Chapter I General Principles
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| Article 1 | These Rules are adopted pursuant to Article 45-1, paragraph 1 of the Regulations Governing Securities Firms, Article 11, paragraph 2 of the Standards Governing the Establishment of Securities Firms, and Article 21-1, paragraph 1 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms.
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| Article 2 | A securities firm operating brokerage business for trading and exchanging beneficial certificates of funds (hereinafter, "fund brokerage") shall do so in accordance with these Rules and related provisions, except as otherwise provided by law or regulation.
"Fund brokerage business" means a securities firm handling trading or exchanging of funds between customers over a trading platform.
For the purposes of these Rules, "fund" means a securities investment trust fund or offshore fund as defined in Article 5 of the Securities Investment Trust and Consulting Act but does not include any fund already listed on the Taiwan Stock Exchange or Taipei Exchange.
If fund brokerage business handled by a securities firm will involve foreign exchange business, the securities firm shall obtain the consent of the Central Bank.
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| Article 3 | Terms used in these Rules are defined as follows:
- The competent authority: the Financial Supervisory Commission.
- Trading platform: the information platform set up by a securities firm for the operations of fund brokerage business.
- Trade: the purchase or sale of a fund over the trading platform by a securities firm based on an order received from a customer.
- Exchange: a transaction in which one fund is exchanged for another fund over the trading platform by a securities firm based on an order received from a customer.
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| Article 4 | To apply to operate fund brokerage business, the applicant shall apply to establish a securities firm or convert into a securities firm under Article 9 or 10-2 of the Standards Governing the Establishment of Securities Firms, or to add an additional business type or business item under Chapter VI of the Standards Governing the Establishment of Securities Firms. It shall submit the application and supporting documents to the TPEx which will review them and then forward them to the competent authority for approval.
After a securities firm has received approval from the competent authority under the preceding paragraph, it shall submit an application (Attachment 1) clearly stating the required information, along with the required supporting documents, to the TPEx to apply to sign a Contract for Operation by a Securities Firm of Brokerage Business for Trading and Exchanging Beneficial Certificates of Funds (Attachment 2).
If a securities firm, when it has merely signed the Contract with the TPEx under the preceding paragraph, experiences any of the matters required to be reported as listed in Article 4, paragraph 1 of the Regulations Governing Securities Firms, it shall, unless otherwise provided by law or regulation, submit its report to the TPEx, which shall forward it to the competent authority.
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| Article 5 | A securities firm shall adopt an internal control system pursuant to the provisions relating to fund brokerage business set out in the Standard Directions for the Internal Control Systems of Securities Firms adopted by the TPEx and submit it for approval by its board of directors and shall comply with Articles 21 to 24 and Article 36-2, paragraph 2 of the Regulations Governing the Establishment of Internal Control Systems by Service Enterprises in Securities and Futures Markets.
A securities firm's operation of the business under these Rules shall comply with laws and regulations, its articles of incorporation, and the internal control system referred to in the preceding paragraph.
Whenever the TPEx gives notice to make any amendments to the internal control system referred to in paragraph 1, the securities firm shall make the amendments within the specified time limit.
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| Article 6 | A securities firm operating fund brokerage business shall adopt a risk-based approach to perform its anti-money laundering and countering the financing of terrorism (AML/CFT) operations, in accordance with the provisions of the Money Laundering Control Act, the Counter-Terrorism Financing Act, the Regulations Governing Anti-Money Laundering of Financial Institutions, and the Regulations Governing Internal Audit and Internal Control System of Anti-Money Laundering and Countering Terrorism Financing of Securities and Futures Business and Other Financial Institutions Designated by the Financial Supervisory Commission.
A securities firm operating fund brokerage business shall establish an internal control and audit system for AML/CFT, based on the risk of money laundering and terrorism financing as well as its business scale, and taking into reference the Taiwan Securities Association Template for Guidelines Governing Anti-Money Laundering and Countering Terrorism Financing of Securities Firms, and shall have the system approved by its board of directors, and furthermore shall regularly review whether any amendments to the system are needed.
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| Article 7 | The places of business and facilities of a securities firm operating fund brokerage business shall comply with the standards governing sites and facilities as prescribed by the TPEx.
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| Article 8 | A securities firm shall, on a customer-by-customer basis, establish mechanisms for the collection, payment, transfer, and custody of money and mechanisms for the recordation, transfer, and custody of funds, and incorporate them into its internal control system.
