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Title:

Operating Rules for Securities Business Money Lending by Securities Firms  CH

Amended Date: 2019.09.06 
Categories: Securities Exchange Market > Borrowing of Money

Title: Operating Rules for Securities Business Money Lending by Securities Firms(2009.07.28)
Date:
   Chapter 1  General Principles
Article 1These Operating Rules are adopted pursuant to Article 18, paragraph 2 of the Regulations Governing Borrowing or Lending Money in Connection with Securities Business by Securities Firms.
Article 2A securities firm conducting securities business money lending shall do so in accordance with securities trading laws and regulations, these Operating Rules, and the relevant bylaws, regulations, public announcements, and circular letters of the Taiwan Stock Exchange Corporation (TWSE), the GreTai Securities Market (GTSM), and the Taiwan Depository & Clearing Corporation (TDCC).
Lending of money in connection with securities business ("securities business money lending") in these Operating Rules refers to any monetary financing business undertaken, pursuant to an agreement between a securities firm and a customer, to facilitate the settlement of customer purchases of exchange-listed or OTC-listed securities. Its scope includes exchange-listed or OTC-listed stocks (including stock warrant certificates, certificates of entitlement to new shares, and certificates of payment for shares), call (put) warrants, beneficial interest certificates, depositary receipts, convertible bonds, bond conversion entitlement certificates, beneficial interest securities, and asset-backed securities.
The scope of financing under the preceding paragraph does not include margin purchase or short sale transactions, block trades, odd-lot trades, auctions, tender offers, or trades in shares subject to an altered trading method or in OTC managed stocks.
The amount of money lent by a securities firm in connection with securities business is limited to the amount payable by each customer after netting its securities purchases and sales, applicable processing fees, and tax liabilities on the transaction date.
Article 3In conducting securities business money lending, a securities firm shall determine its financing customers at its own discretion and in accordance with its internal control system. Among the particulars stipulated between the parties, the conditions applicable to the financing shall be specified by the securities firm at its own discretion and in accordance with its internal control system, and shall be specified in the loan contract.
Article 4A securities firm conducting securities business money lending shall adopt an effective internal control system.
The internal control system of the preceding paragraph shall adopt "know your customer" assessment and credit investigation procedures, securities business money lending operating procedures, segregation of authority and duties, financing limit controls, and account management matters, and adopt relevant risk management mechanisms.
Article 5To apply to conduct securities business money lending, a securities firm shall fill out an application form and submit it together with the relevant documentation to the TWSE. After the TWSE has reviewed an application and found the applicant qualified and in compliance with the applicable provisions of these Operating Rules, it shall forward the application to the competent authority for approval.
After a securities firm under the preceding paragraph has been approved by the competent authority to conduct securities business money lending, it may do so only after it has registered the amendment to its securities business items with the TWSE. The business personnel of the securities firm conducting securities business money lending shall possess the qualifications prescribed by the competent authority in the relevant provisions of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms.
After a securities firm has been approved by the competent authority to conduct securities business money lending, if its regulatory capital adequacy ratio is below 200 percent for two consecutive months, it shall suspend such business, and may resume it only after the securities firm achieves compliance with regulations for three consecutive months and receives approval from the competent authority; if the securities firm has already been approved to conduct such lending but has not begun doing so, it shall suspend proceeding with such business.
Article 6A securities firm conducting securities business money lending may collect interest and processing fees from its customers for money it lends, and set such interest and processing fees at its own discretion. In addition, the interest rate shall be calculated on a per annum basis, and posted at the place of business.
When the interest and fee rates of the preceding paragraph are adjusted, beginning from the date of adjustment the securities firm may calculate and collect interest and fees at the post-adjustment rates on that portion of funds already financed but not yet repaid.
The interest of paragraph 2 shall be calculated based on the number of days from the financing date until the day before the date of settlement.
Article 7A securities firm conducting securities business money lending may not accept the securities listed below as collateral:
1. Pledged securities
2. A company's own shares or other equity securities acquired through a buyback of its own shares, donation, merger, transfer of operations, or other reason.
