Chapter I General Principles |
| 1 | These Operating Rules are adopted pursuant to Article 18, paragraph 2 of the Regulations Governing Borrowing or Lending Money in Connection with Securities Business by Securities Firms.
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| 2 | A securities firm conducting securities business money lending shall do so in accordance with securities trading laws and regulations, these Operating Rules, and the relevant bylaws, regulations, public announcements, and circular letters of the Taiwan Stock Exchange Corporation (TWSE), the Taipei Exchange (TPEx), and the Taiwan Depository & Clearing Corporation (TDCC).
Lending of money in connection with securities business ("securities business money lending") in these Operating Rules refers to any monetary financing business undertaken, pursuant to an agreement between a securities firm and a customer, to facilitate the settlement of customer purchases of securities and other commodities.
The scope of such financing includes the following:
- TWSE or TPEx listed stocks (including stock warrant certificates, certificates of entitlement to new shares, and certificates of payment for shares), call (put) warrants, beneficial certificates, depositary receipts, central book-entry bonds, municipal bonds, ordinary corporate bonds, financial bonds, convertible bonds, bond conversion entitlement certificates, beneficial interest securities, and asset-backed securities, excluding stocks and EFT beneficial certificates traded in foreign currency.
- TPEx traded beneficial certificates of open-end funds and physical gold.
- Subscription for beneficial certificates of open-end securities investment trust funds and of future trust funds.
- Public subscription or competitive auction of new shares before their TWSE or TPEx listing (including cash capital increase).
- Shares of the issuer for which its employees and existing shareholders may subscribe in the event the issuer issues new shares in a cash capital increase after its initial listing on the TWSE or TPEx.
- Others as approved by the competent authority.
For purposes of the preceding paragraph, TPEx traded beneficial certificates refer to the beneficial certificates of securities investment trust funds registered for trading on the Taipei Exchange under the Taipei Exchange Rules Governing the Review of Beneficial Certificates of Open-end Funds for Trading on the Taipei Exchange; securities investment trust funds refer to the trust funds in Article 23 of the Regulations Governing Securities Investment Trust Funds; and futures trust funds refer to the trust funds in Articles 8, 9, 10 and 10-1 of the Regulations Governing Futures Trust Funds.
The beneficial certificates of securities investment trust funds and those of futures trust funds as mentioned in the third paragraph are limited to domestic investments if denominated in New Taiwan dollars.
The scope of financing referred to in the third paragraph does not include shares subject to a margin purchase and short sale, block trading, odd-lot trading, auction, tender offer or altered trading method, or TPEx managed stocks.
The amount of securities business money lending conducted by a securities firm is limited to the amount, as well as the relevant processing fees and taxes, payable by each customer after netting the prices of securities bought and sold by that customer on that trading day.
A securities firm conducting securities business money lending for a financing period not exceeding 30 days may post collateral in the form of new shares subscribed for by a customer being an employee or an existing shareholder of an issuer as issued by the issuer in a cash capital increase after its initial listing or after its listing on the TWSE or TPEx (Subscription Lending). The dollar amount is the stock payment less the margin payable by the customer. The preceding paragraph does not apply.
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| 3 | In conducting securities business money lending, a securities firm shall determine its financing customers at its own discretion and in accordance with its internal control system. Among the particulars stipulated between the parties, the conditions applicable to the financing shall be specified by the securities firm at its own discretion and in accordance with its internal control system, and shall be specified in the loan contract.
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| 4 | A securities firm conducting securities business money lending shall adopt an effective internal control system.
The internal control system of the preceding paragraph shall adopt "know your customer" assessment and credit investigation procedures, securities business money lending operating procedures, segregation of authority and duties, financing limit controls, and account management matters, and adopt relevant risk management mechanisms.
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| 5 | To apply to conduct securities business money lending, a securities firm shall fill out an application form and submit it together with the relevant documentation to the TWSE. After the TWSE has reviewed an application and found the applicant qualified and in compliance with the applicable provisions of these Operating Rules, it shall forward the application to the competent authority for approval.
After a securities firm under the preceding paragraph has been approved by the competent authority to conduct securities business money lending, it may do so only after it has registered the amendment to its securities business items with the TWSE. The business personnel of the securities firm conducting securities business money lending shall possess the qualifications prescribed by the competent authority in the relevant provisions of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms.
After a securities firm has been approved by the competent authority to conduct securities business money lending, if its regulatory capital adequacy ratio is below 150 percent for 2 consecutive months, it shall suspend such business, and may resume it only after the securities firm achieves compliance with regulations for 3 consecutive months and receives approval from the competent authority; The same rule shall be applied if the securities firm has already been approved to conduct such lending but has not begun doing so..
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| 6 | A securities firm conducting securities business money lending may collect interest and processing fees from its customers for money it lends, and set such interest and processing fees at its own discretion. In addition, the interest rate shall be calculated on a per annum basis, and posted at the place of business.
When the interest and fee rates of the preceding paragraph are adjusted, beginning from the date of adjustment the securities firm may calculate and collect interest and fees at the post-adjustment rates on that portion of funds already financed but not yet repaid.
The interest of paragraph 2 shall be calculated based on the number of days from the financing date until the day before the date of settlement.
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| 7 | A securities firm conducting securities business money lending may not accept the securities or other commodities listed below as collateral:
- Pledged securities or other commodities
- new shares not assignable by employees within a given period or new restricted employee shares
- stocks to which company employees elect to apply deferral of income tax payment
- A company's own shares or other equity securities acquired through a buyback of its own shares, donation, merger, transfer of operations, or other reason.
A customer shall warrant that the collateral it provides is free and clear of all liens, claims, and encumbrances of any nature whatsoever; in the event of any defect or legal dispute in this respect, the securities firm may not provide financing.
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| 8 | Collateral that a securities firm obtains in conducting securities business money lending, and for which the customer has issued a written statement of consent for rehypothecation, may not be used for any purpose other than those listed below and shall be deposited in central custody:
- As collateral for securities borrowing through the TWSE securities lending system.
- As collateral for securities borrowing or refinancing through a securities finance enterprise.
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