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Directions for Internal Control of Agency Services Operated by Securities Firms Engaged by Customers to Invest Their Securities Trading Balances  CH

Announced Date: 2006.03.02 
Categories: Market Supervision > Regulation of Securities Firms
1     The internal control system of a securities firm operating agency services on behalf of customers to invest their securities trading balances (hereinafter, the "Services") shall cover, at the very least, the following operating procedures, delegation of powers of responsibilities, management of accounts, and other key points:
  1. The securities firm shall be investigated by and receive approval from the Taiwan Stock Exchange Corporation (hereinafter, "TWSE") before it may operate the Services. The securities firm shall also abide by securities and exchange laws and regulations, the "Operation Directions for Agency Services Operated by Securities Firms Engaged by Customers to Invest Their Securities Trading Balances " (hereinafter, the "Operation Directions"), and relevant rules, regulations, public notices, and letters of the TWSE and the Gre-Tai Securities Market (hereinafter, "GTSM").
  2. The securities firm shall incorporate the delegation of powers and responsibilities with regard to the Services in the hierarchy of responsibility.
  3. Customers entrusting the securities firm to operate the Services must be customers who already have a trading account.
  4. When applying to the securities firm for the Services, customers who are natural persons shall bring in person the original of their national identity card, sign an agreement for rights and interests, and present a specimen seal impression card or signature specimen card.
  5. Customers who are persons with limited or no legal capacity wishing to apply to the securities firm for the Services shall do so through their legal representative or legal guardian, who shall personally bring the original of his own identity card as well as that of the customer for the application. If the customer has not obtained an identity card, a transcript of domiciliary register or a household register may be submitted instead; the guardian shall also present documents proving guardianship.
    When filing the application in the first paragraph, customers who are juristic persons shall have their authorized agent present a power of attorney, the original of the national identity card of the agent as well as that of the representative, and the original of the Juristic Person Incorporation (Amendment) Registration Card and documents proving juristic person registration.
    A photocopy of the identification documents and Juristic Person Incorporation (Amendment) Registration Card each, and the original of the power of attorney, as mentioned above, shall be kept for record-keeping purposes. Each photocopy shall be stamped with the inscription "This document have been received, were brought in person by the person or agent himself/herself, and is correct and without fault."
  6. The agreement for rights and interests between the securities firm and the customer in connection with the Services shall be based upon the template of the Taiwan Securities Association, stating the contract terms stipulated by the Operation Directions, executed by the securities firm, customer, securities investment trust enterprise, bank, government bond repo transactions dealer, and strictly enforced.
  7. In performing the Services, the securities firm as engaged by the customer shall transfer the trading securities balances to the securities firm's settlement account. Where, prior to the transfer of funds from the settlement account to the customer's account opened with the financial institution designated by the securities broker, the customer instructs the securities firm to make a transfer on its behalf on the same day, transfer of the customer's settlement balances must be completed on the same day with no retention, and the securities firm may not open other accounts in the name of itself or the customer.
  8. A securities firm may set its own limit on the amount of funds to be transferred with regard to the Services.
  9. Funds transferred by the securities firm to the relevant accounts in connection with the Services are to be used only for the purposes of repo transactions of government bonds, money market funds, and bond funds - quasi-money market funds approved by the competent authority, and may not be used for other purposes. Funds may only be transferred between accounts. The inter-account transfers mentioned above are subject to the approval of the supervisor responsible for the Services or to his review followed by submission for approval, before they may be conducted.
  10. When the securities firm conducts a repo transaction of government bonds on behalf of the customer, the customer and the counterparty shall sign a repurchase/resale master agreement. The credit rating of the counterparty, letter of authorization for the securities firm representing the customer, and rules governing securities firms conducting repo transactions of government bonds for customers shall be governed by the Operation Directions and the requirements of the competent authority.
  11. When the securities firm invests in money market funds and bond funds - quasi-money market funds and needs to use the seal of the securities firm as appearing in the agreement for rights and interests in lieu of the customer's seal on the application documents of subscription, repurchase, and conversion, the securities firm shall obtain the authorization of the customer. The securities firm shall also establish record-keeping measures for the safekeeping of trade confirmations.
  12. A securities firm shall set up a separate account for each customer and keep a daily record of each transfer of customer funds in the settlement account of the securities firm.
  13. The securities firm shall prepare a monthly account statement for customers using the records described in the previous paragraph, unless there have been no transactions that month and the customer does not request in writing.
    The securities firm and the customer shall sign an agreement, agreeing that the TWSE, GTSM, and institutions appointed by competent authorities may collect, computerize, internationally transmit, and use their personal data pursuant to relevant laws.
  14. A securities firm that performs the Services shall keep accurate records and certification of receipts and payments, and make a report of the following for each day:
    1. Daily business report and balance report.
    2. A detailed report of all receipts and payment and utilization.
  15. A securities firm may charge customers a handling fee for the performance of the Services, at the rate to be set by the firm.
  16. If a customer does not have any transactions for three or more consecutive years, the securities firm shall terminate the Services and notify the customer. If the customer needs to terminate the Services, it shall fill a "Termination of the Services Application."
  17. Where the customer's account is cancelled, the agreement for rights and interests will terminate ipso facto after the investment object expires or is repurchased or after the contract therefor is rescinded.
  18. The internal audit of the Services performed by the securities firm shall be reviewed at least once a month.