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These Directions are promulgated pursuant to Article 87, paragraph 1 of the Operating Rules of the Taiwan Stock Exchange Corporation (TWSE). Reporting and correction of out-trades and account number corrections by securities brokers shall be undertaken in accordance with these Directions.
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Procedures for reporting out-trades and account number corrections:
Securities brokers shall report out-trades and account number corrections in accordance with the following rules:
- Reporting through computer:
- Period for entering information:
Securities brokers shall enter information relating to an out-trade or account number correction into the computer of the TWSE no later than 10 a.m. of the second business day following the trade date. However, where the securities broker is on record as having already made a settlement postponement report, entry shall be completed by 6 p.m. on the third business day from the trade date.
- Handling of breakdowns:
When accidental breakdowns prevent transmission of information over the computer transmission lines, the securities broker shall first report the breakdown to the TWSE by telephone, and re-enter the information after elimination of the problem.
- When the occurrence of a natural disaster results in an announcement of cancellation of work for government offices or schools by county or city governments, reporting by computer transmission by securities brokers within the affected area shall be undertaken in accordance with the provisions for handling of settlement matters due in the Taiwan Stock Exchange Corporation Measures for Responding to Natural Disasters.
- Reporting mechanism: where out-trades of a single type of securities by a securities broker reach NT$100 million or more, if the broker handles the out-trades by repurchase or resale, the broker shall notify the TWSE Trading Department by 2 p.m. on the date of handling; if the broker does not handle the out-trades by repurchase or resale, the broker shall notify the TWSE Trading Department at the time of reporting. The same applies when the amount of combined positions in New Taiwan dollars of foreign-currency or dual-currency securities upon conversion reaches the above sum.
The conversion of the aforementioned foreign currency into New Taiwan dollars is based on the exchange rate posted on the business day prior to the trade date.
- When the electronic reporting of out-trades or account number corrections by a securities broker for the same investor on the same trade date reaches a total amount of NT$50 million or more, or total shares (in beneficiary units) of 1 million shares or more, the TWSE may, depending on the circumstance, require the broker to submit relevant documentation within a prescribed time period. The same applies when the amount of combined positions of foreign-currency or dual-currency securities reaches the above sum.
The conversion of the aforementioned foreign currency into New Taiwan dollars is based on the exchange rate posted on the business day prior to the trade date.
- The securities broker shall internally prepare an itemized ledger showing corrections to account numbers for hierarchical review, and shall retain a copy for their files.
- The securities broker shall open a special error account at its place of business for the repurchasing and re-selling of stock connected with handling of out-trades. Trades made through that error account may not be changed to appear as trades through an investor's account, nor may trades through an investor's account be changed to appear as trades through the error account.
- Where an out-trade occurs in securities trading by a securities broker through an omnibus account, the report of the out-trade may not be based on the omnibus account. The report of the out-trade shall be based on the post-allocation securities trading account of the individual principal. However, this rule does not apply to account number corrections.
- Where an out-trade or account number correction occurs in trading conducted by auction or on-market tender offer, the securities broker shall produce an "Out-Trade Handling Report - Occurrence" or an "Investor Account Number Correction Report," and shall attach a copy of the order form, order confirmation, and execution report for that particular trade, and a written explanation of the reasons for the occurrence stamped with the seal of the company, the company's responsible person, and the person handling the matter, and submit them to the trading department of the TWSE for approval, after which, the TWSE shall input them into the computer system on behalf of the broker; if the error is attributable to alteration of the account number by the investor, an "Application for Account Number Correction" showing the account numbers before and after correction, and agreed upon between both parties, shall also be submitted. For an on-market tender offer transaction that is executed and settled on the same day, the submission must be made no later than 6 p.m. on the next business day.
- A securities broker may, upon application by an investor, report an out-trade for the price difference caused by erroneous execution of a brokerage order, but the provisions relating to repurchase or resale shall not apply.
- When an error occurs from a day trade of securities, the securities broker shall handle it pursuant to the following procedures:
- When the securities broker reports an out-trade or account number correction by 10 a.m. of the second business day following the trade date, it shall first cancel the reported day trade position, and then report the out-trade or account number correction.
- After 10 a.m. of the second business day following the trade date, the securities broker may report an out-trade only for the price difference after the offset of the buy and sell trades, but may no longer report any account number correction.
- The report of out-trades and account number corrections after a delayed settlement shall be conducted pursuant to Point 2, paragraph 9, subparagraph B.
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Procedures for handling out-trades:
- A securities broker reporting an out-trade in accordance with Point 2 shall handle the out-trade, on that day or the following business day, through its error account by a repurchase or resale of equal volume. However, securities of the same type traded on the same trade date may first be mutually offset; the securities broker shall enter information related to offsets into the TWSE computer during the period specified in Point 2, paragraph 1, subparagraph A.