A customer shall warrant that the collateral it provides is free and clear of all liens, claims, and encumbrances of any nature whatsoever; in the event of any defect or legal dispute in this respect, the securities firm may not provide financing.
Article 8Collateral that a securities firm obtains in conducting securities business money lending, and for which the customer has issued a written statement of consent for rehypothecation, may not be used for any purpose other than those listed below and shall be deposited in central custody:
1. As collateral for securities borrowing through the TWSE securities lending system.
2. As collateral for securities borrowing or refinancing through a securities finance enterprise.
   Chapter 2  Signing of a Financing Contract and Account Management
Article 9A securities firm conducting securities business money lending, when processing a customer's application, may commence such lending only after reviewing that customer's credit and agreeing to sign a loan contract with that customer.
The securities firm's signing of a loan contract with a customer under the preceding paragraph shall be conducted in accordance with the following provisions:
1. A customer that is a domestic natural person shall present, in person, the original of their national ID card and submit relevant documents to verify their income and assets.
2. A customer that is a domestic juristic person shall have its authorized person submit a power of attorney, the original national ID cards of customer's authorized person and representative, the customer's original corporate registration (or registration amendment) card, and its original certification of incorporation.
3. An onshore overseas Chinese or foreign national intending to sign a loan contract shall obtain an ID number and submit an application to the securities firm accompanied by relevant documents verifying their income and assets as well as the documents listed below:
(1) A natural person that is an overseas Chinese or foreign national: passport, and Overseas Compatriot Identity Certificate (or Alien Resident Certificate).
(2) Foreign institutional investor (FINI): Ministry of Economic Affairs Recognition Certificate, documentation evidencing company registration, and the responsible person's national ID card (or Alien Resident Certificate, or passport).
4. An offshore overseas Chinese or foreign national intending to sign a loan contract shall have their designated domestic agent or representative obtain an ID number and submit an application to the securities firm accompanied by photocopies of their national ID card or Alien Resident Certificate, or up-to-date documentation of corporate registration (or amendment registration).
5. If the domestic agent under the preceding paragraph is a bank approved by the Bureau of Monetary Affairs, Financial Supervisory Commission, Executive Yuan, to operate custodial business and it and the securities broker handling account opening each have network authentication mechanisms, the documents for account opening may be transmitted electronically to open the account.
The photocopies of the identity verification documents and corporate registration (or amendment registration) cards and the original power of attorney referred to in the preceding paragraph shall be retained, and those that are photocopied shall be stamped with an official seal bearing the words, "The application is confirmed to have been made in person by the applicant or by the applicant's authorized person; this is a true and faithful copy of the original."
The Taiwan Securities Association shall draft a model loan contract referred to in paragraph 1.
Article 10A securities firm conducting securities business money lending shall set up a separate account for each customer, and make itemized entries for all relevant transaction matters:
1. Details of loans.
2. Financing collateral.
3. Collateral calls and disposal of collateral.
The securities firm shall prepare a reconciliation statement each month based on the account entry records of the preceding paragraph and deliver it to the customer, provided that this requirement shall not apply when there is no recorded transaction for the given month, and the customer has not requested such statement in writing.
Article 11The customer shall notify the securities firm in writing whenever there is a change in the name, national ID number, ID number of the Overseas Compatriot Identity Certificate or Alien Resident Certificate, uniform ID number of the juristic person, address, or mailing address of the customer, agent, or representative recorded in the loan contract.
Article 12Notice of matters by a securities firm to its customer as required under these Operating Rules shall be effected by mail or signed for in person by the customer.
Where the securities firm's notice sent by mail is not delivered on time due to the customer's failure to give notice under the preceding article, or some other reason attributable to the customer, the notice shall be deemed effective from the day of the first delivery attempt by the post office.
Where the customer signs in person to acknowledge receipt of a securities firm's notice, the customer's signature or seal shall match the signature on the original loan contract or the original seal/signature-of-record, and shall be accompanied by the date.
