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In securities business money lending conducted by a securities firm, if a customer applies for a financing period not exceeding 6 months and posts collateral in the form of securities or other commodities or foreign currencies that it purchases or holds, the additional collateral securities or other commodities or foreign currencies that the customer shall provide to cover a collateral shortfall under Article 23 shall be limited to the collateral in Article 16, paragraph 9.
The valuation percentage for calculating the collateral value of additional collateral securities or other commodities or foreign currencies under the preceding paragraph shall be subject, mutatis mutandis, to Article 18, paragraph 1.
The collateral in paragraph 1 to which either of the circumstances listed below applies may not be used as additional collateral:
- Securities comprising less than one trading unit.
- 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 or other commodities or foreign currencies.
If the rate of bonus shares or stock dividend shares distributed on collateral or additional collateral securities or other commodities 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 TDCC 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 of the TWSE or TPEx 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.
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