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The headquarters or branch office of a securities firm that receives a disposition to cease operations, voluntarily quits business (below referred to as "the disposed firm"), or terminates operations (for reasons including revocation of the operating permit); a securities firm authorized to handle matters on its behalf (below referred to as "the authorized firm"), and the disposed firm applying for resumption of operations, shall handle relevant matters in accordance with these Rules. Issues not addressed by these Rules are governed by applicable laws and regulations, and other bylaws and public announcements of the Taiwan Stock Exchange Corporation (below referred to as "the TWSE").
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The disposed firm shall designate an authorized firm to carry out settlement matters relating to the centralized custody of its clients' securities, such as securities deposits, withdrawals, account transfers and transfers of title, based on the sequence in which authorization agreements have been entered into for handling of settlement matters on its behalf, provided that where a branch office receives disposition to cease operations, the headquarters or another branch office may represent the branch office receiving the disposition in carrying out settlement matters. Under special circumstances, the TWSE may appoint another securities firm to undertake such matters, and shall note the appointments in the notice of suspension.
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Prior to the disposed firm's suspension of business, the TWSE may adjust the ratio of the total amount of brokered trading orders permitted relative to net funds available for use as prescribed under Article 28-1 of the Operating Rules of the Taiwan Stock Exchange Corporation, and shall report the same to the competent authority for reference.
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Handling of trading matters by the disposed firm and the authorized firm:
- Ordinary trading matters:
- Matters that shall be undertaken by the disposed firm:
- The disposed firm shall, with all due haste, post the notice of suspension of business on the announcement board in its trading room, and shall make an announcement to notify its clients of the following matters:
- Beginning from the day of suspension of business, the authorized firm shall undertake all matters relating to the lawful deposit, withdrawal, transfer, and transfer of title of securities.
- The disposed firm shall continue to carry out settlement of funds and securities for trades made prior to the suspension of business, and shall complete settlement and clearing procedures (including supplemental delivery of insufficient depository securities) with the TWSE and the Taiwan Depository & Clearing Corporation (below referred to as "the TDCC") in accordance with the Operating Rules of the Taiwan Stock Exchange Corporation.
- Clients of the disposed firm who complete account-opening procedures at the authorized firm may place trading orders with the authorized firm on the day of account opening.
- During afternoon clearing procedures prior to suspension of business, the disposed firm shall assist the authorized firm in opening accounts and establishing files with respect to brokered trading and centralized securities depository accounts.
- Prior to suspension of business, the disposed firm shall, with all due haste, carry out procedures for application for correction of securities in accordance with Article 109 of the Operating Rules of the Taiwan Stock Exchange Corporation, and where such procedures have not been carried out or borrowed securities have not been returned, the disposed firm shall notify the authorized firm to handle those matters on its behalf.
- For account errors occurring on the business day preceding the suspension of business, the disposed firm shall report such errors to the TWSE. When the error was not offset through timely repurchase or resale of securities on the day the error occurred, the suspended firm shall entrust the authorized firm to handle the error through an ordinary special account on the date suspension begins.
- The disposed firm shall dispatch business personnel to the authorized firm during the period of suspension (said personnel may not enter the operations counter area) to assist its clients in carrying out brokered trades and settlement matters at the authorized firm; in addition, it shall dispatch settlement and clearing personnel to the authorized firm to assist the authorized firm in carrying out matters relating to centralized securities deposit such as the deposit, withdrawal, transfer, and transfer of title of securities.
- The disposed firm shall, on the business day prior to the suspension of business, transfer to the authorized firm information on its clients' centralized depository accounts, the balance of deposited securities and changes in the volume of those deposits, and the clients' seal impression cards, and from the date suspension of business begins, withdrawal, deposit, transfer, and transfer of title of securities shall be carried out by the authorized firm on behalf of the disposed firm.
- The disposed firm shall, before the day of suspension of business, transfer the client funds kept in the settlement accounts to the securities funds book-entry accounts which are opened by the clients for trading in negotiable securities on the stock or over-the-counter market.
- Matters to be undertaken by the authorized firm:
- During the disposed firm's period of suspension, the authorized firm shall undertake centralized securities depository matters, including deposit, withdrawal, transfer, and transfer of title of securities in accordance with the regulations of the TDCC.
- The authorized firm shall assist the disposed firm's clients with account-opening procedures, and may accept securities trading orders from clients on the day account-opening procedures are completed.
- The authorized firm shall keep good custody of the information transferred from the disposed firm, and shall return the information to the disposed firm upon its resumption of business.
- Margin trading matters:
- Matters that shall be undertaken by the disposed firm:
- For margin loans or stock loans made for clients prior to the date suspension begins, the disposed firm shall carry out settlement in accordance with regulations.