   Chapter 3  Loan Application and Repayment
Article 13In securities business money lending conducted by a securities firm, if the customer intends to post collateral in the form of securities that it is purchasing, the customer shall file an application by 11 a.m. on the second business day after the transaction date, and have the securities firm or custodian institution transfer the customer's purchased securities into the loan collateral account opened by the securities firm at the Taiwan Depository & Clearing Corporation (TDCC); the financing period shall be from the second business day after the transaction date to the fifth business day after the transaction date.
When the customer of the preceding paragraph submits the loan application by a method other than in person, it shall submit a written statement of consent for exemption from the use of a signature or seal on the loan application. If the securities firm has verified and kept that consent statement on file, it is not necessary for the customer to sign/seal the application.
When a customer applies to borrow money from a securities firm by personal telephone call, the securities firm shall make a synchronous recording of the call, which shall be kept at its place of business and retained for at least two months. In the event of any dispute, the recording shall be retained until the dispute has been eliminated.
The value of the collateral in paragraph 1 shall be confined to 100 percent to 125 percent of the monetary amount of the financing provided to the customer by the securities firm. The value of the collateral shall be calculated as the closing price of the business day preceding the financing date or the GTSM-posted next day's reference price ("reference price") or as 80 percent of the face value of government strip bonds.
Where a customer files an application pursuant to paragraph 1 herein and is notified by the securities firm to post collateral in the form of exchange-listed or OTC-listed securities or government strip bonds that it holds, the application-related provisions of paragraph 1 shall apply mutatis mutandis.
When a customer makes partial repayment prior to the expiration of the financing period, the securities firm shall return to the customer the securities it originally posted as collateral on a proportional basis, provided that increments of less than one trading unit may not be returned.
Article 14In securities business money lending conducted by a securities firm, if a customer posts collateral in the form of securities that it is purchasing and then sells the originally purchased securities prior to the expiration of the financing period, the proceeds from the sale shall first be applied to repay the money lent.
The securities firm shall stipulate with the customer that prior to the expiration of the financing period as referred to in the preceding paragraph, the customer's securities trading balance will be used to repay the money lent. The scope of the securities trading balance shall be stipulated between the parties.
Article 15In securities business money lending conducted by a securities firm, if a customer that posts collateral in the form of securities that it is purchasing applies, prior to the expiration of the financing period, to convert to the financing method specified in Article 16, paragraph 1, the originally purchased securities or otherwise-held securities that it posts as collateral shall comply with Article 16, paragraph 3, and the collateral financing shall be calculated according to the standards provided in Article 18.
Article 16In securities business money lending conducted by a securities firm, a customer posting collateral in the form of securities that it holds shall file an application prior by 12 noon on the first business day after the transaction date of its securities purchase, and have the securities firm or custodian institution transfer the customer's collateral to the loan collateral account opened by the securities firm at the Taiwan Depository & Clearing Corporation (TDCC). The customer's financing period may not exceed 6 months, and the ratio of the collateral value to the financing amount provided by the securities firm to the customer may not be lower than that provided in Article 18.
When the customer of the preceding paragraph submits the application to borrow money by a method other than in person, the provisions of Article 13, paragraphs 2 and 3 shall apply mutatis mutandis.
Before the expiration of the financing period in paragraph 1, the customer may file an application to extend the period, and the securities firm may grant a single, six-month extension depending on the customer's creditworthiness.
Collateral referred to in paragraph 1 shall be limited to the following:
1. Common stock of component companies of the Taiwan 50 Index, Taiwan Mid-Cap 100 Index, or Taiwan Technology Index; beneficial interest certificates of exchange-traded funds (ETFs) and common stock of component companies of those funds.
2. Common stock of MSCI Taiwan Index component companies announced by Morgan Stanley Capital International.
3. Government strip bonds.
4. Other collateral approved by the competent authority.
Collateral posted by a customer under the preceding paragraph may be replaced during the financing period. The method for applying for replacement shall be stipulated between the parties.
When a customer makes partial repayment prior to the expiration of the financing period, the securities firm shall return to the customer the securities it originally posted as collateral on a proportional basis, provided that increments of less than one trading unit may not be returned.
