Chapter III Business Operation |
| Article 22 | Where a securities firm underwrites securities on a firm commitment basis, the total underwriting amount shall not be more than 15 times the balance of its current assets less current liabilities. Within such amount, the total amount of firm commitment securities underwriting by overseas branch offices of the securities firm shall not be more than 5 times the balance of its current assets less current liabilities.
Where the regulatory capital adequacy ratio of a securities firm is less than 120 percent, the multiple for total firm commitment securities underwriting under the preceding paragraph may be adjusted to 10, and the multiple for total firm commitment underwriting by overseas branch offices thereof may be adjusted to 3. Where it is less than 100 percent, the total firm commitment underwriting multiple may be adjusted to 5, and overseas branch offices thereof shall not underwrite securities on a firm commitment basis. |
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| Article 23 | A securities firm that underwrites securities on a firm commitment basis by subscribing securities before putting them for re- sale or specifying in the underwriting contract that a portion of the securities covered in the contract shall be subscribed by the securities firm for its own account in accordance with paragraph 2 of Article 71 of the Act shall meet the conditions listed below; however, if a securities firm does not meet the condition in subparagraph 2, but the period of the suspension of business has expired, and concrete improvement has been made, and the improvement has been recognized by the FSC, it may be exempted therefrom:
1. Its financial condition meets the provisions of Articles 13, 14, 16, 18, 18-1 and 19.
2. The securities firm has not been sanctioned by any suspension of business imposed by the FSC in accordance with Article 66 of the Act during the most recent half year due to underwriting related business. |
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| Article 24 | A securities firm that underwrites securities shall make a public announcement of the underwriting and shall publish such announcement in local daily newspapers. Matters to be published shall include the method for deciding the offering price and a description of the basis of pricing, conclusions of the assessment report of the securities firm, the place where the prospectus is available and the method to obtain such prospectus.
A securities firm that underwrites straight corporate bonds shall not be subject to the restrictions of the preceding subparagraph regarding the publishing of such announcement in local daily newspapers, if the sales target is limited to professional institutional investors as specified in the Taipei Exchange Rules Governing Management of Foreign Currency Denominated International Bonds, and the underwriting announcement has been published on the website of the securities dealers association.
If the offering price referred to in paragraph 1 is decided through negotiations between the securities underwriter and the issuer or holder of the securities, in addition to the matters referred to paragraph 1, the public announcement shall include financial information based on which the offering price is decided and the audited opinion of the certified public accountants on the financial information. In calculation of the profitability of each share, the financial information based on which the offering price is decided shall fully reflect the dilution effect caused by the increase of issued shares. The calculation basis of information obtained from different sources of different time periods shall be consistent. |
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| Article 25 | When a securities underwriter is mandated to handle matters relating to the offering, issuing, TWSE listing, or TPEx listing of securities, the assessment report, conclusion opinion and relevant information provided by it shall not have any of the following conditions:
1. Containing false statement or concealment which would mislead others;
2. Containing material omission or obvious errors which would affect investment judgment;
3. Failing to prepare work sheets or failing to keep work sheets according to regulation; adopted so that objective and reasonable evidence is not obtained;
4. The issuer violates Articles 7 and 8 of the Guidelines for Handling Offering and Issuance of Securities by Issuers or Article 8 of the Regulations Governing the Offering and Issuance of Securities by Foreign Securities Issuers, and its application shall be returned; however, if the underwriter can prove that he has exercised as much care as possible, this is not applicable;
5. The underwriter fails to conduct necessary assistance and assessment on major items that require assessment, thus causing major difference between assessment conclusions and facts;
6. After the assessment report or conclusion opinion is submitted, and before the prospectus is printed and published, if the company has a condition that will materially affect shareholders' interests or the price of securities under Article 36, paragraph 2, subparagraph 2 of the Securities and Exchange Act and the underwriter does not immediately carry out supplementation and updating; or
7. Violating other securities laws and regulations and other relevant laws and regulations. |
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| Article 26 | If any of the following events exists between a securities underwriter and an issuer, such underwriter shall not act as the lead underwriter of the said issuance:
1. Where either party and its parent company, and all of the subsidiaries of its parent company, aggregately hold 10 percent or more of the total shares of the other party.
