Chapter III Securities Firms |
| 13 | In order to establish distinctions, a securities firm participating in the Exchange shall clearly designate its role as a securities broker or securities dealer when using the name of "securities firms" in external business.
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| 14 | Securities firms participating in the Exchange shall complete and submit three copies each of the application, executed market usage contract, and the following documents to the TWSE:
- Photocopy of securities firm permit.
- Photocopy of documentary proof following company registration (or amendment registration) (if the applicant is not organized as a company and is operated on a concurrent basis by a financial institution, submit documentary proof of the approval for its establishment).
- Articles of incorporation, business plan, business bylaws, and shareholders list and their respective shareholdings.
- List of directors, supervisors, and managers, registration forms of same, photocopy of National Identity Card or household registration certificate, and declaration that declaring that the person does not fall within any of the categories under Article 53 of the Securities and Exchange Act.
- List of various levels of associated persons, registration form of same, photocopy of National Identity Card or household registration certificate, and declaration that declaring that the person does not fall within any of the categories under Article 54 of the Securities and Exchange Act.
- Financial reports audited and attested by a certified public accountant (CPA).
The format of the registration forms referred to in subparagraphs 4 and 5 of the preceding paragraph shall be prescribed by the Competent Authority.
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| 15 | A securities firm shall wait until the TWSE signs and returns the market usage contract, and paid the settlement and clearing fund before it may trade in the Exchange.
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| 16 | In the event the paid-in capital, articles of incorporation, business address, or chairman of the board of any securities firms is changed, within 5 days of such change, the firm shall submit three copies of the application for amendment, relevant certifying documents, and registration fees for amendment to the TWSE for issuance of its opinion letter, and then transferred by the TWSE to the Competent Authority for its approval and registration.
Where the director, supervisor, general manager, and associated persons of various levels is changed, such changes shall be reported in accordance with the procedures of the Rules Governing Responsible Persons and Associated Persons of Securities Firms.
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| 17 | Various levels of associated persons of securities firms shall possess the qualifications specified by the Competent Authority in the "Rules Governing Responsible Persons and Associated Persons of Securities Firms."
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| 18 | A securities firm shall be responsible for the acts of its employees, whether they are traveling outside to conduct businesses, or within the Exchange.
The persons referred to in the preceding paragraph shall comply with and not plead ignorance to these Operating Rules, public announcements made by the Exchange, and other regulations.
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| 19 | The registration of the personnel of securities firms shall lose its effectiveness if the securities firm discharges or changes his position.
Where the Competent Authority orders the discharge of registered personnel of securities firms, or the responsible person or associated person of securities firms falls within any of the categories under Article 12, paragraph 3 of the Rules Governing Responsible Persons and Associated Persons of Securities Firms, the TWSE shall cancel their registration.
When any amendment is made to the registered personnel of a securities firm, the securities firm shall not be relieved of liability for such personnel's behavior until registration of the amendment is completed.
When a securities firm receives permission for termination of the Market Usage Contract it has entered into, all of its personnel registered with the TWSE shall ipso facto lose their registered status.
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| 20 | A securities firm shall establish its business premises at the registered office, and may not share its business premises with other securities firms. In case of a major event of force majeure such that it may not normally operate at its business premises, a securities firm may search for a temporary business premises and apply to the TWSE for continued operation. The use of such premises shall not exceed 3 months, and before the expiration of this time period, a permanent business premises shall be located. Such replacement location shall conform with the TWSE Standards Governing the Places of Business and Facilities of Securities Firms and Securities Introducing Brokers, and the changes shall be reported in accordance with the regulations before it may commence business.
The standards for business premises and facilities shall be drafted by the TWSE and approved by the Competent Authority.
The bidding equipment used for linkage between the securities firms and the TWSE shall be installed as follows:
- Securities brokers shall install such equipment at the business counters of the business premises of their head offices and branches.
- Securities dealers shall install such equipment at their business premises.
In the event that a major event of force majeure occurs to the trading transmission system of a securities firm such that its bidding equipment develops malfunction, the securities firm may do one of the following at its choice:
- Borrow the bidding equipment of its head office or branch and report in writing to the TWSE on the following business day for recordation.
- Borrow TWSE market backup bidding equipment, limited to two sets. The securities firm shall contact the TWSE by telephone in advance and submit an application bearing its corporate seal and the seal of its responsible person to the TWSE. Any location at which TWSE market cloud-based backup bidding equipment is used must comply with the TWSE Standards Governing the Places of Business and Facilities of Securities Firms and Securities Introducing Brokers.
A securities firm may, pursuant to subpargraph 2 of the preceding paragraph, borrow TWSE bidding equipment for lending auction, reverse auction, and auction transactions.
