| Title： |
Rules Governing Securities Firms Engaging in Consigned Trading of Foreign Securities(2001.10.23) |
| Date： |
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Article 1
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These Rules are prescribed pursuant to Paragraph 4 of Article 44 of the Securities and Exchange Law.
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Article 2
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Securities firms conducting the business of accepting consignment trades of foreign securities shall possess the following qualifications, and shall be further approved by the Securities and Futures Commission, Ministry of Finance (hereinafter "this Commission") and the Central Bank of China.
1. The company itself, its subsidiaries, branch offices, or other securities institutions which it has invested has the membership qualifications of a foreign stock exchange designated by this Commission.
2. Possess the transmission facilities that are capable of quickly obtaining investment information and information necessary for conducting consignment trades in the foreign stock exchange referred to in the preceding Item.
Those without the qualifications may directly or indirectly authorize securities firms referred to in the preceding Paragraph or a securities firm with the membership or trading qualifications of a foreign stock exchange designated by this Commission to engage in the trade of foreign securities; its handling procedures shall be drafted by the securities dealers association and sent to this Commission for its approval.
The invested relationship referred to in Item 1 of Paragraph 1 shall mean any person holding over 20 percent of the outstanding shares of any party.
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Article 3
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The types of foreign securities which a securities firm is allowed to accept consignment trades shall be limited to the following:
1. The stocks, warrants, beneficiary certificates, and depositary certificates traded on a foreign stock exchange referred to in Item 1 of Paragraph 1.
2. Bonds rated as satisfactory or better by a ratings agency recognized by this Commission. However, this requirement does not apply to foreign bonds to be sold under consignment.
3. Other securities approved by this Commission.
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Article 4
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The consigning counter-party of a securities firm entering into a contract accepting the consignment trades of foreign securities shall be limited to the following persons:
1. Persons residing within the Republic of China that are 20 years of age or over and possess the National Identification Card or Alien Residence Certificate.
2. Companies, businesses, or associations that have been approved and registered by the Government of the Republic of China or a foreign government.
In case any of the persons referred to in any Items of the preceding Paragraph has any of the following conditions, a securities firm shall not accept its account opening, and where an account has been opened, such account shall be cancelled:
1. having been adjudged bankrupt and not reinstated.
2. having been adjudicated interdicted, and the adjudication has not been revoked.
3. in case a juristic person consigns to open an account, the inability to produce a power of attorney from such juristic person authorizing the account opening.
4. having a record of breaching a securities trading contract within the last three years, or three years have expired but the case has not been settled.
5. any person who has been sentenced under the Securities and Exchange Law to a penalty more severe than the imposition of a fine, and three years have not elapsed since the completion of sentence execution, the expiration of suspension of sentence, or the pardon of such punishment.
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Article 5
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Securities firms accepting the consignment to trade in foreign securities shall enter into a contract with the consignor concerning the consignment trading of foreign securities before it may accept such consignments to trade in securities.
The form of the contract for the consignment trade of foreign securities shall be drafted by the securities dealers association, and its content shall contain the following particulars:
1. The procedures of executing the consignment contract, and the period of validity of the contract.
2. The particulars that both parties to the consignment shall observe.
3. The terms of the deposit of purchased foreign securities into a foreign depositary institution.
4. The particulars stated on relevant documents regarding the deposit of purchased foreign securities into a foreign depositary institution.
5. The time period for settlement of trades in foreign securities, the method of payment/acceptance of the settlement money, the currency, the exchange rate and its method of calculation, and matters agreed upon regarding the foreign exchange remittance authorization.
6. The method of handling breach of the settlement obligation.
7. The matters agreed to regarding the handling of dividends and exercise of shareholders rights.
8. The reporting of changes in the basic information of the consignor, and indemnity in case of non-reporting.
9. The information and the services that shall be provided by the securities firm.
10. The scope of damages that arise from causes attributable to the other contracting party, arbitration, and the handling of related matters.
11. The method of handling losses not attributable to either party to the contract.
12. Matters regarding the notification regarding amendment to the contract.
13. Matters regarding the termination of the contract.
14. Other particulars that must be noted that are relevant to the rights and obligations of the parties.
The contract for securities firms accepting the consignment trade of foreign securities shall be reported to the securities dealers association for its record.
The matters to be recorded in a contract entered into between a securities firm and a professional institutional investor regarding the consignment trade of foreign securities shall be decided in accordance with the business needs of both parties, and Paragraph 1 shall not apply.