2. Where either party and its subsidiaries appoint more than half of the directors of the other party.
3. Where the board chairperson or president of either party is the spouse or a relative within the second degree or closer of the board chairperson or president of the other party.
4. Where 20 percent or more of the total number of shares of either party is held by the same shareholder.
5. Where half or more of the directors or supervisors of either party are the same as the directors or supervisors of the other party; the spouses, children, and relatives within the second degree or closer of the said persons count as "the same".
6. Where either party and related parties hold a total of 50 percent or more of the total issued shares of the other party. However, where the securities underwriter is a subsidiary securities firm of a financial institution or a financial holding company, this restriction shall not apply if the total shares of the issuing company held aggregately by the subsidiary's parent company, and by all subsidiaries of the parent company, do not exceed 10 percent of the total issued shares of the issuing company, and neither the director nor supervisor seats of the issuing company held by such companies exceed one-third of the director or supervisor seats, respectively.
7. Where the two parties, according to the relevant laws or regulations, must apply for combination, or have filed with the Fair Trade Commission for combination and have not had the combination prohibited thereby.
8. Where, under the regulations of other laws or in actuality, either party directly or indirectly controls the personnel, financial, or business affairs of the other party.
If an issuer issues straight corporate bonds, or financial bonds without equity characteristics, and the sales target is limited to professional institutional investors as specified in the Taipei Exchange Rules Governing Management of Foreign Currency Denominated International Bonds, the lead underwriter is exempt from the restrictions of paragraph 1. If the issuer qualifies as a securities underwriter, it may also act as the lead underwriter.
The terms "parent company" and "subsidiaries" in these Regulations are defined as determined in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Firms. |
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| Article 27 | The securities subscribed to by a securities firm under the first part of paragraph 2 of Article 81 of the Act shall be re-sold within the underwriting period as prescribed in the underwriting agreement.
The provisions of Article 24 shall apply mutatis mutandis to the public announcement for the re-sale by the securities firm referred to in the preceding paragraph.
If the securities for re-sale under paragraph 1 above is not fully sold, the unsold portion shall be sold in accordance with Article 75 of the Act. |
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| Article 28 | A securities firm shall underwrite securities by fair and reasonable means. Underwriting fees collected may not, by any means or under any name, be reimbursed or refunded to the issuer, or to any related party thereof, or to any person designated by the issuer or a related party thereof.
A securities firm shall underwrite or re-sell securities in accordance with the handling rules prescribed by the securities dealers' association.
The securities dealers' association shall submit the handling rules referred to in the preceding paragraph to the FSC for approval.
When a securities firm underwrites or re-sells listed securities, it may conduct stabilized operation transactions when necessary. Regulations governing the administration thereof shall be prescribed by the TWSE and submitted to the FSC for approval. |
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| Article 29 | When a securities firm underwrites securities, it shall mandate a bank to establish a separate account to collect prices on its behalf unless the securities are delivered on the spot.
The prices collected under the preceding paragraph shall not be used unless and until a certificate evidencing payment or the securities sold are delivered to the subscriber. |
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| Article 29-1 | A securities firm underwriting securities shall create and keep a file recording the sales results for the securities and the quantity of its own subscription, following the format and content set out in the handling rules prescribed by the securities dealers' association under Article 28 hereof. The FSC may require the securities firm to provide relevant materials at any time.
A securities firm shall preserve relevant materials in underwriting cases referred to in the preceding paragraph for at least 5 years after the conclusion of the underwriting period. |
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| Article 30 | In trading securities for its own account or selling the securities acquired by underwriting, a securities firm shall efficiently adjust the demand and supply in the market depending on the market situation, and ensure that the formation of fair price and its sound operation are not harmed. |
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| Article 30-1 | A securities firm operating derivative financial product business may not damage fair market price formation or investor rights and interests when conducting hedging operations or when calculating product gains or carrying out settlement upon cancellation or expiration. |
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| Article 31 | A securities firm trading securities for its own account shall adopt a trading policy and related procedures. Except as otherwise provided by the FSC, the operational procedures for trade analysis, decision-making, execution, change, and review shall be included in its internal control system.