The securities firm shall sign a contract with the centralized securities depositary enterprise, and on a daily basis transmit data including the itemized details of trades and exchanges of funds over the trading platform to the information reporting system designated by the centralized securities depositary enterprise, and the centralized securities depositary enterprise shall save backups of the data and make it available for querying and reference by investors. If any discrepancy is discovered, the securities firm and the centralized securities depositary enterprise shall jointly investigate and determine the cause and correct the discrepancy.
The itemized data that the securities firm shall transmit under the preceding paragraph shall be confined to funds for which the collection and payment of money for subscription and redemption is done through a segregated bank account designated for this purpose by the centralized securities depository enterprise.
Matters relating to information transmission, handling of irregularities, and fees shall be handled in accordance with the provisions of the centralized securities depositary enterprise.
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| Article 9 | A securities firm operating fund brokerage business shall, in accordance with Article 38-1 of the Regulations Governing Securities Firms, establish a segregated deposit account with a bank for the collection and payment of customer money. The money in that account shall be kept separate and independent from the securities firm's own assets and may not be used for any other purposes.
A securities firm may not utilize the money referred to in the preceding paragraph except for the purpose of making required payments on behalf of its customer.
A securities firm operating fund brokerage business shall sign a trust agreement with the financial institution with which the segregated deposit account is opened, designate the segregated deposit account as the trust account, and engage the financial institution to manage, utilize, and dispose of the funds in the account in accordance with the trust agreement.
A securities firm operating fund brokerage business, if it fails to do as set out in the preceding paragraph, may not accept money from customers.
A securities firm's creditors may not, to satisfy any debt owed by the securities firm with respect to its own property, make any claim or exercise any other right against money obtained by the securities firm for a customer in connection with business.
The trust agreement signed between the securities firm and the financial institution in accordance with paragraph 3 shall stipulate the following:
- The scope of the management and utilization of the trust property shall be limited to investment in funds as defined in Article 2, paragraph 3 herein or other scope of investment/utilization approved by the TPEx or the competent authority.
- When the trustee financial institution makes payments or transfers money in accordance with the instructions of the securities firm, it shall check the trade data of the securities firm's customer.
- The securities firm agrees that the trustee financial institution shall provide data related to the transactions of the dedicated trust account as required by the competent authority or the TPEx to audit the business of the securities firm.
- If the securities firm suspends operations, terminates its operations, reorganizes, is declared bankrupt, dissolves, has its establishment registration or permit canceled, or is otherwise unable to perform matters in connection with the payment of money, the beneficial rights in the trust shall vest in the customer. The trustee financial institution shall then promptly return the trust property to the customer or transfer it to the new trustee financial institution.
- Except as provided in the preceding subparagraph, the beneficial rights in the trust may not be transferred or pledged.
- Other matters as provided by the TPEx or the competent authority.
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| Article 10 | The securities firm's chief officer for and personnel executing fund brokerage business and its internal audit officer and internal auditors shall possess the qualification of securities agent and shall participate in pre-service and in-service training as required by the TPEx.
In the case of a securities firm operating only fund brokerage business, the board of directors shall appoint one senior officer to serve as the chief AML/CFT compliance officer.
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| Article 11 | The internal auditors of a securities firm shall perform regular or unscheduled internal audits of its finances, business, and information security, prepare internal audit reports, and keep them available for auditing.
The internal audit reports under the preceding paragraph shall include whether the finances and business of the securities firm comply with relevant laws and regulations and its internal control system.
A securities firm shall file with the TPEx, in the prescribed format by the end of each fiscal year, its annual audit plan for the next fiscal year, and within 2 months from the end of each fiscal year, it shall file with the TPEx in the prescribed format its report on the execution of its previous fiscal year's annual audit plan.
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| Article 12 | A securities firm shall keep records of its handling of fund brokerage business and keep them available for auditing.
The records under the preceding paragraph shall be kept for at least 15 years. In the event of any dispute, however, they shall be kept until the dispute is resolved.
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Chapter II Finances and Business
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| Article 13 | A securities firm that operates only fund brokerage business shall, within 3 months after the end of each fiscal year, file with the TPEx and publicly announce its annual financial report audited and attested by CPAs. The auditing and attestation of the aforesaid financial report shall be performed by practicing CPAs of a joint accounting firm approved by the FSC in accordance with the Regulations Governing Approval of Certified Public Accountants to Audit and Attest to the Financial Reports of Public Companies.
The financial reports under the preceding paragraph shall be prepared in accordance with applicable laws and regulations. For matters on which applicable laws and regulations are silent, they shall be prepared in accordance with generally accepted accounting principles.