- A list of information shall be produced, including a ledger of the balances on margin trades up to and including the last business day prior to suspension, letters of consignment, and seal impression cards, which shall be transferred to the authorized firm for checking and acceptance along with other information.
- Applications made by clients for redemptions in cash and redemption of securities in connection with margin trades after the date of suspension shall be transferred to the authorized firm for handling.
- Procedures shall be as follows when the disposed firm operates its own securities finance business:
The disposed firm shall notify any clients with established margin trading accounts that an additional account shall be opened for brokered securities trading at the authorized firm before further margin trading orders may be placed with the authorized firm and orders for short purchases and margin sales may be placed based on the balance of margin loans and borrowed securities at the disposed firm.
- Procedures shall be as follows when the disposed firm and the authorized firm act as agents for the same securities finance enterprise:
The disposed firm shall notify clients with established margin trading accounts that an additional account shall be opened for brokered securities trading at the authorized firm before further margin trading orders may be placed with the authorized firm.
- Procedures shall be as follows when the disposed firm and the authorized firm act as agents for different securities finance enterprises:
- Where the securities finance enterprise for which the disposed firm is agent has not signed an agency contract with the authorized firm, the disposed firm shall notify its margin trading clients of the following procedures:
- For margin trading, after clients open a new brokered securities trading account at the authorized firm, clients may only place orders for margin sales and short purchases.
- Margin purchases or short sales may only be made after margin trading accounts are transferred to another securities firm having an agency contract with the securities finance enterprise for which the disposed firm is agent, and the related margin sale and short purchase shall also be handled by the said securities firm.
- After the date of suspension, clients shall make application with the authorized firm for redemptions in cash and securities.
- When the securities finance enterprise for which the disposed firm is agent has entered into an agency contract with the authorized firm, procedures shall be as under Article 4, Paragraph 2, Subparagraph 1, Sub-Subparagraph 5.
- Matters that shall be undertaken by the authorized firm:
- Transaction receipts and forms produced by the authorized firm for brokered margin trades undertaken for clients of the disposed firm shall be stamped with "representing ______ securities firm," and shall be printed and produced separately.
- Margin trading clients proceeding to the authorized firm to open accounts shall be assisted in doing so with all due haste. For margin trading, the original account numbers of those clients may continue to be used, and orders for securities trades may be accepted on the day that account-opening procedures are completed.
- If the disposed firm is an agent for the same securities finance enterprise as the authorized firm, the authorized firm shall first request authorizing documents from the securities finance enterprise, and shall compile a set of all documents relating to the securities finance enterprise [in the course of representing the disposed firm,] and transfer a copy to the securities finance enterprise.
- Procedures for redemptions in cash and securities:
- When the disposed firm operates its own securities finance business, the authorized firm shall establish a special bank account for payment and receipt of funds in connection with clients' applications for cash or securities redemptions, and shall assist clients with related withdrawal or transfer procedures.
- When the disposed firm is agent for a securities finance enterprise in margin trading, the authorized firm shall, after handling clients' applications for cash or securities redemptions, transfer the prices of securities into clients' bank accounts, following the transfer of securities to the custodian accounts of clients by the securities finance enterprise or transfer of the prices of securities into the account of the bank account of the authorized firm by the securities finance enterprise.
- Securities lending and borrowing operations in relation to transaction needs and contractual performance shall be handled as follows:
- Matters that shall be undertaken by the disposed firm:
- Suspending, from the date of suspension, all securities lending and borrowing transactions, including opening of accounts, securities lending, compensation for entitlements, and return of securities.
- Transferring transaction information on clients who have opened securities lending and borrowing accounts up to the final business day to the authorized securities firm.
- Dispatching business personnel to the authorized firm during the period of suspension to assist its clients in carrying out securities lending and borrowing transactions at the authorized firm and subsequent matters.
- Matters that shall be undertaken by the authorized securities firm:
- Accepting and handling, from the date of suspension of the disposed firm, subsequent matters on its client's behalf including return of securities, compensation for entitlements, and withdrawals and exchanges of collateral.
- Assisting clients of the disposed firm with signing orders for securities lending and borrowing transactions and opening securities lending and borrowing accounts.
- Returning the unused balance on processing fees receivable by the disposed firm prior to the date of suspension after deduction of applicable expenses.
- Warrants issuing operation matters:
- Matters to be handled by the disposed firm:
- From the date of suspension, to suspend handling of matters in connection with investors' exercise of warrants.
- To provide information on unexpired call (put) warrants to the authorized securities firm.
- To assist the authorized securities firm in carrying out procedures in connection with investors' exercise of call (put) warrants.