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Article 6
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Where the consignor in a contract between the securities firm and the consignor for the consignment trade of foreign securities is a natural person, the consignor shall provide an original of the National Identity Card or the Alien Resident Certificate and personally sign the consignment contract and also provide a copy of the identification document; where the consignor is a juristic person, a copy of its juristic person registration documents, and legally effective power of attorney shall be enclosed and the appointee shall personally appear and process the matter, and carry his National Identity Card or the Alien Resident Certificate plus submit a copy thereof.
Upon signing the consignment contract, the consignor shall prepare a chop or signature specimen card for the securities firm, and process consignment trades, settlement and other related procedures using the identical chop or specimen.
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Article 7
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A securities firm in accepting the consignment for trades of foreign securities shall, at the time the consignor opens the account, send an employee to explain the possible risks of various types of foreign securities and provide a copy of the risk disclosure statement (of the format described below) to the consignor. Both the employee responsible for explaining the risks involved and the consignor shall sign the risk disclosure statement for record.
The following items are the particulars to be contained and the format of the above referred risk disclosure statement:
1. the possible risks of various types of foreign securities differ with the investment target and the investment exchange market. The investor shall understand the differences and risks of the stocks, warrants, beneficiary certificates, bonds, and depositary certificates to be invested in.
2. Investing in foreign securities involves foreign securities exchange markets and hence requires following the local laws and exchange market regulations, which may differ from the Securities and Exchange Law of the R.O.C.
3. Investing in foreign securities involves foreign currency exchange. In addition to any actual losses from the transaction, there is the risk of fluctuating exchange rates.
4. In investing in foreign securities the information securities firms provide to the investor according to Articles 19 and 20 of these Rules, including research reports on the stock market or individual stocks, notification from the issuer of stock, or other information concerning the rights and benefits of the investor, are handled according to the procedures prescribed by foreign laws. The investor itself shall understand and judge accordingly.
5. Trade in foreign securities requires signing a contract for the consignment trade of foreign securities. The investor shall clearly understand the content regarding the currency used, exchange rates, and other items involving calculations for the settlement/clearance fund and other costs in the contract.
6. The warnings in the risk disclosure statement are extremely simplified and cannot convey the details of all the risks involved in investing and the factors influencing the market situation. Therefore, before the transaction, the consignor, in addition to thoroughly analyzing the risk disclosure statement, must exhaustively deliberate on other possible influential factors and accurately estimate the risks involved to prevent losses resulting from the transaction that he is unable to shoulder.
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Article 8
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In accepting the consignment trade of foreign securities, the securities firm shall require that the consignor or its representative or agent complete the consignment order face to face, or an associated person may complete such order in accordance with the consignments given by the consignor, or its representative or agent using letter, telegram, telephone or other electronic means.
The consignment order referred to in the preceding Paragraph shall contain the following particulars:
1. Account number and account holder name.
2. Method of consignment (face to face, letters, telephone, telegram or other electronic means).
3. Date, time, and valid period of the consignment.
4. Type of market.
5. Type and volume of securities.
6. Consignment price.
7. Currency of settlement.
8. Chop of the associated person.
9. Chop of the consignor.
The format of the trading report shall be prescribed by the securities firm and submitted to the securities dealers association for its record.
The consignor or its representative or agent may also use the Internet or other electronic forms of transaction to make consignments; where consignments are made by means of such media, the securities firm may be exempt from producing and filling out the consignment form, provided that a record of consigned trades shall be printed immediately and in the order received for the purpose of verification.
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Article 9
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The provisions of Paragraph 1 of Article 36 of the Regulations Governing Securities Firms shall apply mutatis mutandis to securities firms recommending and accepting consignments to trade in foreign securities.
The regulations governing securities firms recommending trades in foreign securities shall be prescribed by the securities dealers association.
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Article 10
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Securities firms accepting consignment to trade in foreign securities shall not accept the full authorization to determine the type, volume, price, or the purchase or sale of securities.
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Article 11
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Securities firms accepting consignment to trade in foreign securities shall not provide margin loans or stock loans.
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Article 12
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For securities firms accepting consignment to trade in foreign securities, upon confirmation by the foreign securities market that the transaction has been made, the confirmed transaction date shall be the first business day after the transaction date.
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Article 13
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A securities firm accepting consignment to trade in foreign securities shall prepare and submit a trading report to the consignor on the confirmed transaction date.
The trading report referred to in the preceding Paragraph shall contain the following particulars:
1. Account number and account holder name.
2. Transaction date.
3. Settlement date.
4. Type of market.
5. Type of transacted securities.
6. Number of shares or par value thereof.
7. Unit price and total price
8. Service charges.
9. Taxation.
10. Amount of money to be received or paid.
11. Currency of settlement.
12. Exchange rate.
13. Other matters to be recorded in accordance with the regulations of the foreign securities market.
The format of the trading report shall be prescribed by the securities firm and sent to the securities dealers association for its record.