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| 21 | Securities firms which have been approved by the Competent Authority to establish domestic branch offices and have been issued such permit certificates shall submit in duplicate the following documents to the TWSE for recordation before commencing business:
- Photocopy of permit certificate for establishment of branch office.
- List of directors, supervisors, and managers, registration forms of same, photocopy of National Identity Card or household registration certificate, and declaration that declaring that the person does not fall within any of the categories under Article 53 of the Securities and Exchange Act.
- List of various levels of associated persons, registration form of same, photocopy of National Identity Card or household registration certificate, and declaration that the person does not fall within any of the categories under Article 54 of the Securities and Exchange Act.
Where there are changes in the business location of a domestic branch office or its manager, within 5 days of such changes, three copies of the application for amendment registration, along with the relevant documentary evidence and registration fees for amendment, shall be sent to the TWSE for issuance of its opinion letter, and then transferred by the TWSE to the Competent Authority for its approval and registration.
Article 20, paragraph 2 of these Operating Rules shall apply to the business locations and facilities of the domestic branch office of a securities firm.
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| 21-1 | Securities firms which have been approved by the Competent Authority to establish foreign branch offices or representative offices shall submit in duplicate the following documents to the TWSE for recordation before commencing business:
- Photocopy of the permit for establishment issued by the domestic Competent Authority and of the documents of approval of establishment issued by the foreign competent authority.
- List of managers and associated persons or representatives of the branch office or representative office.
- Date of establishment and detailed address of the branch office or representative office.
Where there are changes in the business location or the manager or representative of a foreign branch office or representative office, within 10 days of such changes, three copies of the application for amendment registration, along with the relevant documentary evidence, shall be sent to the TWSE, which will transfer them to the Competent Authority.
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| 22 | Upon receiving permission for establishment of a branch office, a securities firm shall receive the permit certificate and in accordance with Article 118 of these Operating Rules pay additional settlement and clearing fund before it may commence business.
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| 23 | A securities firm and its branch offices shall display their permit certificates at a prominent location in its business premises.
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| 24 | A securities firm shall maintain complete accounts, and make accurate book entries. Its accounting and financial reports shall be processed in accordance with the Standards for Preparation of Financial Reports of Securities Firms.
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| 25 | A securities firm shall maintain all accounts and related trading certificates, vouchers, books and statements, and contracts at its business location. However, if a brokerage contract between a securities broker and a principal is stored on electronic media that cannot be edited or erased and the original of which can be provided anytime, the place to keep the hard copy of the contract will not be restriced to the business location.
The TWSE may send personnel to examine and review the trading certificates, vouchers, books and statement, and contracts referred to in the preceding paragraph, and securities firms shall not avoid or refuse such examinations; the securities firm shall consent that the TWSE may query the Joint Credit Information Center for information concerning the securities firm's credit with financial institutions.
The TWSE Determination Standards and Handling Procedures for the Avoidance or Refusal of Examinations by Securities Firms shall be separately prescribed by the TWSE.
Except as otherwise provided in the Business Accounting Act, the number of years that the books and accounts and relevant trading certificates, vouchers, books and statements, and contracts under paragraph 1 shall be kept shall be in accordance with the Required Periods for Preservation of Accounting Statements and Vouchers by Securities Firms prescribed by the TWSE.
For brokerage contract not maintained at the business location as provided in the first paragraph, a securities broker should pay attention to the safety of the locatation, environment and facilities of the storage, enhance the security measures of access and maintance, and establish relevant internal control system.
When deemed necessary, the TWSE may request securities firms to provide their financial and business information, and disclose them to the public.
Government bonds which are in bearer form that are obtained by securities firms by utilizing their assets pursuant to Article 18 of the Regulations Governing Securities Firms shall be deposited with a custodian institution.
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| 26 | The financial reports produced by a securities firm in accordance with the regulations prescribed by the Competent Authority shall be audited and attested by a CPA, approved by the board of directors, recognized by the supervisor, and then publicly announced in a newspaper.
Where they are semi-annual in nature, two copies of the financial report referred to in the preceding paragraph (including assets and liabilities statement, statement of comprehensive income, statement of change in equity, cash flow statement and its notes or attachments), minutes of board of directors meeting, supervisor's review report, and public announcements shall be sent to the TWSE within 2 months of the end of each semi-annual fiscal year, with one copy sent to the Competent Authority by the TWSE. Where they are annual in nature, two copies of the above shall be sent to the TWSE within 3 months of the end of each fiscal year, with one copy sent to the Competent Authority by the TWSE. In addition, TWSE (or Taipei Exchange) listed securities firms, and securities subsidiaries of a financial holding company that are public companies, also shall, within 45 days from the end of the first and third quarters of each fiscal year, submit two copies each of the CPA-audited financial report, the minutes of the board of directors meeting, and newspapers containing the public announcement to the TWSE, and the TWSE shall then submit one copy of the said documents to the Competent Authority.
