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Article 91
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Where the principal fails to fulfill its settlement obligations on time, the principal is in default. In such an event, the securities broker shall report the default in accordance with the TWSE Guidelines for Securities Brokers in Reporting Delayed Settlement and Default by Principals , and shall simultaneously notify the principal.
When the principal is an offshore overseas Chinese or foreign national, or a mainland area investor, and a report of delayed settlement has been filed in accordance with Article 82, paragraph 2, if settlement is not completed in accordance with provisions and it is not an out-trade, the principal is in default. The securities broker shall handle the matter pursuant to the provisions in the preceding paragraph.
A securities broker which receives securities or consideration in accordance with paragraph 1 or paragraph 2 of this Article shall engage another securities broker to dispose of it on the Exchange no later than the first business day after the principal's default. Thereafter, the securities broker shall forthwith report to the TWSE and notify its principal in accordance with the Guidelines for Securities Brokers in Reporting Delayed Settlement and Default by Principals. However, those securities which belong to the same account and are of the same type and same volume may be offset against each other.
Where the aggregate number of [shares represented by] the share certificates of securities received by a securities broker under paragraph 1 and paragraph 2 during the period of a single default reaches 5 percent or more of the number of shares of the underlying securities already issued, and furthermore reaches or exceeds the average daily volume of the underlying securities during the 20 trading days prior to reporting of the default, the securities broker may adopt either of the following measures to handle the default:
- If handling of the default cannot be completed through reverse transactions during the 3 consecutive business days from the day next following the date of confirmation of the default by the principal, the securities broker, by reaching a mutual agreement with the principal or by notice to the principal, may, depending on market conditions, in accordance with the content of the agreement or the notice, complete handling of the default through reverse transactions within 180 days, and report the agreement or notice to the TWSE via letter for recordation.
- The securities broker may reach an agreement with the principal setting a price(s) to serve as the basis for calculating profit/loss, and submit the written agreement reached between the parties to the TWSE via letter for recordation.
Based on the report of a securities broker referred to in paragraph 1 or paragraph 2 of this Article, the TWSE will forthwith notify each securities broker, which shall act in accordance with paragraph 3 of Article 76 hereof.
In the event that the principal suffers losses or there is any other dispute arising out of the notification sent by the TWSE to each securities broker based on the report by a securities broker, the securities broker reporting the default shall be fully responsible therefor.
If a securities broker, for a reason not attributable to the broker, is unable in a timely manner to take measures pursuant to paragraphs 3 and 4, it shall prepare a handling record and keep it on file for inspection along with related documentary evidence.
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Article 91-1
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Except under the circumstance prescribed in paragraph 2 below, if settlement is not completed on time for a discretionary investment account, the securities broker shall handle the matter in accordance with the provisions governing default by an ordinary principal.
If settlement is not completed on time for a discretionary investment account because of non-performance by the authorized discretionary trader of obligations arising from trading exceeding the discretionary trader's authorization, such event shall be handled as follows:
- The securities broker shall carry out settlement on behalf of the principal and notify the principal. Not later than 6:00 p.m. of the business day next following the trade day, the securities broker shall prepare written report on relevant facts with seals of both the company and its responsible person fixed thereon, together with photocopy of the notice of unauthorized trading issued by the custodian institution, and related trade vouchers and brokerage contract (including documents submitted for account opening), and fax the aforesaid to the TWSE and notify the TWSE by telephone before forwarding original copy of the said documents to the TWSE for reporting to the Competent Authority. However, those that meet the requirements of Article 42, paragraph 5 of the Regulations Governing the Conduct of Discretionary Investment Business may substitute a notice of unauthorized trading issued by a party authorized to do so under the relevant contract or legal opinion for the notice of unauthorized trading issued by the custodian institution.
- In connection with the discretionary investment account, the securities broker shall immediately suspend acceptance of trading orders for securities. Other accounts in the name of the same principal shall not be affected by restrictions under paragraph 3 of Article 76.
- In connection with the securities or consideration received by a securities broker through settlement on behalf of the principal, the securities broker shall engage another securities broker to dispose of it on the Securities Exchange Market of the TWSE starting on the next business day after the required reporting has been made, provided that the securities in the same account, and of the same type and quantity may be offset against each other.
- Upon completion of the process prescribed in preceding subparagraph 3, the securities broker shall prepare written report on how the process has been handled, with the seals of both the company and its responsible person fixed thereon, together with photocopy of related trade vouchers, and forward the said documents to the TWSE for reporting to the Competent Authority.
The TWSE shall promptly relay information reported per subparagraph 1 of paragraph 2 above to all securities brokers.
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