For each loan of money using the financing method set out in paragraph 1 herein, the securities firm shall notify the customer in writing 10 business days before the expiration of the financing period.
Article 17In securities business money lending conducted by a securities firm, if the customer posts collateral in the form of securities that it holds, funds derived from any sale of those collateral securities prior to the expiration of the financing period shall first be used to repay the money lent, provided that this condition shall not apply if the customer has already replaced the collateral securities before repayment is made.
The securities firm may stipulate with the customer that prior to the expiration of the financing period as referred to in the preceding paragraph, the customer's securities trading balance will be used to repay the money lent. The scope of the securities trading balance shall be stipulated between the parties.
Article 18In securities business money lending conducted by a securities firm, if the customer posts collateral in the form of securities that it holds, the financing calculation standards for the collateral provided by the customer shall be as listed below:
1. Common stock of component companies of the Taiwan 50 Index, Taiwan Mid-Cap 100 Index, or Taiwan Technology Index; exchange-traded funds (ETF) and common stock of component companies of those funds; and common stock of MSCI Taiwan Index component companies announced by Morgan Stanley Capital International, shall be calculated at 60 percent of the closing or reference price on the business day prior to the financing, excluding any portion of less than one trading unit.
2. Government strip bonds shall be calculated at 80 percent of their face value.
The closing price and reference price referred to in subparagraph 1 of the preceding paragraph shall be set in accordance with Article 58-3 of the TWSE Operating Rules or Article 57 of the GTSM Rules Governing Securities Trading on Over-the-Counter Markets.
The financing calculation standards for collateral set out in paragraph 1 may be adjusted by the TWSE in consultation with the GTSM based on the circumstances regarding that collateral.
Article 19When the competent authority approves and announces suspension of trading, or termination of exchange or OTC listing, of a security that a customer has posted as collateral, or when government strip bonds that a customer has posted as collateral mature, the suspension or delisting date, or the maturity date, of that security shall be deemed the expiration date of the financing period. After being notified by the securities firm, the customer shall repay the money lent and the interest by the 10th business day before the trading suspension or listing termination date or the government strip bonds' maturity date, provided that this requirement shall not apply if the customer has replaced the collateral, or in cases where the issuing company of an OTC-listed security is applying to convert the security to an exchange-listed security, or where the securities of both the surviving and non-surviving listed (or OTC) companies in a merger qualify as collateral.
When during the collateral period, the customer replaces collateral it provided with common stock of a component company of the Taiwan 50 Index, Taiwan Mid-Cap 100 Index, Taiwan Technology Index, MSCI Taiwan Index, or common stock of a component company of an exchange-traded fund, the securities firm may accept that collateral until the expiration date of the financing period.
Article 20When the customer repays money lent, it shall fill out a Loan Repayment Application Form, and shall deposit (remit) the repayment money into the financial institution account designated by the securities firm by 12 noon of the application date. After the securities firm verifies that the financed amount and interest have been properly credited to its account, it shall transfer the collateral and additional collateral securities to the depository account opened by the customer by the first business day after the repayment application date.
If the customer is not itself the owner of the additional collateral securities referred to in the preceding paragraph, the securities firm shall transfer the collateral to the depository account opened by the owner.
When a customer referred to in the first paragraph submits the application to repay money by a method other than in-person, Article 13, paragraphs 2 and 3 shall apply mutatis mutandis.
Article 21A securities firm shall keep detailed and accurate records and receipt/payment vouchers for securities business money lending, and shall compile on a daily basis the following statements:
1. Daily operations report for loan transactions.
2. A summary statement and itemized statement of additions to, repayments of, and balances of, loan accounts.
3. Itemized statement of receipt/payment, disposition, and utilization of collateral for loan accounts.
4. Summary statement of collateral shortfalls and covering thereof.
5. Itemized statement of additional collateral securities.
Article 22Each business day, a securities firm shall compile statements and computer data based on the balance of the collateral and additional collateral securities deposited by a customer that has applied to borrow money, and transmit them to the TWSE.