The materials referred to in the preceding paragraph shall be recorded in chronological order and kept in files. They shall be preserved for a period of not less than 5 years. |
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| Article 31-1 | For a securities firm trading foreign securities for its own account or engaging in foreign derivative financial product transactions, the scope of the foreign securities, types of foreign derivative financial products, and foreign trading markets shall be determined by the FSC. |
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| Article 31-2 | A securities firm trading foreign securities for its own account or engaging in foreign derivative financial product transactions shall adopt handling procedures, which shall be implemented after approval by the board of directors, as shall any amendments thereto.
The handling procedures under the preceding paragraph shall include all the following items:
1. Trading principles and policies: shall include types of underlyings traded, trading or hedging strategies, setting of position limits.
2. Trading procedures: shall include hierarchy of responsibility, trading process, division of powers and duties of relevant departments, procedures for preservation of trading records.
3. Risk management measures: shall include risk management scope, risk management procedures, methods and frequency of position evaluation, production and review of position evaluation reports, irregularity reports and procedures for follow-up surveillance.
4. Audit procedures: shall include internal audit and self-inspection, frequency and scope of audits, audit reports and procedures for correction and follow-up of deficiencies. |
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| Article 31-3 | A securities firm trading foreign securities for its own account or engaging in foreign derivative financial product transactions may not engage in margin transactions.
When a securities firm engages in trading or transactions mentioned in the preceding paragraph with any overseas affiliated enterprise, the terms and conditions thereof may not be more favorable than those offered to other similar counterparties, nor may there be any non-arm's length circumstances, and, except in cases where the securities firm is mandating the overseas affiliated enterprise to trade or transact on its behalf, the securities firm shall comply with the following provisions:
1. Such trading or transactions shall be limited to trading of foreign bonds for the securities firm's own account and engaging in foreign derivative financial product transactions.
2. Such trading or transactions may be done only with the approval of not less than three-quarters of the directors in attendance at a board meeting attended by not less than two-thirds of the directors. However, for case in which the following conditions are met, the securities firm may draft internal operational rules and, by an aforesaid board resolution, generally authorize the management to engage in such trading or transactions in accordance with those operational rules:
A. The counterparty to the trade or transaction is an overseas affiliated enterprise that is registered in a jurisdiction that is supervised by a signatory member of the International Organization of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding (MMoU), and holds relevant financial business licenses and is supervised by a competent authority of that jurisdiction.
B. The instruments traded or transacted have an open market price, or the monetary amount of the trade or transaction is insignificant.
3. Unless the securities firm is concurrently operated by a financial institution and subject to other relevant acts or regulations, it shall comply with the following provisions:
A. The total balance of its trades and transactions with any single overseas affiliated enterprise may not exceed 10 percent of the securities firm's net worth.
B. The total balance of its trades and transactions with all overseas affiliated enterprises may not exceed 20 percent of the securities firm's net worth.
Affiliated enterprise in the preceding paragraph shall be as defined in the Affiliated Enterprises Chapter of the Company Act. |
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| Article 31-4 | A securities firm trading foreign securities for its own account or engaging in foreign derivative financial product transactions, and whose regulatory capital adequacy ratio is lower than the requirement set by the FSC for 3 consecutive months, may only sell or close out its existing positions, and may not engage in any further trading or transactions, unless its regulatory capital adequacy ratio has already been corrected. |
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| Article 32 | Unless otherwise provided by law or regulation, a securities firm trading securities for its own account on the centralized securities exchange shall not give a quote for the sale of securities not held by it.
A securities firm concurrently operated by a financial institution that uses its own fund and the trust fund to conduct cross-trades for its own account of the same kind of securities on the same day shall be subject to the provisions of Article 108 of the Banking Act and report such transactions to the FSC for recordation. |
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| Article 32-1 | As needed for hedging in the issuance of call (put) warrants and exchange traded notes and in the operation at its place of business of structured instruments and equity derivatives, a securities firm may borrow and sell, or sell short, the underlying securities, exempt from the restriction that the selling price of the securities borrowed or sold short may not be lower than the closing price of the previous business day.
