Chapter II Finance |
| Article 9 | After completion of corporate registration, a securities firm shall lodge an operation bond with a bank designated by the FSC as follows:
- A securities underwriter: NT$40 million.
- A securities dealer: NT$10 million.
- A securities broker: NT$50 million. However, if the securities broker operates only the following business, the bond shall be NT$10 million:
- Operates only equity crowdfunding business.
- Operates only brokerage business for trading and exchanging beneficial certificates of funds.
- Operators of two or more types of securities business: aggregate of the amounts as referred to in the preceding three subparagraphs according to the types of business being engaged in.
- Branch office: additional NT$5 million for each branch.
The operation bond referred to in the preceding paragraph shall be paid in cash, government bond, or financial bond.
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| Article 10 | A securities firm operating the business of accepting brokerage orders to trade securities on the centralized securities exchange market shall make deposits to the TWSE settlement and clearing fund in the following manner:
- Before commencement of business operation, the securities firm shall deposit a basic amount of NT$15 million; after commencement of business operation, it shall deposit a specified percentage of the net receipt or net payment amount of the executed trades of TWSE listed securities for which it has accepted brokerage trading orders within 10 days after the close of each quarter until the end of the then-current year. The said percentage shall be separately determined by the FSC.
- From the year following the commencement of business operation, the original basic amount shall be reduced to NT$3.5 million and combined into the amount equal to the above-mentioned percentage of the net receipt or net payment amount of the executed trades of TWSE listed securities for which it accepted trading orders for the previous year on a yearly basis. At the end of January of each year, the insufficient or excess amount of the fund shall be deposited with or withdrawn from the TWSE.
Before the commencement of business operation, a securities firm trading securities for its own account on the centralized securities exchange shall make a lump sum deposit of NT$5 million to the TWSE settlement and clearing fund. After commencement of business operation and from the year following commencement of business operation, in addition to the basic amount, it shall furthermore continue to make deposits to the fund based on a specified percentage of the net receipt or net payment amount of the trades of TWSE listed securities that it has executed for its own account. The method for calculation and lodging of the deposit shall follow that set out in the preceding paragraph.
A securities firm trading securities for customers' accounts and its own account on the centralized securities exchange shall deposit an aggregate of the amounts referred to in the preceding two paragraphs.
Before commencement of business operation of each domestic branch office, a securities firm shall make a lump sum deposit of NT$3 million to the settlement and clearing fund; provided that from the year following the business operation, the original amount shall be reduced to NT$500,000.
A joint liability system shall be adopted for the settlement and clearing fund deposited by securities firms, and a special management committee of the fund shall be set up. The management rules shall be drafted by the TWSE with input from the securities dealers' association and reported to the FSC for approval. This provision shall apply to the amendment of the said rules.
The special management committee of the fund may, depending on the degree of overall risk of a securities firm, notify the securities firm to make additional deposits to the settlement and clearing fund and report such to the FSC for recordation. The detailed rules for the above fund shall be drafted by the special management committee of the fund and reported to the FSC for approval. This provision shall apply to the amendment of the said rules.
A securities firm operating over-the-counter securities trading business for customers’ accounts or its own account shall make deposits to the TPEx settlement and clearing fund in compliance with the applicable requirements of the TPEx.
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| Article 11 | (deleted)
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| Article 12 | (deleted)
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| Article 13 | Unless a securities firm has obtained special-case approval for its special needs, or is concurrently operated by a financial institution and subject to other relevant acts or regulations, its total debts to other parties shall not be more than 6 times its net worth. The total amount of its current liabilities shall not exceed the total amount of its current assets; provided that, unless otherwise provided by the FSC, the total amount of debts to other parties of a securities firm trading securities for customers' accounts or for its own account shall not exceed its net worth.
In calculating the total amount of liabilities referred to in the preceding paragraph, the liabilities arising from trading of government bonds may be deducted.
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| Article 14 | A securities firm, unless concurrently operated by a financial institution and subject to other relevant acts or regulations, shall, if it has already issued securities pursuant to the Act, set aside a 20 percent special reserve from the annual after-tax profit pursuant to Article 41 of the Act. However, if the accumulated amount reaches the paid-in capital amount, no further fund needs to be set aside.
