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Taiwan Stock Exchange Corporation Rules Governing the Targeted Examination and Handling of Defaults on Settlement Obligations by Securities Firms  CH

Amended Date: 2002.07.05 
Categories: Market Supervision > Regulation of Securities Firms
Article 1     These Rules are adopted pursuant to Article 23, Paragraphs 3 and 4 of the Regulations Governing Stock Exchanges.
Article 2     Targeted examination and handling procedure of defaults on settlement obligations by a securities firm are governed by these Rules, unless otherwise stipulated in laws and regulations. The rules of the TWSE shall be followed in the event of issues not regulated by these Rules.
Article 3     The securities firm that enters into a contract for the use of the centralized securities exchange market with the TWSE shall obtain a letter of consent from two or more securities firms at the time of executing the contract undertaking to conduct settlement matters immediately when the contracting securities firm is unable to perform its settlement obligations, and shall such mandate in writing and submit an original of each of the undertakings to the TWSE for recordation.
    The mandate indicated in the preceding paragraph shall specify the priority of the securities firms to conduct settlement matters on behalf of the mandating securities firm, and the securities firm that is within the same geographic district shall take priority as the mandatary. However, if there is no other securities firm located in the same geographic district, the one that is closer to the mandating securities firm shall take priority.
    If any of the following events occurs to the mandated securities firm, the mandating securities firm shall re-appoint another securities firm in accordance with the requirements set forth in preceding two paragraphs and report to the TWSE in writing for recordation:
  1. Termination of mandate relationship.
  2. Reorganization, liquidation or bankruptcy.
  3. Revocation of business approval by the competent authority.
  4. Termination of the contract by the TWSE.
Article 4     When the securities firm is unable to perform its settlement obligations, the TWSE may notify and oversee the mandated securities firm as specified in Paragraph 2 of the preceding article in the latter's engagement in settlement affairs on behalf of the mandating securities firm and, subject to the actual circumstances, may also appoint another securities firm to take over the settlement affairs.
    If a material and unexpected incident occurs to the securities firm preventing its performance of its settlement obligations, the preceding paragraph shall apply mutatis mutandis, and the clearing and settlement fund shall be utilized in accordance with applicable regulations.
Article 5     When a securities firm breaches its settlement obligations, in addition to halting trading of its dealing or brokerage business pursuant to Article 142 of the Operating Rules of the TWSE (the "TWSE Rules"), the TWSE shall conduct targeted examination to ascertain the following matters:
  1. The reason(s) of the breach of settlement obligations.
  2. The financial status of said securities firm.
  3. The settlement situation between said securities firm and its clients.
  4. Whether the responsible person and the employees have violated any laws and regulations.
Article 6     When a securities firm breaches its settlement obligations, the TWSE shall adopt measures in accordance with the "Procedures for Handling Defaults on Settlement Obligations by Securities Firms."
    The handling procedures above are to be duly established.
Article 7     If it is found that the securities firm has violated securities laws and regulations or the rules of the TWSE after the targeted examination, the TWSE shall impose penalties pursuant to the TWSE Rules in addition to reporting such violation to the competent authority in writing.
Article 8     These Rules are adopted by the TWSE and the Taiwan Securities Association. These Rules shall take effect after having been submitted to and approved by the competent authority. Subsequent amendments thereto shall be effected in the same manner.