delivered in the day trade amount in a lump sum together with a detailed account by the customer category to the investment trust or the bank.
    The securities firm shall stipulate the method of safekeeping trading records in its internal control system.
Article 12     When applying to the securities firm for the Services, principals who are natural persons shall bring in person the original of their national identity card, sign a letter of authorization, and present a specimen seal impression card or signature specimen card.
    Principals who are persons with limited or no legal capacity wishing to apply to the securities firm for the Services shall do so through their legal representative or legal guardian, who shall personally bring the original of his own identity card as well as that of the principal for the application. If the principal has not obtained an identity card, a transcript of domiciliary register or a household register may be submitted instead; the guardian shall also present documents proving guardianship.
    When filing the application in the first paragraph, principals who are juristic persons shall have their authorized agent present a power of attorney, the original of the national identity card of the agent as well as that of the representative, and the original of the Juristic Person Incorporation (Amendment) Registration Card and documents proving juristic person registration.
    A photocopy of the identification documents and Juristic Person Incorporation (Amendment) Registration Card each, and the original of the power of attorney, as mentioned above, shall be kept for record-keeping purposes. Each photocopy shall be stamped with the inscription "This document have been received, were brought in person by the person or agent himself/herself, and is correct and without fault."
Article 13     The securities firm operating the Services shall do so based on the investment objects, investment amounts, investment sequences and the order in which funds are to be utilized, as stipulated in the letter of authorization.
Article 14     A securities firm shall set up a separate account for each principal and keep a daily record of each transfer of principals' funds in the settlement account of the securities firm.
    The securities firm shall prepare a monthly account statement for principals using the records described in the previous paragraph, unless there have been no transactions that month or the principal does not request in writing.
    The securities firm and the principal shall sign an agreement, agreeing that the TWSE, GTSM, and institutions appointed by competent authorities may collect, computerize, internationally transmit, and use their personal data pursuant to relevant laws.
Article 15     If a principal does not have any transactions for three or more consecutive years, the securities firm shall terminate the Services and notify the principal. If the principal needs to terminate the Services, it shall fill a "Termination of the Services Application."
    Where the principal's account is cancelled, the letter of authorization will terminate ipso facto after the investment object expires or is repurchased or after the contract therefor is rescinded.
Article 16     A securities firm that performs the Services shall keep accurate records and certification of receipts and payments, and make a report of the following for each day:
  1. Daily business report and balance report.
  2. A detailed report of all receipts and payment and utilization.
Article 17     Where a securities firm, its responsible person or employees violate the provisions of these Directions, the TWSE or GTSM may take measures according to its related rules.
Article 18     These Directions shall take effect after having been submitted by the TWSE to and approved by the competent authority.