- Matters to be handled by the authorized securities firm:
- Handling procedures for exercise of the call (put) warrants issued by the disposed firm on its behalf during the period of suspension of the disposed firm.
- Providing immediate notification to the TWSE and the TDCC in cases where the disposed firm lacks the capacity for exercise of call (put) warrants. In addition to assisting investors already exercising warrants with remaining procedures, it shall suspend any further handling of exercise of warrants by investors.
- Keeping proper custody of information transferred to it by the disposed firm, and returning that information to the disposed firm at such time as its operations are either resumed or terminated.
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Matters that shall be undertaken by the headquarters or branch office of a securities firm terminating business operations (including when the operating permit is revoked):
- When the headquarters of a securities firm is merged or transfers its business, it shall submit the following documents to the competent authority through the TWSE to seek approval:
- Employee placement plan
- Minutes of consultation meetings between the headquarters and the trade association or of labor-management meetings (applicable where there is no trade association)
- Other documents required by the competent authority
- When the headquarters of a securities firm terminates business operations:
- The firm shall announce matters relating to the termination of business, and shall assist clients, according to their preference, in making account transfer of centralized depository securities to another securities firm.
- The approval and certificate of license originally issued by the competent authority (including those for branch offices, where they exist) shall be returned to the competent authority.
- The original and copies of the Contract for Use of Centralized Securities Exchange Market Computer Linking, the Contract for Centralized Securities Exchange Market Computer Linking, the General Agreement for Securities Lending and Borrowing, and the Contract for Use of Trade Information shall be returned to the TWSE for cancellation.
- Following settlement of trades made on the TWSE exchange, and after final settlement of all accounts, application may be made to the TWSE for return of the already paid-in settlement and clearing fund.
- The securities firm has the obligation to preserve and keep in custody account books and vouchers, and shall undertake to do so in accordance with Article 13 of Criteria Governing the Preparation of Financial Reports by Securities Firms and the Required Periods for Preservation of Accounting Statements and Vouchers by Securities Firms. A custodian may be designated by the liquidator, or interested parties may apply to the courts for appointment of a special custodian.
- When a branch office of a securities firm terminates business operations (including when the operating permit is revoked), it shall immediately announce matters relating to the termination and assist clients, in accordance with their preferences, in making account transfer of centralized depository securities to the securities firm headquarters, another branch office, or another securities firm. These matters shall be handled in accordance with Subparagraphs 2 and 4 of the preceding paragraph.
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The disposed firm applying for resumption of operations shall comply with the following provisions:
- If the operation bond deposited as required by the competent authority is attached upon the court's provisional seizure, the shortfall shall first be made up where the creditors are entitled to preferential right of payment according to Article 55, paragraph 2 of the Securities and Exchange Act; where the enforcing creditors are not so entitled, the shortfall may be made up after the bond is delivered to the enforcing court or collected by the creditors.
- Where the settlement and clearing fund paid to the TWSE pursuant to Article 2 of the contract for the usage of the centralized securities exchange market is attached by the creditors, the shortfall amount shall first be made up.
- The requirements set forth in the Standards Governing the Establishment of Securities Firms governing the business floor and facilities shall be met.
- The circumstance mentioned in Article 142, paragraph 1, subparagraph 3 of the Operating Rules of the TWSE, where the net worth is less than one-half of the paid-in capital for six consecutive months with no rectification made, does not apply.
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The dispersed firm applying for resumption of operations shall make an application to the TWSE with an application form (as attached) accompanied by the required attachments submitted. The TWSE conducts written reviews in principle, provided it may conduct field inspections where necessary.
Whether the dispersed firm applying for resumption of operations complies with the subparagraphs of the preceding article is reviewed based on the information on file of the day the application is received by the TWSE.
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The dispersed firm applying for resumption of operations may resume its trading and shall report to the competent authority in writing for recordation, if it conforms to these Rules.
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Documents of the dispersed firm applying for resumption of operations shall be received by the TWSE at least seven business days prior to the scheduled resumption date. Resumption of trading by such firm may be deferred if the TWSE fails to complete its review timely as a result of any late delivery of such documents.
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Resumption of trading by the dispersed firm applying for resumption of operations may be permitted or deferred, depending on the circumstances, if it rectifies any noncompliance confirmed upon review with these Rules and gives formal notice to TWSE.
Trading by the dispersed firm applying for resumption of operations will not be resumed if it fails to rectify any noncompliance confirmed upon review with these Rules.
A report shall be made to the competent authority for recordation where trading by the dispersed firm applying for resumption of operations is deferred or not permitted due to the circumstance in either of the preceding two paragraphs as found upon review.
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These Rules shall take effect after having been submitted to and approved by the competent authority.
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