When sending financial reports within the time-limit as prescribed in the preceding paragraph, a securities firm shall report, through Internet transmission to the TWSE, basic information regarding its investments in other enterprises, numbers of TWSE listed or Taipei Exchange listed securities at the end of the reporting period respectively held by the securities firm and its invested enterprises, respective cost of shareholding, derivatives trading of TWSE listed or Taipei Exchange listed securities, and acquisition and disposal of major assets. The increase, decrease, and changes of shareholding in invested enterprises of a securities firm shall also be reported to the TWSE through Internet transmission.
The shareholders meeting of a securities firm shall be convened within 6 months after the end of the fiscal year. Within 20 days of their recognition by the shareholders meeting, the minutes of the shareholders meeting and the business report shall be sent to the TWSE in triplicate. Where the annual financial report recognized by the shareholders meeting differs from the financial report publicly announced and sent to the TWSE, within 2 days of its occurrence, it shall be publicly announced and reported to the TWSE for its ultimate transmittal to the Competent Authority.
Securities firms shall prepare a monthly accounting summary, income statement, itemized statements of bank deposits, and all attachments (each including the information for all branch offices), and file it with the TWSE by electronic media within 7 days from the start of the next month.
One copy of the various financial reports and monthly accounting summaries of securities firms shall be made available for public inspection in print or electronic medium.
Securities firms shall prepare the monthly capital sufficiency statement, and file it with the TWSE by electronic media within 10 days from the start of the next month; compilation and calculation regarding the capital sufficiency statement shall be handled in accordance with the Regulations Governing Securities Firms. The TWSE shall furthermore make quarterly disclosures thereof itemized as provided by the Competent Authority.
Securities dealers shall prepare the monthly securities inventory report, and file it with the TWSE by electronic media within 7 days from the start of the next month.
The various financial reports, forms, and monthly capital sufficiency statement to be reported via electronic media shall be announced by the TWSE.
The procedures for said reporting shall be separately prescribed by the TWSE.
Where the Competent Authority has provided otherwise than as set forth in the provisions of paragraph 1 and paragraph 2 concerning public announcement by newspaper and submission of the newspaper announcement, the provisions of the Competent Authority shall prevail.
The TWSE may, depending on operational needs, notify securities firms to send additional copies of the various materials required to be submitted under paragraph 4. The TWSE may, depending on operational needs, notify securities firms to send paper copies of the various materials required to be filed by electronic media under paragraphs 5, 7, and 8. The securities firms shall deliver such materials to the TWSE within the time limit.
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| 27 | Securities firms shall comply with the restrictions prescribed by the Competent Authority under Article 49 of the Securities and Exchange Act requiring that the aggregate liabilities of a securities firm shall not exceed a prescribed multiple of its net capital; and the aggregate current liabilities shall not exceed a prescribed percentage of its aggregate current assets.
Except as to securities firms concurrently operated by financial institutions acting in compliance with the provisions of the Banking Act, a securities firm shall not purchase real estate which is not used for its business purposes. The sum of its aggregate operating real estate and equipment and aggregate non-operating real estate shall not exceed 60 percent of its aggregate assets.
Securities firms shall comply with the regulations of the Competent Authority and set aside a portion of its annual after-tax profit as special reserve.
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| 28 | A securities brokerage firm shall not deposit its funds in an institution other than one engaged in the banking business.
Without the approval of the Competent Authority, a securities brokerage firm shall not use its own funds to invest in securities that are not listed on the TWSE; where its own funds are invested into TWSE listed securities, the amount of investment shall not exceed the limit set by the Competent Authority.
When the regulatory capital adequacy ratio of a securities broker is less than 100 percent, it may not use its own funds to purchase TWSE listed (or Taipei Exchange listed) stocks, and may make only sell trade dispositions. The standards and measures relating to the lifting of these restrictions after corrections have been made shall be governed, mutatis mutandis, by the provisions of Article 28-1, paragraph 2.
Unless otherwise prescribed by the TWSE, a securities brokerage firm shall not use its own funds or securities, or funds or securities borrowed from others to process securities trading settlement for its principals.
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| 28-1 | Where the total of brokerage or dealer trading orders placed by a securities firm in a single day exceeds twenty times its net funds available for use, the TWSE may suspend the placing of additional trading orders.
Where the net worth of a securities firm is less than its paid-in capital but more than 50 percent thereof, the multiple referred to in the preceding paragraph may be adjusted to ten times. Where the net worth is less than 50 percent of the paid-in capital, the multiple may be adjusted to five times. Where the net worth is less than 50 percent of the paid-in capital for 3 consecutive months, the multiple may be adjusted to two times. If a securities firm uses a capital reduction to raise the ratio of its net worth to its paid-in capital, it must meet and maintain for 3 months the required conditions for the multiple that it wishes reinstated for its brokerage trading before that multiple may be adjusted pursuant to the preceding provisions.