A securities firm that operates only fund brokerage business shall, by the 7th day of each month, file with the TPEx in the prescribed format its monthly accounting summary and income statement for the preceding month.
The periods for which a securities firm keeps its accounting reports, account books, and accounting documents shall comply with the Business Entity Accounting Act, and additionally shall comply with the Required Periods for Preservation of Accounting Statements and Vouchers by Securities Firms Trading on the TPEx adopted by the Taipei Exchange.
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| Article 14 | In the case of a securities firm that operates only fund brokerage business, the total amount of the securities firm's external liabilities may not exceed its net worth.
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| Article 15 | In the case of a securities firm that operates only fund brokerage business, its capital may not be loaned to others nor used for other purposes. The utilization of its capital shall be limited to the following:
- Bank deposits.
- Purchase of government bonds or financial bonds.
- Purchase of treasury bills, negotiable certificates of deposit, or commercial paper.
- Other uses approved by the competent authority or the TPEx.
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| Article 16 | A securities firm that operates only fund brokerage business may not make any equity investment in any other enterprise and may not be a shareholder of unlimited liability in another company or a partner in a partnership enterprise.
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| Article 17 | A securities firm and its responsible persons, managers, and employees shall conduct fund brokerage business in accordance with the duties of care and loyalty of a good fiduciary and the principles of honesty and good faith.
A securities firm and its personnel may not do any of the following when executing fund brokerage business:
- Agree to or provide any specific interest or sharing of losses, or provide any judgment regarding whether a certain fund will rise or fall in price, or provide any investment recommendation, or provide investment consulting service, to induce investors to trade or exchange.
- Misappropriate any fund or money owned by a customer or kept under the custody of the securities firm in the course of business.
- Conceal or omit important financial or business information of a fund that is traded or exchanged on the issuer's trading platform, or of a fund's securities investment trust enterprise or an offshore fund's manager or master agent.
- Forge, conceal, or make any false entry regarding any record of collection, payment, or transfer of money.
- Anything else injurious to the rights and interests of investors or in violation of any relevant law or regulation.
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| Article 18 | Except as otherwise provided by law or regulation, when handling fund brokerage business, the securities firm shall maintain the confidentiality of customers' personal data, transaction and trade data, and other relevant information.
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| Article 19 | A securities firm's collection, processing, use, or provision for use by the competent authority, the TPEx, and the centralized securities depositary enterprise, of the personal data of investors shall comply with the Personal Data Protection Act.
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| Article 20 | A securities firm shall adopt an information security policy in accordance with applicable laws and regulations, its internal control systems, and its business needs, and the policy shall serve as a basis for evaluating risks and establishing various information security management mechanisms, to ensure the effectiveness of security measures for fund brokerage trading.
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| Article 21 | The securities firm shall adopt procedures for managing information security incidents. The procedures shall at least include incident confirmation and troubleshooting mechanisms, incident reporting mechanisms, emergency response mechanisms, occasions for suspension of trading and the handling thereof, compensation measures with respect to the rights and interests of investors, and procedures for handling resumption of trading. The securities firm furthermore shall be diligent about effectively preserving a trail log and evidence and set up business continuity management mechanisms.
When there occurs any incident of irregularity in information services, or any cyber security incident, that materially affects customer rights or interests or normal operation, the securities firm shall make a preliminary notification through the Cyber Security Notification System for Securities and Futures Industry within 30 minutes after the incident takes place, and shall make a formal notification and an incident resolution notification, respectively, at the time the incident has been investigated and understood and after the handling of the incident is finished.
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Chapter III Trading and Settlement Methods
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| Article 22 | The securities firm shall adopt procedures for reviewing funds prior to launching them on the trading platform and conduct pre-launch reviews.
The review procedures under the preceding paragraph shall include at least the following:
- The investment objectives and policies, operational strategies, risk and return, and past performance of the fund.
- The reasonableness of the fees associated with the fund.
- Types of customers suitable for the fund.
- The adequacy of disclosure of information in documents including the fund prospectus and the investor information summary.
The net asset value of a fund under paragraph 1 must be NT$300 million or greater.
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| Article 23 | If the net asset value of a fund is lower than that specified in the preceding paragraph, the securities firm may not newly accept customer orders for trades or exchanges of that fund.
Only once the net asset value of a fund under the preceding paragraph has recovered to NT$400 million or greater may the securities firm resume accepting customer orders for trades or exchanges of that fund.
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| Article 24 | The securities firm shall disclose information about the fund including its basic information, risk-return rating, and net asset value, for convenient query and reference by investors.