If it has not issued securities pursuant to the Act, it shall set aside a 20 percent special reserve from the annual after-tax profit. However, if the accumulated amount reaches the paid-in capital amount, no further fund needs to be set aside.
The FSC may increase or decrease the percentages under the preceding two paragraphs based on business needs.
The special reserve referred to in the preceding three paragraphs shall not be used for purposes other than covering the losses of the company or, when the accumulated special reserve reaches 25 percent of the amount of paid-in capital, the portion in excess of 25 percent of paid-in capital may be used for capitalization; provided, that this rule shall not apply if the FSC has provided otherwise.
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| Article 14-1 | Where any of the following circumstances applies to a securities firm, the FSC may reject its filing to carry out a capital increase for cash or issue corporate bonds; provided, this restriction shall not apply where the reason is a merger of securities firms, or where concrete improvement has been made, and the improvement has been recognized by the FSC:
- It has been sanctioned by the FSC under Article 66, subparagraph 1 of the Act within the past 3 months.
- It has been sanctioned by the FSC under Article 66, subparagraph 2 of the Act within the past half year.
- It has been sanctioned by the FSC under Article 66, subparagraph 3 of the Act within the past 1 year.
- It has been sanctioned by the FSC under Article 66, subparagraph 4 of the Act within the past 2 years.
- It has had its trading rights terminated or restricted by the TWSE, the TPEx, or the Taiwan Futures Exchange (the TAIFEX) pursuant to bylaws thereof within the past 1 year.
Calculation of the periods in the subparagraphs of the preceding paragraph shall commence from the date of issuance of the disposition letter by the FSC, the TWSE, the TPEx, or the TAIFEX.
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| Article 14-2 | (Deleted).
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| Article 14-3 | Where a securities firm files for offering and issuance of securities pursuant to Article 6 of the Criteria Governing the Offering and Issuance of Securities by Securities Issuers, it may refrain from engaging a lead securities underwriter to conduct assessment if it meets the following financial and operational requirements:
- None of the circumstances in Article 14-1, paragraph 1 exist.
- Its financial condition meets the provisions of Articles 13, 14, 16, 18, 18-1 and 19.
- Its regulatory capital adequacy ratio 6 months prior to the date of reporting is 200 percent or greater.
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| Article 14-4 | (deleted)
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| Article 14-5 | A securities firm offering and issuing securities shall comply with the provisions of the Criteria Governing the Offering and Issuance of Securities by Securities Issuers or the Criteria Governing the Offering and Issuance of Overseas Securities by Issuers in addition to the provisions of these Regulations.
The FSC shall separately prescribe the required application forms and rules applicable to issuance of securities by securities firms that have not publicly issued stock.
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| Article 14-6 | When a securities firm distributes surplus earnings or offsets loss, it shall do so based on the financial statements audited and attested by a certified public accountant.
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| Article 15 | A securities firm, unless concurrently operated by a financial institution and subject to other relevant acts or regulations, shall not act as a guarantor of any nature, make endorsement for transfer of negotiable instruments, or provide its property as security for other persons without the approval of the FSC.
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| Article 16 | A securities firm, unless it is concurrently operated by a financial institution and subject to other relevant laws or regulations, may not purchase real property for non-operating purposes. However, this restriction shall not apply to a securities firm that holds real property for non-operating purposes as a result of a merger, acquisition, branch unit closure, change in or reduction of places of business, or as a result of conducting business, or as approved by the FSC. The sum of the total amount of property and equipment used for operating purposes and the total amount of real property used for non-operating purposes of a securities firm shall not be more than 60 percent of its total assets.
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| Article 17 | A securities firm, unless concurrently operated by a financial institution, shall not borrow funds from a non-financial or non-insurance institution; provided that this rule shall not apply to the following:
- Issuance of commercial paper;
- Issuance of corporate bonds;
- Meeting urgent capital needs of the company.
When borrowing funds to meet urgent capital needs referred to in subparagraph 3 of the preceding paragraph, a securities firm shall report to the FSC within 2 days from the date of occurrence of the event.