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Article 14
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For securities firms accepting consignment to trade in foreign securities, the settlement of the consignor's money/securities shall be conducted within the settlement period specified by the foreign securities market.
The settlement period of various foreign securities markets referred to in the preceding Paragraph shall be reported by the securities firm to the securities dealers association for its record; the same procedure shall apply with amendments.
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Article 15
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For securities firms accepting consignment to trade in foreign securities, the settlement of the consignor's money/securities and the receipt/payment of fees shall be conducted in the foreign currency of the securities being transacted or in the foreign currency agreed upon by the securities firm and the consignor; further, deposit/withdrawal of the money shall be conducted through the foreign currency deposit account opened by the consignor at the bank designated by the securities firm.
The procedures for conducting the settlement money remittance referred to in the preceding paragraph are as follows:
1. at the time of the transaction, the consignor shall set the currency for conducting the settlement as the foreign currency of the securities being transacted or the foreign currency agreed upon by the securities firm and the consignor.
2. after buying foreign securities, the consignor shall transfer the agreed upon amount, according to the purchase transaction report, into the securities firm's settlement amount before the settlement date.
3. after the consignor sells the foreign securities, the securities firm shall transfer the agreed upon amount, according to the sales transaction report, into the consignor's foreign currency savings account at the bank designated by the securities firm.
4. when the consignor, using the same account, on the same day, has both buying and selling foreign securities transactions, the securities firm shall, according to the consignor's instruction, combine and set off all the received (paid) money in the same currency and then transfer the net received (paid) amount into the account.
5. in remittance of the settlement money and fees, the consignor shall follow the rules under the Statute for Control of Foreign Exchange and may use the foreign currency that the consignor holds outside of the Republic of China for direct remittance to the financial institution designated by the securities firms at the location of the various securities exchange markets.
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Article 16
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(deleted)
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Article 17
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The foreign securities purchased by securities firms on consignment from a consignor, except in the case of institutional investors, shall be deposited in the name of the securities firm or in the name of the agent of the securities firm in a depositary in the locale of the site of transaction. Further, such record shall be recorded in detail in the account of the consignor and in the reconciliation statement to facilitate review by the consignor.
The securities firm shall report the depositary referred to in the preceding Paragraph to the securities dealers association for its record.
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Article 18
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Securities firms accepting consignment to trade in foreign securities shall conduct settlement with the consignor on schedule, and shall not breach the consignment contract.
Where the consignor fails to settle on schedule, or fails to provide the settlement funds or settlement securities to the securities firm, such events shall be regarded as breach of contract.
In the event the consignor breaches the contract, the securities firm shall handle the matter in accordance with the provisions of the contract for consignment trade in foreign securities regarding breach of the obligation to settle, and it may further immediately terminate the consignment contract.
In processing the matters referred to in the preceding Paragraph, the securities firm shall notify the Commission by letter for its record, and further provide a copy of such letter to the consignor.
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Article 19
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For securities firms accepting consignment to trade in foreign securities, information or research reports on the securities market, the industries, or individual securities which securities firms provide to investors shall be limited to those companies which have been approved for issuance. Such materials shall be excerpted and translated into Chinese in order to facilitate review by the investors.
The information and the research report referred to in the preceding Paragraph shall not contain any false, concealed, fraudulent, or other matters which is sufficient to mislead others.
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Article 20
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For securities firms accepting consignment to trade in foreign securities, where the securities issuer provides to the securities firm any notification or other information relating to the rights of the consignor, upon receipt, the securities firm shall as quickly as practical transmit such to the consignor.
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Article 21
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For securities firms accepting consignment to trade in foreign securities, the exercise of the rights relating to the securities purchased on consignment from the consignor shall be done in accordance with the laws and regulations of each local securities market, the bylaws of the securities exchange or self-regulating organization, and the contract with the consignor.
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Article 22
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Securities firms accepting consignment to trade in foreign securities shall prepare monthly reconciliation statements and send such to the consignors for their review before the tenth day of the subsequent month.
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Article 23
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The rate of the service charge and other charges for securities firms accepting consignment to trade in foreign securities shall be provided by the securities dealers association to this Commission for its approval.
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Article 24
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For securities firms accepting consignment to trade in foreign securities, in addition to reporting on a daily basis to the securities dealers association the daily business report on the consignment trade of foreign securities, it shall also submit a monthly business report on the consignment trade of foreign securities to this Commission, the competent authority in charge of foreign exchange and the securities dealers association before the fifth day of the subsequent month.
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Article 25
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These Rules shall come into effect on the date of promulgation.
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