A securities firm, for purposes of providing bid and ask quotes or meeting hedging needs in its capacity as a market maker, may borrow and sell the underlying securities, exempt from the restriction that the selling price of the securities borrowed may not be lower than the closing price of the previous business day.
A securities firm selling securities by borrowing them as referred to in the preceding two paragraphs shall enter into a loan contract with the lender of the securities. The following particulars shall be specified in the loan contract:
1. Name, volume, period, and rate of the loaned securities.
2. Means of exercise of shareholders' rights of the loaned underlying securities.
3. The means of reimbursement by the securities firm of the rights/dividend value to the lender for ex-rights/ex-dividend dates of the loaned securities (including the means of calculation, whether reimbursement is to be made in cash or securities, and the reimbursement date).
4. Means stipulated between the parties for return of the securities upon expiry of the contract (including whether or not the securities may be refunded as cash).
5. Means stipulated between the parties for handling of breach and related matters of damages. |
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| Article 33 | When a securities firm enters into a brokerage agreement with its customer, it shall explain the contents of the contract and the relevant procedures for trading securities. |
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| Article 34 | A securities firm accepting orders to trade securities shall establish the following information on its customers:
1. Name, domicile, and mailing address;
2. Occupation and age;
3. Assets status;
4. Investment experience;
5. Reason of opening account; and
6. Other necessary information.
A securities firm shall keep confidential the information referred to in the preceding paragraph unless being inquired according to law. |
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| Article 35 | A securities firm accepting orders to trade securities shall evaluate a customer's investment ability based on the information referred to in the preceding article and transaction conditions. If the evaluation of a customer's credit status shows that the customer's order is beyond his/her investment ability, unless proper security is furnished, the securities firm may refuse the order for trading. |
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| Article 35-1 | For trades of a certain dollar amount or greater, or suspected to involve money laundering, the securities firm shall keep trade documentation sufficient for a full and complete understanding of the trade, records of verification of the customer's identity, and reporting records, and shall comply with the Money Laundering Control Act. |
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| Article 35-2 | The TWSE may collect, process, or use all types of credit data of investors, and may request securities firms and FSC-approved institutions to provide relevant data.
The TWSE shall adopt operational rules regarding the scope of the data under the preceding paragraph, the parties to whom it will be provided for querying, the content of the data, and related matters. It shall report the operational rules, and any amendments thereto, in writing to the FSC for approval.
The TWSE's collection, processing, or use of data under the two preceding paragraphs meets the provision of being necessary for the fulfillment of its statutory obligations in Article 8, paragraph 2, subparagraph 2 of the Personal Data Protection Act, so the TWSE is exempted from the obligation to inform the data subject under Article 9, paragraph 1 of that Act.
Securities firms and FSC-approved institutions shall ensure that the data they provide under paragraph 1 is accurate and is free of falsehood and misrepresentation. |
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| Article 36 | When a securities broker recommends that a customer trade in a securities, it shall first evaluate the customer's investment ability and that the customer possesses reasonable information and shall not guarantee the value of the recommended securities.
When a securities broker recommends that a customer trade in a securities, if such securities are to be traded on the centralized securities exchange, it shall follow the rules prescribed by the TWSE; if the securities are to be traded on the TPEx, it shall follow the rules prescribed by the same. The above-mentioned rules shall be reported to the FSC for approval. |
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| Article 36-1 | Where a department of a securities firm that concurrently operates securities investment consulting services or futures advisory services (hereinafter, collectively, "consulting services department") produces research reports, or a department of a securities firm that concurrently operates a securities investment consulting enterprise handling discretionary investment services ("discretionary investment department") produces analysis reports or investment strategies for customers, personnel other than of those departments shall not participate in composing or reviewing the reports.
Within two hours from the time market trading hours begin after a research report provided by a consulting services department of a securities firm is publicly disclosed, other departments and personnel apart from that department may not engage in any trading of any security recommended in the research report, unless otherwise provided by the FSC.