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| Article 18 | Unless a securities firm has obtained approval from the FSC or is concurrently operated by a financial institution and subject to other relevant acts or regulations, its funds not required for business operation shall not be loaned to other persons or used for other purposes; the funds shall be used for the following purposes only:
- Bank deposits;
- Purchase of government bonds or financial bonds;
- Purchase of treasury bills, transferable certificates of deposit, or commercial papers;
- Purchase of securities in a specific ratio in compliance with FSC provisions; and
- Other purposes approved by the FSC.
When funds are utilized under subparagraphs 4 and 5 of the preceding paragraph, the total original acquisition cost shall not exceed 30 percent of the securities firm's net worth.
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| Article 18-1 | When a securities firm makes equity investment in any securities, futures, financial, or other enterprises, the total amount of its equity investments in those enterprises may not exceed 40 percent of the securities firm’s net worth, and shall comply with Article 13 of the Company Act. The FSC shall separately prescribe the scope of individual enterprises within which a securities firm may make equity investment and related provisions.
When a securities firm merges with or acquires a financial institution, if approval is obtained from the FSC, the total amount of the investment therein may be exempted from the restriction in the preceding paragraph. In that event, the amount in excess shall be brought into compliance with the restriction within 6 months after the merger or acquisition.
A securities firm that operates only securities brokerage business, when holding shares in any single company, may do so either by the method in paragraph 1, subparagraph 4 of the preceding article, or by the equity investment method in paragraph 1 herein, but not by both methods.
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| Article 19 | A securities firm trading securities for its own account, unless it is concurrently operated by a financial institution and subject to other relevant acts or regulations, shall do so in accordance with the following rules:
- The firm shall not hold more than 10 percent of the total issued shares of any domestic company. The total amount of the cost of the securities issued by any domestic company held by such securities firm shall not be more than 20 percent of the securities firm's net worth.
- The firm shall not hold more than 5 percent of the total issued shares of any foreign company. The total amount of the cost of the securities issued by any foreign company held by the securities firm shall not be more than 20 percent of the securities firm's net worth; however, the total amount of the cost of such securities with equity characteristics shall not be more than 10 percent of the securities firm's net worth.
- The total amount of the investment cost of a securities firm in holdings of equity securities issued by a single related party may not exceed 5 percent of the firm's net worth. The total amount of the investment cost of a securities firm in holdings of equity securities issued by all related parties may not exceed 10 percent of the firm's net worth. However, these restrictions are exempted in the handling of exercise and hedging operations for call (put) warrants, exchange traded notes, and over-the-counter derivative financial product trading business, and in the hedging of beneficial certificates of exchange traded funds and the underlying baskets of stock represented by such beneficial certificates.
- The total amount of the investment cost of a securities firm in holdings of straight corporate bonds issued by a single securities firm may not exceed 5 percent of the securities firm's net worth. The total amount of the investment cost of a securities firm in holdings of straight corporate bonds issued by all securities firms may not exceed 10 percent of the securities firm's net worth.
The term "related party" in these Regulations is defined as determined in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Firms.
A securities firm, when holding shares in any single company, may do so either by the method of a proprietary trading position or by the equity investment method in paragraph 1 of the preceding article, but not by both methods.
If the aggregate of the securities acquired by a securities firm for underwriting purposes, counted in combination with those acquired under the preceding paragraph, exceeds the limit prescribed by the FSC, the portion in excess shall be sold within 1 year after its acquisition in accordance with Article 75 of the Act.
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| Article 19-1 | The FSC shall prescribe the total amount limits, and methods for calculation thereof, on the positions held in foreign securities and the expenditures on derivative financial product transactions of a securities firm trading foreign securities for its own account.
When a securities firm engages in the business of trading foreign securities for its own account as referred to in the preceding paragraph, if such trading is neither an investment of proprietary funds nor done to meet hedging needs, it shall apply to the Central Bank for permission for any portion involving an inward or outward remittance of funds, and any trading of foreign bonds for its own account shall be done in compliance with the provisions of the TPEx.
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| Article 19-2 | Exchange settlement matters for securities firms trading securities denominated in a foreign currency for their own accounts or engaging in derivative financial product trading shall be handled in accordance with the Regulations Governing the Reporting of Foreign Exchange Receipts and Disbursements or Transactions.