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| Article 25 | The securities firm shall adopt fair and reasonable trading rules for fund brokerage trading and publish them on its trading platform and incorporate them into its internal control system.
The trading rules under the preceding paragraph shall include the trading hours, methods of trading and reporting of trades, trade procedures, trade price determination methods, trade execution principles, restrictions on currencies used in trades, method for collection and payment of money, clearing and settlement method, and times for payments and receipts. The trading rules, and any amendments thereto, shall be filed with the TPEx.
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| Article 26 | A customer who is engaging in fund brokerage trading with the securities firm for the first time shall submit their identity document(s) and carry out account opening procedures on the trading platform and sign an account opening contract.
Before a customer engages in fund brokerage trading with the securities firm for the first time, the customer shall designate a deposit account or accounts opened in the investor's own name at a financial institution and agree and authorize the securities firm to pay and receive money through that account.
A customer's deposit account or accounts under the preceding paragraph shall be limited to one New Taiwan dollar account and one foreign currency account. When there is any change to a customer's deposit account, it shall enter into a new agreement with the securities firm.
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| Article 27 | A securities firm shall thoroughly get to know a customer before it may agree to open an account for the customer.
A securities firm shall adopt principles for the acceptance of customers and working procedures for know-your-customer reviews. The securities firm shall keep a customer's basic information on record, including the customer's identity, financial background, income and source of funds, risk preference, past investment experience, and investment objectives and demands, and give overall consideration to the following items, to distinguish a customer's risk tolerance rating:
- The customer's funds utilization status and professional competence.
- The customer's investment attributes, understanding of risk, and risk tolerance.
- Suitability of customer services and suitable range of investment recommendations.
The content of a customer's basic information and the results of the analysis under the preceding paragraph shall be presented to the customer for their confirmation, and the same shall be done when there is any change thereto.
When there is any change to a customer's basic information under paragraph 2, the securities firm shall reevaluate the customer's risk tolerance rating.
The securities firm shall fulfill its duty of due diligence with respect to the basic information on record for a customer. When necessary, it may require the customer to provide relevant supporting documents.
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| Article 28 | A securities firm shall, based on the customer risk tolerance rating classifications and fund risk-return rating classifications it has adopted, formulate a method for suitable matching of customer risk tolerance ratings with fund risk-return ratings. When accepting a customer order for fund brokerage trading through the trading platform, it shall make an evaluation of suitability, and confirm that the customer is capable of bearing the risk associated with the fund in which it intends to invest and shall keep a record of the evaluation.
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| Article 29 | With respect to the itemized account ledgers set up by a securities firm for customer money under Article 8, and to money of the customer that is kept in custody, the securities firm shall enter into a contract with the customer, specifying the following:
- Nature of the account, and the scope within which money is kept for the customer.
- Scope of payment services provided to the customer.
- Ownership and method for settlement and distribution of bank interest accruing on money kept for the customer.
- Procedures for the customer's withdrawal of money and termination of deposit of money.
- Method for the customer to inquire about its money.
- The securities firm shall keep records of all payments and receipts of customer money on the itemized customer account ledger.
- Schedule of the securities firm's management fees.
- Effective date of the contract and methods for handling amendment and termination of the contract
- Pursuant to the Personal Data Protection Act and relevant laws and regulations, the customer agrees the securities firm may furnish information pertaining to the customer's account ledger to the competent authority, the TPEx, and other institutions designated by the TPEx.
- The matters under Article 9, paragraph 6, subparagraph 4.
- The handling of disputes.
- Other matters relating to the rights and interests of the customer.
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| Article 30 | The securities firm shall each day make itemized entries of each of the following items in the itemized account ledger of customer money that it sets up under Article 8:
- Transfers of sources of the customer's funds to the account
- Transfers of interest accrued on money kept for the customer.
- Transfers for the customer of money payable by the customer
- Transfers of money withdrawn by the customer
- Transfers of funds in the event of termination of the contract by the securities firm or customer.
The securities firm shall retain records of receipts and payments of money under the preceding paragraph and retain the payment and receipt documents and shall prepare and send the customer a monthly reconciliation statement based on the itemized daily account entries.
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| Article 31 | The securities firm shall provide daily to the trustee financial institution under Article 9, subparagraph 3 information including the basic information of a customer and the monetary balance in the customer's itemized ledger.
When the securities firm instructs the trustee financial institution under the preceding paragraph to pay or transfer money, the securities firm shall be solely liable, and may not prejudice the rights or interests of the customer, in the event any monetary loss is incurred because of operational error by the securities firm.