Market in the preceding paragraph refers to the TWSE, the TPEx, and the TAIFEX.
The compensation or bonuses paid to personnel of a consulting services department or discretionary investment department of a securities firm shall not be directly linked to the performance of any other department. |
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| Article 36-2 | When an underwriting department of a securities firm underwrites securities, during the period from the time the securities firm enters into an advisory contract with a public issuer until the termination of the advisory relationship, or from the time the securities firm enters into an underwriting contract with a TWSE listed or TPEx listed company until the deadline for payment, its consulting services department shall not recommend any trading of that security or any derivative financial product thereof; a discretionary investment department may not purchase securities for a customer without first explicitly informing the customer of any related conflicts of interest and control measures and then obtaining the customer's consent on an instance-by-instance basis, and specifically stating the quantity of the securities that may be purchased.
When an underwriting department of a securities firm obtains securities through a firm commitment underwriting, the provisions of the preceding paragraph shall apply mutatis mutandis to the handling of those securities by the consulting services department and discretionary investment department of the securities firm until such time as all the procedures of the firm commitment underwriting have been completed in accordance with regulations. |
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| Article 37 | Unless otherwise provided by the laws and regulations, a securities firm operating securities business shall not:
1. Provide opinion on the rise or drop of the price of securities to induce customers to trade;
2. Agree to or provide specified interest or to share losses to induce customers to trade;
3. Provide account for customers to subscribe to and/or trade securities;
4. Commit false, fraudulent, or other misleading act in providing information of securities to customers;
5. Accept general authorization from customers in connection with the type, quantity, price, and purchase or sale of securities;
6. Accept settlement of customers who use the same account for offsetting purchase against sale or offsetting sale against purchase of the same type of securities, provided that this restriction does not apply if the requirements of Article 37-1 are met;
7. Accept settlement of customers who use different accounts for offsetting purchase against sale or offsetting sale against purchase of the same type of securities;
8. Directly or indirectly set up fixed places outside the business premises of the head office or branch office to accept orders for securities trading;
9. Directly or indirectly set up fixed places outside the business premises of the head office or branch office to sign brokerage agreements with customers or settle securities transactions; however, this restriction shall not apply where the FSC has provided otherwise;
10. Accept securities transactions of a customer who has not signed a brokerage contract;
11. Accept the company's director, supervisor, or employee as an agent for others for the account opening, subscription, trade, or settlement of securities;
12. Accept from any person other than the customer himself/herself the customer's instructions for account opening; however, this is not applicable for those in accordance with other regulations set by the FSC;
13. Accept from any person other than the customer himself/herself, or from an agent without a power of attorney issued by the customer, instructions for subscription, trade, or settlement; however, this restriction does not apply when the securities firm, pursuant to a three-party agreement signed jointly between it and the customer and the securities investment consulting enterprise, accepts automatic rebalancing trades automatically executed for the customer through the computer system provided by the securities investment consulting enterprise;
14. Knowingly accept a trading order from a customer who intends to use an issuer's non-public information which may materially affect the price of its stocks or who intends to manipulate the prices of the market;
15. Use the name or account of a customer to subscribe to and/or trade securities;
16. Disclose, not in response to inquiries given in accordance with laws and regulations, the contents of orders placed by a customer or other secrets obtained in the course of operation of business;
17. Misappropriate the securities or funds owned by a customer or temporarily kept under the custody of the securities firm in the course of business;
18. Safekeep the securities, funds, seal, or passbook under its custody for its customers;
19. Directly or indirectly provide funds or securities to customers in connection with margin purchases or short sales to effect settlement without the FSC's approval;
20. Violate settlement obligation to the securities exchange market;
21. Use personnel other than securities firm personnel to solicit business, or pay unreasonable commission; or
22. Conduct other acts in violation of laws and regulations governing securities or orders of the FSC on mandatory or unpermitted acts. |
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| Article 37-1 | When a securities firm, in brokerage trading of securities, accepts customer settlement by means of mutually offsetting an equal quantity of cash purchases and spot sales of the same security that have been executed through the same account on the same business day, it shall do so in accordance with the Operational Rules Governing Day Trades of Securities as adopted by the Taiwan Stock Exchange and the GreTai Securities Marker.