- A securities broker handling an out-trade through a repurchase or resale in accordance with the preceding paragraph shall enter the information relating to handling of the out-trade into the TWSE computer at the latest by 10 a.m. on the second business day following the handling of the out-trade. After an out-trade that occurred in trading conducted by auction or on-market tender offer has been handled through a resale or repurchase, the securities broker shall submit a copy of the order form, order confirmation, and execution report for that particular trade, and a written explanation of the reasons stamped with the seal of the company, the company's responsible person, and the person handling the matter, to the trading department of the TWSE, which shall input them into the computer system on behalf of the broker.
- A securities broker which, through no fault attributable to itself, fails to repurchase or resell securities within the specified period in Point 3, paragraph 1, shall produce a record of its handling of the matter to be kept on file with the relevant evidentiary documents.
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Procedures for reporting account number corrections for which an investor is liable:
- A securities broker processing an application for correction of an account number from the investor who originally placed the order shall do so, at the latest, by 10 a.m. of the second business day after the trade date; in the case of an on-market tender offer transaction that is executed and settled on the same day, it shall do so, at the latest, by 6 p.m. of the first business day after the trade date.
- A securities broker shall report correction of an account number in accordance with the investor's instructions regarding account numbers before and after correction and the "Application for account number correction" agreed upon between the investors. If the account number prior to correction was the number of a vacated account, the securities broker shall provide verification of such fact.
- A professional institutional investor requesting an account number correction in a manner consistent with the requirements on method of brokerage trading under Article 75 of the Operating Rules may not be required to submit the application in the preceding paragraph, in which case the securities firm shall keep the related information. If, however, the agent authorized for old account number is different from the agent authorized for corrected account number, or the corrected account number is for a different professional institutional investor for which not the same agent is authorized, the securities firm shall keep the agreement information showing the above expression of intent by both parties for the old and the new corrected account number.
- A securities firm shall retain the records about account number correction requested in accordance with paragraphs 2 or 3 above for a minimum of five years.
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Guidelines for handling of reporting of out-trades and account number corrections:
- A securities broker shall only report out-trades and account number corrections based on real errors and shall not have the following circumstances:
- To report an account number correction when an out-trade should have been reported, and vice versa.
- To report out-trades or account number corrections because investors have failed to complete share transfers in accordance with the procedures required for insiders.
- To report out-trades or account number corrections because investors are in violation of the regulations prohibiting sellout during the period of buyback of treasury stock by insiders or interested parties.
- To report out-trades or account number corrections because investors are in violation of the requirements on insider's right of claim for the recovery.
- To avoid regulatory compliance that should be complied with, or to facilitate investors to report inappropriate or false out-trades or account number corrections for their trades not because of an error attributable to the securities broker.
- To report out-trades or account number corrections based on other unreal errors.
- The securities broker shall bear liability for its encroachment on the rights and interest of the investor or for disputes arising out of the reporting and handling of out-trades or account number corrections.
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Handling of violations:
- Given the occurrence of any of the circumstances listed below in the reporting of out-trades or correction of account numbers by a securities broker, the TWSE, pursuant, mutatis mutandis, to Article 135 of the Operating Rules, may notify the securities broker to improve its practices, or, in addition thereto, a default penalty of not more than NT$100,000 may be imposed:
- Failure by a broker to action in accordance with Point 2, paragraphs 1, 2, 7 and 9, or Points 3 and 4, except for with reasonable cause and with the approval of the TWSE.
- Failure to report or handle a case in accordance with Point 2, paragraph 3 or 4.
- Violation of any of the subparagraphs in paragraph 1 of Point 5.
- When the circumstances of a securities broker's reporting of out-trades or correction of account numbers in violation of paragraph 1 of Point 5 are severe, the TWSE may issue a warning pursuant, mutatis mutandis, to Articles 136, 141 and 145 of the Operating Rules, or a default penalty of not more than NT$300,000 may be imposed, or restrict or suspend its trading or terminate its use of the market contract, and the TWSE may, pursuant, mutatis mutandis, to Article 144 of the Operating Rules, also notify the securities broker to issue a warning to or suspend its employees from executing business activities for one to six months.
- Where a securities broker has reported out-trades or account number corrections based on real errors but the errors are material or the securities broker is found by the TWSE to have committed apparent negligence in its operation, the TWSE may issue a warning pursuant, mutatis mutandis, to Article 136 of the Operating Rules, or a default penalty of not more than NT$300,000 may be imposed, and the TWSE may, pursuant, mutatis mutandis, to Article 144 of the Operating Rules, also notify the securities broker to issue a warning to or suspend its employees from executing business activities for one to six months.
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These Directions and any amendments to them shall be announced and take force upon filing with the competent authorities.
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