If the regulatory capital adequacy ratio of a securities firm meets the requirements of Article 65 of the Regulations Governing Securities Firms, the multiple referred to in the preceding paragraph may be adjusted to 15 times. If the regulatory capital adequacy ratio of the securities firm falls into the circumstances specified in Article 66 of the Regulations Governing Securities Firms, further downward adjustment may be made. The adjustment standards shall be separately prescribed by the TWSE.
If the monthly statements filed by a securities firm show that the cause for an adjustment under paragraph 2 or paragraph 3 to some degree ceases to exist, successive adjustments to the multiple may be made according to the degree to which the cause ceases to exist.
The method of calculation of the net funds available for use referred to in paragraph 1 shall be prescribed by the TWSE.
If for 3 consecutive months, the financial ratio as shown in the monthly accounting summaries of a securities firm fails to satisfy the requirements of Article 13 or Article 16 of the Regulations Governing Securities Firms, and the Competent Authority issues the first notice of improvement to be made within a time period, but no improvement is made, the TWSE may adjust the multiple referred to in paragraph 1 to fifteen times; upon the second notice of the Competent Authority to improve within a time period, but no improvement is made, the multiple may be adjusted to ten times; for each additional notice by the Competent Authority to improve within a time period, but no improvement is made, the multiple may be adjusted to half the previous multiple as the total limit on trading for customers' account and its own account. After the above adjustments, the highest allowable amount shall not exceed four times the net worth. Once improvement is made, the original multiple shall be restored.
In the event any securities firm falls within any of the categories under Article 3 of the Rules for Assistance to and Examination of Securities Firm of the TWSE, or subsequent to assistance, improvements cannot be made, the TWSE may lower the multiple referred to in paragraph 1. Where improvement has been made, the original multiple shall be restored.
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| 28-2 | In the event of abnormalities in the price or the trading situation of any listed securities sufficient to affect market trading, clearing, and settlement, the TWSE may limit the amount of brokerage or proprietary trading of all or part of securities firms, or take other measures as resolved by the Supervisory and Assistance Commission.
The standards for determining the abnormalities and the limitations on amount of trading shall be drafted by the TWSE and approved by the Competent Authority before its implementation. The same procedure applies with amendments to the same.
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| 29 | Where a securities firm is under any of the circumstances set out in Article 4, paragraph 1 of the Regulations Governing Securities Firms, it shall, in accordance with paragraph 2 of that article, report by letter the condition to the TWSE for transmittal to the Competent Authority.
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| 30 | Securities firms shall not supply false or inaccurate information in any of their reports to the TWSE.
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| 31 | (deleted)
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| 32 | (deleted)
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| 33 | The TWSE shall assign a code number to each securities firm. All forms and vouchers related to trading and clearing shall contain the code as well as the name of the securities firm.
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| 34 | If a securities firm suspends its business, until it has wound up its securities transactions and matters undertaken by it on the Exchange, its business within the scope of those transactions and matters shall be deemed as not suspended.
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| 35 | Where any securities firm is liquidated, its permit is suspended, the market usage contract is terminated, or due to other reasons it loses its right to operate, the TWSE shall offset the outstanding rights and obligations of the said firm to the TWSE, and if there are amounts remaining, they shall be returned to the said firm, and if the amount is insufficient, compensation shall be sought from the said firm.
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| 36 | Where any securities firm receives permission to terminate its market usage contract, the original executed contract shall be returned to the TWSE for cancellation.
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| 37 | Securities firms shall not have any investment, loan, or guaranty relations with any personnel of the TWSE, nor shall they concurrently hire or give honorary title to any personnel of the TWSE in any manner.
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| 38 | Where any informant points out violations of the laws or regulations or the rules of the TWSE by securities firms or their employees, the informant shall supply his true name and address. Informant statements which use aliases or are anonymous will not be accepted.
In order to investigate the informant statement referred to in the preceding paragraph, the TWSE may notify the person being informed against to supply detailed written responses. Where necessary, the TWSE may also request the securities dealers association to investigate the matter.
The TWSE shall treat a pending investigation as a confidential matter. Upon completing the investigation, if there is clear evidence of violations of laws and regulations or the bylaws or rules of the TWSE, the TWSE shall report the matter to the Competent Authority for its processing, or alternatively handle the matter in accordance with the rules of the TWSE.
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| 39 | Upon the permission of the TWSE, government bond brokers may participate in the market to trade government bonds, and shall comply with relevant regulations prescribed by the TWSE. The same shall apply to securities finance enterprises with respect to engaging in competitive bid borrowing of securities required in connection with stock loans and short sales.
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| 40 | Where any securities firm broadcasts to the public information related to securities, two copies of such broadcast shall be sent to the TWSE for its recordation.
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