The types and scope of the securities under the preceding paragraph shall be separately prescribed by the FSC. |
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| Article 38 | A securities firm accepting orders to trade securities shall establish a separate deposit account with a bank for paying and receiving settlement funds of the customer. The funds in the said account shall not be used for other purposes.
A securities firm may, with the consent of the customer, retain the customer's settlement funds in the securities firm's settlement account. The securities firm shall set up a separate account ledger for each customer in the settlement account, and record therein on a daily basis the itemized receipts and payments of funds, and shall retain the record. The securities firm may not utilize such funds except for making payments of funds payable on behalf of the customer or as otherwise provided by the FSC. |
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| Article 38-1 | A securities firm that operates brokerage business for trading and exchanging beneficial certificates of funds shall set up a separate account with a bank for paying and receiving funds of the customer. The funds in the account shall be kept separate and independent from the securities firm's own assets, and may not be used for other purposes.
A securities firm that operates only brokerage business for trading and exchanging beneficial certificates of funds shall sign a trust agreement with the financial institution with which the separate deposit account is opened, designate the separate 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 that operates only brokerage business for trading and exchanging beneficial certificates of funds, if it fails to do as set out in the preceding paragraph, may not accept funds from customers. |
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| Article 39 | A securities firm accepting orders to trade securities shall clear and settle transactions in the manner provided in the Operating Rules of the TWSE or the Taipei Exchange Rules Governing Securities Trading on the TPEx. |
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| Article 40 | A securities firm accepting orders to trade securities shall not place the securities deposited by the customers under its custody. It shall handle the securities pursuant to the regulations of the centralized securities depository. |
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| Article 41 | A securities firm accepting orders to trade securities shall collect or deliver the funds or securities within the time limit for settlement. |
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| Article 42 | A securities firm accepting orders to trade securities shall prepare a trade report for signing/sealing by the customer after the customer executes a trade; provided that the trade report may be waived if the securities firm is concurrently operated by a financial institution, and the delivery of funds for trading the securities may be verified through the separate saving account of the customer.
If the trade report referred to in the preceding paragraph is confirmed by an agent engaged by the customer to trade securities on its behalf, a power of attorney issued by the customer shall be provided.
If the funds and securities of the customers of a securities firm accepting orders to trade securities are settled through book-entry transfer, or trade confirmation has been carried out and records have been kept, the signing/sealing referred to in paragraph 1 above may be waived, and Article 28, paragraph 1 of the Rules Governing Book-entry Operations of securities in Centralized Custody regarding recordation on passbook shall not apply. |
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| Article 43 | A securities firm trading securities on centralized stock exchange for its own account and customers' accounts shall establish separate accounts for placing orders and settlement. After placing orders, no inter-change between the accounts shall be allowed. |
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| Article 44 | When a securities firm accepts orders to trade securities, it shall not use information obtained from a trading order to take the opposite side of the customer's order for trading in its own account; provided that this provision shall not apply if the securities firm engages in securities trading on the TPEx and based on the quotation it should sell the securities and concurrently places an order for purchase. |
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| Article 45 | While operating its securities business, when a securities firm obtains information which may materially affect the price of the stocks listed on the TWSE or traded on the TPEx, it shall not trade on such stocks or provide the said information to its customers or other persons before the information becomes public. |
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| Article 45-1 | Securities firms operating the business of proprietary trading of security tokens (virtual currencies that have the nature of securities), equity crowdfunding business, or brokerage business for trading and exchanging beneficial certificates of funds shall do so in accordance with applicable rules adopted by the TPEx.
A securities firm that operates only security token proprietary trading business, equity crowdfunding business, or brokerage business for trading and exchanging beneficial certificates of funds is not subject to the provisions of Article 2, Article 5, Article 6, Article 13, Article 14, Article 18, Article 18-1, Article 21, Chapter V, and Chapter VI. |
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