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Article 31-3
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A securities firm trading foreign securities for its own account or engaging in foreign derivative financial product transactions may not engage in margin transactions.
When a securities firm engages in trading or transactions mentioned in the preceding paragraph with any overseas affiliated enterprise, the terms and conditions thereof may not be more favorable than those offered to other similar counterparties, nor may there be any non-arm's length circumstances, and, except in cases where the securities firm is mandating the overseas affiliated enterprise to trade or transact on its behalf, the securities firm shall comply with the following provisions:
- Such trading or transactions shall be limited to trading of foreign bonds for the securities firm's own account and engaging in foreign derivative financial product transactions.
- Such trading or transactions may be done only with the approval of not less than three-quarters of the directors in attendance at a board meeting attended by not less than two-thirds of the directors. However, for case in which the following conditions are met, the securities firm may draft internal operational rules and, by an aforesaid board resolution, generally authorize the management to engage in such trading or transactions in accordance with those operational rules:
- The counterparty to the trade or transaction is an overseas affiliated enterprise that is registered in a jurisdiction that is supervised by a signatory member of the International Organization of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding (MMoU), and holds relevant financial business licenses and is supervised by a competent authority of that jurisdiction.
- The instruments traded or transacted have an open market price, or the monetary amount of the trade or transaction is insignificant.
- Unless the securities firm is concurrently operated by a financial institution and subject to other relevant acts or regulations, it shall comply with the following provisions:
- The total balance of its trades and transactions with any single overseas affiliated enterprise may not exceed 10 percent of the securities firm's net worth.
- The total balance of its trades and transactions with all overseas affiliated enterprises may not exceed 20 percent of the securities firm's net worth.
"Affiliated enterprise" in the preceding paragraph shall be as defined in the Affiliated Enterprises chapter of the Company Act.
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