   Chapter 4  Calculation of the Collateral Maintenance Ratio and Covering of Shortfalls
Article 23In securities business money lending conducted by a securities firm, if a customer posts collateral in the form of securities that it holds, the customer's overall-account and individual-transaction collateral maintenance ratio for money lent to the customer shall be calculated as follows:
Collateral maintenance ratio = (market value of the collateral + market value of additional collateral securities [for government strip bonds: 80% of face value]) divided by the financing amount, and multiplied by 100%.
If the customer has posted collateral in the form of securities that it holds, the securities firm shall mark-to-market the customer's collateral maintenance ratio each business day. If the customer's collateral maintenance ratio is lower than 120 percent due to a change in the value of the collateral or additional collateral securities, the securities firm shall notify the customer to cover the collateral shortfall and bring the collateral maintenance ratio above 166 percent within two business days from receipt of the notice, and the following provisions shall be complied with:
1. If the customer fails to cover the collateral shortfall within two business days from the date upon which the notice is served and the collateral maintenance ratio is still lower than 120 percent, beginning from the third business day, the securities firm shall dispose of the customer's collateral beginning from the third business day under the mutatis mutandis application of Article 27, paragraph 1.
2. If the customer fails to cover the collateral shortfall within two business days from the date on which the notice is served and the collateral maintenance ratio has risen to 120 percent or higher, the securities firm may temporarily refrain from disposing of the collateral on the third business day. However, on any subsequent business day in which its collateral maintenance ratio is again lower than 120 percent and where the customer does not deposit additional collateral on its own initiative on the afternoon of that day, its collateral shall be disposed of beginning on the next business day under the mutatis mutandis application of Article 27, paragraph 1.
3. If the collateral maintenance ratio returns to 166 percent or higher even though the customer has not covered, or has covered only a portion of, the collateral shortfall, or if the customer makes successive collateral deposits sufficient in total to cover the shortfall as stated in the notice prior before its collateral has been disposed of under the preceding subparagraphs, the record of the collateral call shall be expunged.
In securities business money lending conducted by a securities firm, if the customer posts financing collateral in the form of securities that it holds, any and all individual loans of funds in the financing account for which the collateral maintenance ratio is below 120 percent are shortfalls that is required to be covered pursuant to the preceding paragraph, and shall be subject to a collateral call.
If, as a result of any change in share price, there is an increase in the net value of the collateral in a customer's financing account less the customer's obligations, the securities firm is prohibited from delivering to the customer any cash or securities equivalent to the amount of the increase.
The disposal of collateral under paragraph 2, subparagraphs 1 and 2 shall be carried out in accordance with Article 27 of the Operating Rules. If such disposal is insufficient to make repayment, the customer shall be notified to make repayment within a certain time period, with interest accruing at the financing interest rate from the date on which the claim occurred until the date of repayment.
Article 24A securities firm conducting securities business money lending may, beginning from six business days before the ex-rights date of the collateral and additional collateral securities provided by a customer, calculate the collateral maintenance ratio for each day based on that day's closing or reference price of each security on each given day minus the value of the share rights or dividends, and the provisions of the preceding article shall apply mutatis mutandis.
Article 25In securities business money lending conducted by a securities firm, if a customer posts collateral in the form of securities that it holds, the additional collateral securities that the customer shall provide to cover a collateral shortfall under Article 23 shall be limited to common shares of TWSE Taiwan 50 Index, TWSE Taiwan Mid-Cap 100 Index, or TWSE Taiwan Technology Index component companies, exchange-traded funds and common shares of their component companies, common shares of MSCI Taiwan Index component companies announced by Morgan Stanley Capital International, government strip bonds, or other collateral approved by the competent authority.
The valuation percentage for calculating the collateral value of additional collateral securities under the preceding paragraph shall be subject, mutatis mutandis, to Article 18, paragraph 1.