A securities firm may conduct the trading referred to in the preceding paragraph only in the capacity of a customer, through a designated bank approved by the Central Bank to conduct derivative foreign exchange product business, or through an overseas financial institution.
Except as otherwise provided by the Central Bank, a securities firm trading securities denominated in a foreign currency for its own account, when conducting payment of settlement funds and fees by remittance of the exchange of New Taiwan Dollars or of the original foreign currency from Taiwan to the overseas settlement account, or when having fees remitted back into Taiwan from abroad, shall do so through a segregated foreign exchange deposit account in the selected foreign currency that it has opened at a designated foreign exchange bank.
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| Article 19-3 | A securities firm meeting the qualifying requirements listed below may operate derivative financial product trading business at its business premises, and shall do so in accordance with the provisions of the TPEx:
- It must be an integrated securities firm that concurrently engages in brokerage, underwriting, and dealership business
- Its CPA audited or reviewed financial report for the most recent period shows net worth not less than paid-in capital, and its financial condition meets the provisions of Articles 13, 14, 16, 18, 18-1 and 19.
- It must have reported a regulatory capital adequacy ratio meeting the requirements of the FSC for each of the most recent 6 months.
- It must be free of any of the following circumstances:
- Any sanction, during the preceding 3 months, under Article 66, subparagraph 1 of the Act or Article 100, paragraph 1, subparagraph 1 of the Futures Exchange Act.
- Any sanction, during the preceding 6 months, equal to or greater than those under Article 66, subparagraph 2 of the Act or Article 100, paragraph 1, subparagraph 2 of the Futures Trading Act.
- Any sanction imposed by the FSC during the preceding year requiring a suspension of business.
- Any sanction imposed by the FSC during the preceding 2 years voiding approval for any part of its business.
- Any sanction during the preceding 1 year whereby the TPEx, the TWSE, or the Taiwan Futures Exchange Corporation (the TAIFEX), acting pursuant to its operating rules or bylaws, has suspended or restricted the firm's trading privileges.
Any securities firm in non-conformance with the conditions of subparagraph 4 of the preceding paragraph but that has made concrete improvement and has satisfied the FSC thereof shall not be subject to the restrictions of that subparagraph.
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| Article 19-4 | Securities firms operating derivative financial product trading business that involves foreign exchange operations shall apply to the Central Bank for permission for any portion involving an inward or outward remittance of funds.
Securities firms operating business referred to in the preceding paragraph and engaging in related hedge trades shall handle exchange settlement matters in accordance with the Regulations Governing the Reporting of Foreign Exchange Receipts and Disbursements or Transactions and related provisions.
A securities firm may, in the capacity of customer, conduct hedge trading through a designated bank approved by the Central Bank to conduct derivative foreign exchange product business, or through an overseas financial institution.
For a securities firm operating business referred to in paragraph 1, matters relating to settlement of funds, payment and receipt of fees, and payment of funds upon early rescission or expiration of contracts shall be carried out according to the following:
- When denominated in New Taiwan Dollars, all settlement of funds and payment and receipt of fees with a customer shall be carried out in New Taiwan Dollars.
- When denominated in a foreign currency, all settlement of funds and payment and receipt of fees with a customer shall be carried out in foreign currency. The customer's payment of funds may be carried out by transfer from its own foreign exchange deposit account. Where foreign exchange settlement is required, it shall be carried out by the customer at a designated foreign exchange bank or at the same securities firm that conducts spot foreign exchange trading business in accordance with the Regulations Governing the Reporting of Foreign Exchange Receipts and Disbursements or Transactions.
- Upon early rescission by the customer or expiration of the contract, the securities firm shall deposit the funds receivable by the customer in its New Taiwan Dollar or foreign exchange deposit account on the settlement date based on the currency stipulated in the contract.
A securities firm operating business referred to in paragraph 1 shall submit a monthly operations statement to the foreign exchange authority and the TPEx by the 5th business day after the end of each business month.
