Chapter III Securities Firms
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Section I General Provisions
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| Article 44 | A securities firm must obtain permission and issuance of a license from the Competent Authority before operating a securities business. The operation of securities business by persons other than securities firms is prohibited.
Permission from the Competent Authority shall be required for the establishment of branches by a securities firm.
Permission and issuance of a license from the Competent Authority shall be required for a foreign securities firm to establish branches in the Republic of China.
Standards for the establishment of securities firms governing matters including the conditions for the establishment of securities firms and branches thereof, the types of business in which they may engage, application procedures, documents required to be submitted, and regulations governing their finances, operations, and other required matters for compliance shall be prescribed by the Competent Authority.
The Competent Authority shall consult with the Central Bank of China when it adopts or amends provisions of the regulations referred to in the preceding paragraph that relate to foreign exchange business. |
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| Article 44-1 | To facilitate the development of financial inclusion and financial technologies, applicants, not limited to securities firms and securities finance enterprises, may apply to conduct innovative experimentation in securities business pursuant to the Financial Technology Development and Innovative Experimentation Act.
An innovative experiment under the preceding paragraph may be exempted from the application of the provisions of this Act within the period and scope approved by the Competent Authority.
The Competent Authority shall reference the results of the implementation of the innovative experimentation under paragraph 1 to review the appropriateness of this Act and relevant financial laws and regulations. |
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| Article 45 | A securities firm shall operate the securities business within the category to which it belongs under Article 16 and may not operate securities business beyond its own category. However, if it obtains approval from the Competent Authority, this restriction shall not apply.
A securities firm shall not be operated concurrently by another enterprise. However, a financial institution with permission from the Competent Authority may concurrently operate a securities business.
A securities firm shall not invest in another securities firm except with the approval of the Competent Authority. |
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| Article 46 | A securities firm that concurrently operates the business of a securities dealer and a securities broker pursuant to the proviso of paragraph 1 of the preceding Article shall distinguish by written document for every trade whether the trade is made for its own account or a customer. |
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| Article 47 | A securities firm shall be a company duly incorporated and registered under the law. However, this restriction does not apply to securities firms that concurrently operate under the proviso of paragraph 2 of Article 45. |
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| Article 48 | The minimum capital requirements of securities firms shall be prescribed by an order of the Competent Authority based respectively on the categories of business in which a securities firm operates.
The capital referred to in the preceding paragraph shall mean the total monetary amount of issued shares. |
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| Article 49 | The total external liabilities of a securities firm shall not exceed a prescribed multiple of its capital net worth. Its total current liabilities shall not exceed a prescribed percentage of its total current assets.
The multiple and percentage referred to in the preceding paragraph shall be prescribed by an order of the Competent Authority. |
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| Article 50 | The name of a securities firm shall explicitly bear the word "securities." However, this requirement shall not apply to a securities firm under the proviso of paragraph 2 of Article 45.
No person other than a securities firm may use a name similar to that of a securities firm. |
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| Article 51 | A director, supervisor, or managerial officer of a securities firm shall not serve concurrently in any position at another securities firm. However, if because of an investment relationship, and with the approval of the Competent Authority, a director, supervisor, or managerial officer may serve concurrently as a director or supervisor of the invested securities firm. |
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| Article 52 | (Deleted) |
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| Article 53 | A person who falls within any of the following categories shall not serve as a director, supervisor, or managerial officer of a securities firm. If such a person is already serving in such a capacity they shall be discharged, and the Competent Authority shall make a written request to the Ministry of Economic Affairs to void the registration of such person as a director, supervisor, or managerial officer:
1. Any person specified in any subparagraph of Article 30 of the Company Act.
2. Any person who served as a director, supervisor, managerial officer, or other equivalent position in a juristic person at a time when it was adjudicated bankrupt, if three years have not elapsed since the close of the bankruptcy or the reconciliation has not been performed.
3. Any person who within the last three years has a record with a financial institution of being refused transactions or a loss of credit.
4. Any person who has been sentenced under this Act to a criminal penalty of severity equal to or greater than the imposition of a criminal fine, and three years have not elapsed since completion of the sentence, expiration of the suspended sentence, or pardon.
5. Any person who has violated the provision of Article 51 hereof.
6. Any person who was discharged from their position under Article 56 or subparagraph 2 of Article 66 hereof within the last three years. |
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| Article 54 | Associated persons employed by securities firms whose duties relate to the securities business shall have reached the age of majority and possess the qualifications required by relevant laws and regulations and shall not fall into any of the following categories:
1. Having been adjudicated bankrupt and their rights not yet reinstated, or having been declared by a court to be under guardianship or assistance, and that declaration has not been voided.