Securities to which either of the circumstances listed below applies may not be used as additional collateral:
1. Securities comprising less than one trading unit.
2. Where the securities are registered shares of the issuing company acquired by its shareholders or capital contributors as a result of that company's conduct of a capital increase from earnings, capital increase through contributions by that company's employees out of their bonuses to the industry in which they serve, or capital increase by a venture capital company out of undistributed earnings pursuant to Article 13 of the Statute for Encouragement of Investment or Articles 16 and 17 of the Act for Upgrading Industries, and such shares have not been transferred or reported for taxes.
When calculating a customer's overall account collateral maintenance ratio, a securities firm is not required to apply a haircut to the value of the additional collateral securities.
If the rate of bonus shares or stock dividend shares distributed on collateral or additional collateral securities provided by a customer is 20 percent or higher, except where the Competent Authority has imposed restrictions on trading of the securities, all such new shares shall serve as collateral, and the right to defer income tax shall be waived. The Taiwan Depository & Clearing Corporation shall transfer the shares by book-entry transfer into the segregated loan collateral account opened by each securities firm, and the provisions of Article 33 of the Regulations Governing the Handling of Stock Registration and Transfer Services by Public Companies shall not apply.
Bonus shares or stock dividends referred to in the preceding paragraph may not be used as collateral for borrowing securities from the TWSE securities lending system or for obtaining refinancing from a securities finance enterprise.
The provisions of Article 24 shall not apply to bonus shares or stock dividend shares used as collateral. After ex-rights trading has commenced, the market value of such shares shall be calculated at 60 percent of the closing price or reference price of the exchange-listed or OTC-listed securities. After the shares have been transferred to the securities firm's segregated loan collateral account, the haircut need not be applied to the calculation of their value.
The provisions of Article 18, paragraph 2 shall apply mutatis mutandis to paragraph 1 and the preceding paragraph.
Article 26A customer shall warrant that additional collateral securities it provides are free and clear of all liens, claims, and encumbrances of any nature whatsoever. If there is any defect in rights or legal dispute regarding the securities, within three business days after receiving notice thereof from the securities firm, the customer shall replace such securities with securities eligible for use as additional collateral, or pay their equivalent value in cash.
Where the customer is not the owner of additional collateral securities it provides, it shall be responsible for obtaining the household registration information, verification of source, and consent letter of the owner of such securities.
   Chapter 5  Handling of Violations
Article 27When any of the circumstances listed below applies to a customer, at market opening on the business day on which disposal is required, the securities firm shall, through the Money Lending Default Handling Account opened with another securities broker, dispose of the respective collateral and additional collateral securities on the TWSE centralized exchange market or through the GTSM Securities market trading system through. If an order to dispose of the collateral is not executed, it shall continue to be quoted on the next business day, and the related processing fees and tax shall be borne by the customer.
1. Repayment has not been made at the expiration of the financing period.
2. The money lent has not been repaid pursuant to Article 19.
3. A collateral shortfall has not been covered pursuant to Article 23.
4. Replacement of additional collateral securities has not been made pursuant to Article 26.
Where a securities firm disposes of securities pursuant to the preceding paragraph and such disposal is insufficient to offset the debt, it shall notify the customer to cover the shortfall on the next business day. If the customer fails to do so, the securities firm may dispose of the collateral and additional collateral securities provided by that customer up to the amount required to repay the debt. If any surplus remains, it shall be returned to the customer; if any shortfall remains, the customer shall be notified to repay it within a prescribed time period.
Where a customer fails to perform a settlement obligation on time during the financing period as provided in Article 91 of the TWSE Operating Rules or Article 87 of the GTSM Rules Governing Securities Trading on Over-the-Counter Markets, the securities firm shall notify the customer to settle the obligation the next business day. If the obligation is not settled, the securities firm shall, through the Money Lending Default Handling Account opened with another securities broker, dispose of the collateral and additional collateral securities provided by the customer to repay the money lent.
During the financing period, if a customer is in default, at another securities firm, as defined in Article 76, paragraph 3, subparagraphs 1 or 3 of the TWSE Operating Rules, or Article 47, paragraph 2, subparagraphs 1 or 3 of the GTSM Rules Governing Securities Trading on Over-the-Counter Markets, prior to settlement of the obligation, the customer may have the collateral and additional collateral securities it provided sold by the securities firm through the Money Lending Default Handling Account opened with another securities broker to repay the money lent.
