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Article 5
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A securities firm conducting securities trading margin purchase and short sale operations shall be subject to the requirements of the competent authority in relation to amount limit, duration, margin purchase leverage ratio, and short sale margin.
The duration of a securities trading margin purchase and short sale is six months. A customer may apply for extension prior to the expiration of the duration. The number of such applications allowed is two. A securities firm shall review a customer's credit status before granting an extension. Notwithstanding, if, on account of a split, reverse split, or otherwise, the securities acquired through margin purchases by a customer at different times are consolidated into one trading unit, the duration of margin purchases of said securities will be the duration of the latest acquisition through margin purchases. Upon accepting an application for the opening of a margin account, a securities firm shall sign application documentation for extending the duration of each margin purchase and short sale on a blanket basis with the customer. The application documentation must include the number of extensions available for selection and the follow-up to the evaluation result regarding applications for extension upon expiration. Upon execution, the said documentation shall apply to each subsequent margin purchase and short sale. Where a customer seeks to amend the number of extensions, it shall re-sign the application documentation. Notwithstanding, in the circumstance where the amendment is to reduce the number of extensions, and the margin purchase and short sale has been extended as requested, such margin purchase and short sale shall continue until the extension period expires.
A securities firm that agrees to a customer's extension of each margin purchase and short sale shall grant a six months' extension for each such purchase and sale, and may not terminate an extension unless these Rules provide otherwise.
Where a securities firm disagrees with an extension sought by a customer as in the preceding paragraph, or a margin purchase and short sale has been extended twice, said firm shall notify the customer in writing ten business days prior to the expiry.
The duration of a margin purchase and short sale where the underlying securities are subject to a suspension of trading or transaction is extended until the resumption of their trading or transaction.
The securities firm shall give a written notice to the customer of a margin purchase or short sale no later than 10 business days before the end of the duration as fixed by the competent authority under the preceding paragraph. Notwithstanding the foregoing, the notice is not required if, pursuant to the Operational Guidelines Governing Securities Firms and Securities Finance Enterprises Accepting Applications by Customers for Extending the Duration of Each Margin Purchase and Short Sale the customer has entered into application documentation for extending the duration of each margin purchase and short sale on a blanket basis and the securities firm has granted consent to the customer for such extension.
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