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| Article 32 | Before conducting a fund trade or exchange transaction based on a customer order accepted through the trading platform, the securities firm shall collect the relevant money or securities in full, and only then may it proceed with the transaction.
The securities firm shall deliver relevant documents including the prospectus and the risk disclosure statement before accepting a customer's application to engage in a trade or exchange transaction and before delivery is made of any money or securities.
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| Article 33 | When a customer has completed a fund trade or exchange transaction, the securities firm shall prepare and issue to the customer a trade confirmation or trade report, and immediately perform settlement. Additionally, it shall prepare and deliver trade reconciliation statements to the customer on a monthly basis.
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| Article 34 | A securities firm that conducts fund brokerage business is prohibited from itself making price quotations and engaging in trading or exchange of funds.
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| Article 35 | A securities firm conducting fund brokerage business shall adopt standards for the fees it collects from customers, and publicly disclose them on its trading platform.
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| Article 36 | The securities firm shall annually pay to the TPEx a business management fee of NT$500,000, and any period of less than a year shall be counted as one year.
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| Article 37 | When a securities firm suspends or terminates its handling of fund brokerage business, it shall assist its customers to carry out follow-up matters relating to the redemption or conversion of funds or other related matters.
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Chapter IV Auditing of Securities Firms and Handling of Violations
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| Article 38 | The TPEx may, in coordination with the centralized securities depositary enterprise, audit a securities firm's operation of fund brokerage business, and the securities firm may not refuse to provide information or fail to cooperate with the investigation or audit.
When any deficiency is discovered, the TPEx or the centralized securities depositary enterprise may request the securities firm in writing to submit a corrective plan or an internal audit report.
When the TPEx deems necessary, it may require the securities firm to engage a CPA(s) designated by the TPEx to conduct a targeted examination within an audit scope designated by the TPEx, and to submit the results of the examination to the TPEx. The audit fees shall furthermore be borne by the securities firm.
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| Article 39 | If a securities firm is in any of the following circumstances, the TPEx may notify it to make supplementation or correction within a time limit, and in addition may impose a penalty of not more than NT$100,000:
- Violation of Article 5, Article 8, Articles 10 to 12, paragraphs 3 or 4 of Article 13, Article 17, or Articles 22 to 33.
- Failure to provide information to the TPEx, the centralized securities depositary enterprise, or a CPA designated by the TPEx by a deadline set by the TPEx,
- Violation of any other provision of these Rules or other relevant requirements.
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| Article 40 | If a securities firm is in any of the following circumstances, the TPEx may issue a warning, and additionally may impose a penalty of not more than NT$1 million, and notify it to make supplementation or correction within a time limit:
- Violation of Article 9, Articles 14 to 16, or Article 34.
- Failure to make supplementation or correction or to pay a penalty within a time limit set pursuant to the preceding Article.
- Commission of a violation set forth in subparagraph 1 of the preceding article, and the violation is of a material nature.
- Failure to file and publicly announce an annual financial report attested by a CPA in accordance with Article 13, paragraph 1.
- Refusal, obstruction, or evasion of an examination by the TPEx or by a CPA designated by the TPEx.
- Misrepresentation, concealment, material omission, or obvious error in any relevant material presented by the securities firm.
- Occurrence of a serious information security incident.
- Material breach of a contract signed with the TPEx.
- Violation of laws or regulations of the competent authority where the violation is of a material nature.
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| Article 41 | If a securities firm is in any of the following circumstances, the TPEx may suspend or terminate its operation of fund brokerage business:
- Failure to make supplementation or correction or to pay a penalty within a time limit set pursuant to the preceding Article.
- Misrepresentation or concealment in any information presented, sufficient to cause damage to the TPEx or others.
- Making of untrue records of trading or payment/receipt.
- Occurrence of a serious information security incident, where it affects the rights or interests of investors.
- Net worth lower than one-half of paid-in capital for 6 consecutive months.
- Upon application by the securities firm or as the TPEx otherwise deems necessary.
A disposition under the preceding paragraph to suspend operation of fund brokerage business shall be filed with the competent authority for recordation. A disposition to terminate operation of fund brokerage business shall be submitted to the competent authority for approval.
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| Article 42 | If any employee of a securities firm has materially violated these Rules or other relevant requirements, the TPEx may notify the securities firm to give a warning to the employee or suspend the employee's execution of business for a period of from 1 month to 6 months.
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Chapter V Supplementary Provisions |
| Article 43 | These Rules, and any amendments hereto, shall enter into force after submission to the competent authority for approval and recordation. Any addition, deletion, or amendment to the attachments of these Rules shall enter into force after approval by the president of the TPEx.
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