Article 28Where a shortfall still exists after the securities firm disposes of collateral pursuant to paragraph 2 of the preceding article, the securities firm shall notify the customer to make repayment within a certain time period; prior to repayment, the securities firm may not make any additional loans of money to the customer in connection with securities business.
When any of the circumstances in Article 27, paragraph 1 applies to a customer, in addition to taking the measures set out in that paragraph, the securities firm may collect a default penalty equal to 10 percent of the stipulated financing interest rate from the day repayment is overdue until the date of repayment.
   Chapter 6  Title Transfer for Collateral Securities and Additional Collateral Securities Used for Financing
Article 29On the business day preceding book closure of the issuing company, a securities firm shall prepare a customer-by-customer title transfer list and electronic data file for the collateral and additional collateral securities provided by each customer and send it to the Taiwan Depository & Clearing Corporation to effect the share transfer with the issuing company or its stock registrar and transfer agent on the customer's behalf.
If any of the collateral or additional collateral securities obtained by a securities firm in the course of securities business money lending is utilized for rehypothecation, the securities firm shall replace it four business days before book closure, and proceed in accordance with the preceding paragraph.
   Chapter 7  Risk Control
Article 30A securities firm conducting securities business money lending may not engage in transactions with any party having any of the following relationships with it:
1. A director, supervisor, representative of a juristic-person director or juristic-person supervisor, employee, or shareholder holding more than 10 percent of the total shares, of the securities firm.
2. A spouse of a director or supervisor, or of a representative of a juristic-person director or juristic-person supervisor, of the securities firm.
3. A minor child of a person of a status specified in subparagraph 1 herein.
A securities firm shall incorporate the provisions of the preceding paragraph into its internal control system.
Article 31In securities business money lending conducted by a securities firm, with respect to customers posting collateral in the form of securities being purchased by the customers, the securities firm shall adopt an internal control system regarding circumstances such as over-concentration of the outstanding balance of financing to customers in a single party, a single group of related parties, or a single security, and shall adopt risk control mechanisms.
Article 32In securities business money lending conducted by a securities firm, with respect to customers posting collateral in the form of securities held by the customer, the securities firm shall calculate for each individual customer the combined total of the amount of money the securities firm has approved for lending to the customer plus the amount of financing it has made available to the customer in margin purchase and short sale business. The combined total of financing to a single natural person may not exceed 1 percent of the securities firm's net worth or NT$60 million; that to a single juristic person may not exceed 5 percent of the securities firm's net worth or NT$1 billion; that to a single group of related parties may not exceed 10 percent of the securities firm's net worth, and that to natural persons within such a group may not exceed may not exceed 2 percent of the securities firm's net worth.
Article 33In securities business money lending conducted by a securities firm, with respect to customers posting collateral in the form of securities being purchased by the customers, the outstanding balance of financing to customers may not exceed 150 percent of the securities firm's net worth; the outstanding balance of overall financing provided to customers, counted as the combined total of financing provided in securities margin purchase and short sale business and securities business money lending, may not exceed 400 percent of the securities firm's net worth.
A securities firm conducting securities business money lending shall report the information under the preceding paragraph to the TWSE on a daily basis.
Article 34In securities business money lending conducted by a securities firm, with respect to customers posting collateral in the form of securities being purchased by the customers, if the amount of financing made available to customers on any single business day exceeds 50 percent of the securities firm's net worth or reaches NT$1 billion, or if the outstanding balance of financing to customers exceeds 100% of the securities firm's net worth, the securities firm shall file the relevant financing data with the TWSE on the same day.
   Chapter 8  Supplementary Provisions
Article 35A violation of these Operating Rules by a securities firm, its responsible person, or employee may be dealt with by the TWSE or GTSM in accordance with its applicable rules and regulations.
Article 36These Operating Rules, and amendments hereto, shall be jointly drafted by the TWSE and GTSM, and publicly announced and implemented after submission to and final approval by the competent authority.