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Article NO. Content

Title:

Operating Rules for Securities Firms Handling Non-Restricted Purpose Loan  CH

Amended Date: 2017.11.27
Article 30     In non-restricted purpose loan conducted by a securities firm, the sum of the financing amount and total amount of financing to clients plus the total financing amount in margin purchases and short sales of securities may not exceed 400% of the securities firm's net asset value. The securities firm shall report the related information to TWSE daily, and the report shall include finance purpose, finance amount, and collateral type, etc.
    When a securities firm conducts non-restricted purpose loan business, the highest financing limits that it extends to each customer shall be regulated by the securities firm. The securities firm shall adopt its own internal procedures for credit extension operations and risk management, in order to appropriately assess client credit limits and manage credit extension risks. Such procedures shall at least incorporate the following:
  1. To assess the maximum non-restricted loan purpose amount to individual clients, the assessment shall take the loan amounts extended to approved customers in other loan businesses into consideration. The percentage by which the total value of funds or securities loaned to individual customers in the overall loan business may not exceed the net worth shall be prescribed. Approval of the board of directors is required if the financing amount to individual persons reaches the higher of NT$300 million or 1% of the securities firm's NAV.
  2. To assess the maximum non-restricted purpose loan amount of a single security to individual customers, the assessment shall take the loan amounts extended to approved customers in other loan businesses into consideration.
  3. To identify securities or client with a high risk, special monitoring and approval procedures shall be established in regard to the amount of high-risk securities or the lending limit to high-risk customers.
  4. The lending limit to clients shall be determined according to principles that are both fair and reasonable. Lending of such whole amount to a single customer shall be avoided.
  5. If the assessment of the maximum financing amount to individual customers indicates certain individual customers are known or can be determined to be related accounts, which means the credit risks of such customers are related (for example, the risk of providing trading service to such customers), the lines of credit of all such related customers are subject to combined regulations in consideration of the credit risks and apply to renewals and adjustments of credit lines by customers which have opened an account and to new accounts, provided in the event of a change in respect of a related account of a customer, such as credit line adjustment or addition of related accounts, the financing amounts of the customer and its related accounts are still subject to combined regulation.