2. Concurrently holding a position with another securities firm, provided that this restriction shall not apply when there is an investment relationship and the Competent Authority has granted approval allowing concurrent holding of the position of director or supervisor at the invested securities firm.
3. Having been sentenced to a criminal penalty of severity equal to or greater than a term of imprisonment for fraud, breach of trust, or violation of laws governing business and industry, and three years have not elapsed since completion of the sentence, expiration of the suspended sentence, or pardon.
4. Falling in any of the situations specified in subparagraphs 2 through 4 or subparagraph 6 of the preceding Article.
5. Having violated any order issued by the Competent Authority in accordance with this Act.
The job titles of the associated persons referred to in the preceding paragraph shall be prescribed by the Competent Authority. |
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| Article 55 | Following the incorporation and registration process, a securities firm shall, in accordance with the regulations prescribed by the Competent Authority, deposit an operation bond.
Creditors whose claims arise from the business that a securities firm has special permission to operate shall have a preferential payment right from the deposited operation bond referred to in the preceding paragraph. |
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| Article 56 | If any director, supervisor, or employee of a securities firm is found to have committed any act that violates this Act or another related law or regulation, and if such violation is sufficient to affect the normal operation of the securities firm, the Competent Authority may at any time ordering the securities firm to suspend the execution of business by such person for not more than one year or discharge such person from their position and additionally may impose sanctions in accordance with Article 66 depending on the severity of the violation. |
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| Article 57 | After a securities firm has obtained special permission to operate a securities business or permission to establish branches, the Competent Authority may withdraw such special permission or permission if it finds that the securities firm has violated a law or regulation or made any misrepresentation. |
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| Article 58 | When a securities dealer or its branch commences or suspends operations, it shall file with the Competent Authority for recordation. |
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| Article 59 | From the date a securities firm obtains its securities business license or a branch thereof obtains permission and registration, if the securities firm or branch fails to commence operations within three months or after commencing operations voluntarily suspends business for three consecutive months or longer, the Competent Authority may withdraw its special permission or permission.
The securities firm, if it has good cause, may apply to the Competent Authority for an extension of the time limit referred to in the preceding paragraph. |
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| Article 60 | Except with the approval of the Competent Authority, a securities firm may not engage in the following types of business:
1. Margin purchases or short sales in securities trading.
2. Acting as an agent for margin purchases or short sales in securities trading.
3. Borrowing or lending securities or acting as an agent or broker for the borrowing or lending of securities.
4. Borrowing or lending money in connection with securities business or acting as an agent or broker for such borrowing or lending.
5. Accepting engagement by a customer to keep custody of and utilize money of the customer in connection with securities business.
Regulations governing matters including the qualifications, personnel, business, and risk management of a securities firm applying for approval to engage in related business under the preceding paragraph shall be prescribed by the Competent Authority. |
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| Article 61 | The amount limits, periods, financing ratios, and margin percentages for margin purchases and short sales in securities trading shall be prescribed by the Competent Authority after consultation with and approval from the Central Bank of China. The standards governing what securities are eligible for margin purchases and short sales shall be prescribed by the Competent Authority. |
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| Article 62 | A securities broker or dealer may not engage in over-the-counter trading of securities, whether brokerage or proprietary, unless with the approval of the Competent Authority.
Regulations governing the trading referred to in the preceding paragraph shall be prescribed by the Competent Authority.
The provisions of Articles 156 and 157 shall apply mutatis mutandis to the trading referred to in paragraph 1. |
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| Article 63 | The provisions of Article 36 regarding the preparation, submission, and publication of financial reports shall apply mutatis mutandis to securities firms. |
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| Article 64 | The Competent Authority, to protect the public interest or the interest of investors, may at any time order a securities firm to provide financial or business reports and information or examine its business operations, assets, books and records, documents, or other relevant objects. The Competent Authority may place under seal or subpoena of relevant evidence and materials if it finds that there is a substantial likelihood of violation of a law or regulation. |
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| Article 65 | When the Competent Authority examines the business or financial conditions of a securities firm and finds that the securities firm has failed to comply with a law or regulation, it may, at any time, issue an order for corrections or improvements within a specified period. |
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| Article 66 | If a securities firm violates this Act or any order issued hereunder, in addition to being subject to the punishment provided under this Act, the Competent Authority may, depending on the severity of the situation, impose any of the following sanction, and may order the securities firm to correct the violation within a prescribed period:
1. Warning.
2. Order the securities firm to remove a director, supervisor, or managerial officer from their office.
3. Suspending the business, in whole or in part, of the company or its branch for a period of not more than six months.
4. Withdraw or revoke the business permission of the company or its branch.
5. Other necessary measures. |
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| Article 67 | If a securities firm has its special permission withdrawn or is ordered to suspend business by the Competent Authority under this Act, the securities firm shall wind up and liquidate any securities trades engaged in or any other matters entrusted to it before such withdrawal or business suspension. |
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| Article 68 | A securities firm whose special permission has been withdrawn shall still be deemed as a securities firm within the scope of the purposes of winding up and liquidating the trades or matters entrusted to it under the preceding article. A securities firm ordered to suspend operation shall be deemed still to be in operation within the scope of winding up and liquidating the securities trades engaged in or matters entrusted prior to the suspension of business. |
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| Article 69 | When a securities firm dissolves or partially ceases its business, its board of directors shall file a statement with the Competent Authority explaining the reasons.
The provisions of Articles 67 and 68 shall apply mutatis mutandis to the matters referred to in the preceding paragraph. |
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| Article 70 | The regulations governing matters regarding the responsible persons and associated persons of securities firms shall be prescribed by an order of the Competent Authority. |
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Section II Securities Underwriting
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| Article 71 | A securities underwriter that underwrites securities on a firm commitment basis shall, after the expiration of the period of underwriting specified in the underwriting agreement, subscribe for its own account the unsold portion, if any, of the securities it agreed to underwrite on a firm commitment basis.
A securities underwriter that underwrites securities on a firm commitment basis may subscribe to such securities before placing them for sale or specify in the underwriting agreement that a portion of the securities covered in the agreement shall be reserved for subscription by the underwriter for its own account.
The qualifications required for an underwriter to perform firm commitment underwriting shall be prescribed by the Competent Authority. |
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| Article 72 | A securities underwriter that underwrites securities on a best-efforts basis may, after the expiration of the underwriting period specified in the underwriting agreement, return the unsold portion, if any, of the securities to the issuer. |
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| Article 73 | (Deleted) |
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| Article 74 | Except as provided in Article 71, a securities underwriter shall not, during the underwriting period, acquire for its own account the securities that it has underwritten on a firm commitment or a best efforts basis. |
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| Article 75 | (Regulations Governing Sale of Shares Subscribed by Underwriter)
The regulations governing the sale of securities acquired by a securities underwriter in accordance with Article 71 shall be prescribed by the Competent Authority. |
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| Article 76 | (Deleted) |
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| Article 77 | (Deleted) |
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| Article 78 | (Deleted) |
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| Article 79 | A securities underwriter shall be required to deliver on behalf of the issuer a prospectus in compliance with paragraph 1 of Article 31 when selling the securities it underwrites. |
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| Article 80 | (Deleted) |
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| Article 81 | A securities underwriter's total amount of firm commitment underwriting shall not exceed a certain multiple of the balance of its current assets less its current liabilities. The standards with respect thereto shall be prescribed by an order of the Competent Authority.
If there is joint underwriting, the preceding paragraph shall apply to the calculation of the total amount of firm commitment underwriting by each securities underwriter. |
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| Article 82 | The standards governing the maximum compensation for firm commitment underwriting or the maximum commission for best efforts underwriting shall be prescribed by an order of the Competent Authority. |
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Section III Securities Dealers
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| Article 83 | A securities dealer may be a subscriber to stock or a subscriber to corporate bonds. |
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| Article 84 | A securities dealer that is concurrently operated by a securities underwriter shall be subject to the restrictions specified in Article 74. |
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Section IV Securities Brokers |
| Article 85 | The rates for the commission to be collected from principals by a securities broker engaged to buy or sell securities on a centralized securities exchange market shall be filed by the stock exchange with the Competent Authority for its approval.
The rates for the commission to be collected from principals by a securities broker engaged in buying or selling securities on markets other than a centralized securities exchange market shall be filed by the securities association with the Competent Authority for its approval. |
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| Article 86 | A securities broker engaged by a principal to trade securities shall, in addition to preparing and delivering a trade report to the principal upon execution of a trade, also send a reconciliation statement to each of its principals at the end of each month.
The particulars to be included in the trade report and the reconciliation statement referred to in the preceding paragraph shall be prescribed by an order of the Competent Authority. |
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| Article 87 | Securities brokers shall provide order forms to their principals for their use in buying and selling securities.
The particulars to be included in the order forms referred to in the preceding paragraph shall be prescribed by an order of the Competent Authority. |
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| Article 88 | The documents referred to in paragraph 1 of Article 86, and paragraph 1 of Article 87 shall be kept at the place of business of the securities broker. |
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