A securities firm operating trading business in structured instruments linked to foreign financial products shall submit a monthly operations statement on its trading business in structured instruments linked to foreign financial products to the foreign exchange authority and the TPEx by the 5th business day after the end of each business month.
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| Article 19-5 | A securities firm operating equity-linked derivative financial product trading business at its place of business may not make any use of such trading to carry out mergers or acquisitions or unlawful trades on its own behalf or in cooperation with its clients.
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| Article 19-6 | Derivative financial product trading business operated by a securities firm may not be linked to any of the below-listed underlyings, except in trading with professional institutional investors and high net worth juristic person investors:
- Securities privately placed domestically or abroad.
- Certificates of beneficial interest that are issued overseas by domestic securities investment trust enterprises and are not listed for trading on a securities market.
- Any Taiwan stock index compiled by a domestic or foreign institution and related financial commodities, provided that this restriction shall not apply to an index compiled by the TPEx or the TWSE, either singly or in cooperation.
When a securities firm conducts, with a professional institutional investor or a high net worth juristic person investor, derivative financial instrument trades linked to any of the instruments in the subparagraphs of the preceding paragraph, it shall submit an application to the TPEx with the relevant documentation, and the TPEx will forward the application to the FSC. After the FSC has granted approval for the first securities firm to conduct such trades, other securities firm shall apply to the TPEx for its consent before beginning to conduct such trades.
A securities firm that handles foreign exchange derivative financial instruments shall apply to the Central Bank for permission or report by letter to the Central Bank for recordation, with a copy to the TPEx, in accordance with the Regulations Governing the Conduct of Foreign Exchange Business by Securities Enterprises.
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| Article 19-7 | When a securities firm provides customers other than professional institutional investors and high net worth juristic person investors with complex high-risk products not approved by the FSC or approved by the FSC for less than half a year and that furthermore do not involve foreign exchange, the securities firm shall submit an application to the TPEx with the relevant documentation, and the TPEx will forward the application to the FSC.
The term "complex high-risk products" in the preceding paragraph means complex high-risk products defined by the competent authority as authorized under paragraph 2 of Article 11-2 of the Financial Consumer Protection Act.?
After the FSC has granted approval for the first securities firm to conduct trades in a product and half a year has elapsed, other securities firms shall submit the relevant documentation to the TPEx for recordation within 7 days after first conducting a trade in the product, and may conduct a subsequent trade only after having received a letter of consent and recordation from the TPEx.
The provisions of Article 3 of the Regulations Governing Offshore Structured Products shall apply to the "professional institutional investors" and "high net worth juristic person investors" referred to in these Regulations.
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| Article 20 | Except in a case involving its equity investment in another enterprise as approved by the FSC, a securities firm, when exercising rights on any company shares that it has acquired shall do so for the greatest benefit of the company and may not directly or indirectly participate in the operation of the issuer company or other inappropriate actions.
Except where otherwise provided by law or regulation, a securities firm exercising voting rights of stock it holds in a public company shall dispatch a personnel member to attend and do so as its representative.
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| Article 21 | Within 2 months after the close of each half fiscal year and 3 months after the close of each fiscal year, respectively, a securities firm shall publicly announce and report to the FSC the semi-annual financial reports and the annual financial reports signed or sealed by the chairperson, managerial officer, and accounting officer, audited and attested by certified public accountants, approved by the board of directors, and recognized by the supervisors. Where the stocks of such securities firm have been listed on the TWSE or the TPEx, the provisions of Article 36 of the Act shall be complied with. However, a public securities firm or a securities subsidiary of a financial holding company shall publicly announce and report its annual financial report no later than 75 days after the close of the fiscal year.
Auditing and attestation of the financial reports referred to in the preceding paragraph shall be performed jointly by two or more practicing certified public accountants 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.
A securities firm shall submit to the FSC its monthly accounting summary for the preceding month by the 10th day of each month.
Where a securities firm has entered into a contract for using the centralized securities market with the TWSE, submission of matters referred to in paragraph 1 and the preceding paragraph shall be made to the FSC through the TWSE. Where a securities firm only entered into a contract for trading securities on the TPEx, the said submission shall be made to the FSC through the TPEx. Where no has been entered into, the submission shall be made to the FSC through a securities dealers' association.
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