Chapter 2 Opening and Management of Securities Lending Accounts |
| Article 6 | A securities firm shall complete the following procedure before it may begin to accept securities lending transaction-related business from a customer:
- open a customer brokerage account;
- enter into a securities lending agreement with a customer; and
- open a securities lending account.
The Taiwan Securities Association shall draft a model securities lending agreement referred to in subparagraph 2 of the preceding paragraph and submit it to the TWSE for recordation. |
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| Article 7 | When applying to open a securities lending account, a customer that is an ROC citizen shall present in person their original national ID card and sign an account opening application and securities lending agreement on the spot.
A customer organized and registered as a juristic person under ROC law shall conduct the account opening procedures of the preceding paragraph by having its authorized person submit originals of the power of attorney, national ID cards of its authorized person and representative, corporate registration (or registration amendment) card, and evidentiary documentation of corporate registration.
When applying to open an account, a customer other than those specified in paragraphs 1 and 2 shall conduct the account opening procedures by presenting the relevant proof of identity documents in accordance with the TWSE Operating Rules or the relevant provisions regarding the opening of a brokerage account prescribed by the GTSM.
Photocopies of the relevant proof of identity documents and the original power of attorney used to apply to open an account shall be retained; the following statement shall be stamped on the photocopied portion, "It has been verified that the account opening application has been made in person by the applicant or by the authorized person thereof and that the photocopies are true and faithful copies of the original." Where a client is to apply for opening a securities lending account in the capacity mentioned in the first or second paragraph, it may make its application to a securities firm by correspondence or electronic means that is sufficient to identify the client as the applicant itself or its indication of intent, if the client has opened a transaction account.
A securities firm processing the opening of a securities lending account shall decide whether to open that account based on a detailed and faithful credit check in accordance with its internal control system. It shall record the detailed credit check method, information, and results on the account opening application, and record the account opening date. It shall transmit the account opening information that same day to the TWSE or GTSM computer database, and shall do likewise for account cancellation information. If the customer is a juristic person, it shall separately notify the customer in writing to confirm that the account is being opened with its authorization, provided that this requirement shall not apply if the customer has engaged a custodian institution to open the account on its behalf, or submits proof that settlement is to be handled on its behalf by a custodian institution.
A securities firm shall approve a customer's authorized limit on loaned securities based on that customer's credit check results. If the customer, prior to opening the securities lending account, has already applied and received approval for a specific amount of credit in connection with other credit business handled by the securities firm, the customer's authorized limit on loaned securities shall be calculated in the aggregate with the already approved amount of credit, and the proof of financial capacity provided by the customer must equal at least 30 percent of the total amount of credit after calculation of the aggregate amount of the applications made by the customer. If the customer, after opening the securities lending account, applies to the securities firm for a specific amount of credit in connection with other credit business, that amount shall also be included as part of the aggregate.
The securities firm shall provide the customer with a risk disclosure statement, disclosing the possible risks of securities lending transactions. A model template for the risk disclosure statement shall be drafted by the Taiwan Securities Association.
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| Article 7-1 | The proof of financial capacity that a customer must provide with respect to the total amount of credit calculated in aggregate, pursuant to paragraph 6 of the preceding article, means provision by the customer of information on income and all types of assets for the preceding year.
The proof of financial assets of the preceding paragraph shall consist of only the following vouchers and documents of the customer or the customer's spouse, parents, or adult children:
- A photocopy of the certificate of title to real property, a transcript of the registration for the real property, or a receipt for payment of property tax on it. The securities firm shall calculate the value of the property after inquiring about any other encumbrances on it.
- Documentary evidence of deposits at a financial institution (such as a certificate of deposit balance, bankbook, or certificate of deposit). The basis of calculation will be the average balance for the most recent month.
- Documentary evidence of securities holdings.
- A certificate of balance for a gold account issued by a financial institution (a gold account passbook, or a certificate of gold account passbook balance or certificate of gold account balance).
- Documentary evidence of trust assets in a trust of money, a securities trust, or a real estate trust (such as a reconciliation statement, list of trust assets, or certificate of trust assets). The beneficiary of the trust must be the same person as the trustor, and trust assets may only be real estate, deposits with a financial institution, securities, or the balance in a gold account at a financial institution.
If the customer provides proof of financial assets not owned by the customer, the actual owner of the assets must be a joint and several guarantor of the customer.
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| Article 7-2 | In conducting securities lending business, a securities firm may transfer its securities for loaning into a designated securities trading account according to the Guidelines for the Transfer of Securities from a Securities Borrowing and Lending Account to the Transfer Account of the Dealing and Futures Departments (Appendix 1), to make such securities available to said departments for meeting different business requirements.
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| Article 8 | If for three consecutive years or longer there is no record of any lending transaction by the customer that opens a securities lending account, the securities firm shall promptly cancel the securities lending transaction account and notify the customer, except where the customer has executed a “securities firm securities borrowing and lending agreement (to borrow securities from customer)” for the sheer purpose of lending securities.
If a customer must terminate a securities lending account that it opened, it shall fill out an application for termination of the securities lending account. When the securities firm has investigated and determined that all its lending transactions have been closed out and all relevant obligations settled, it shall promptly carry out account cancellation procedures.
A securities firm may process an application for account cancellation by correspondence or electronic means that is sufficient to identify the customer as the applicant itself or its indication of intent.
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| Article 9 | A securities firm shall set up a separate account ledger for each customer and record the matters listed below on a transaction-by-transaction basis each day:
- Matters regarding securities lending, borrowing and return.
- Collateral details, value, and collateral ratio.
- Matters regarding collateral calls, and withdrawal, exchange, and disposal of collateral.
- Matters regarding compensation for entitlements.
A securities firm shall compile and deliver to the customer a monthly reconciliation statement based on the account ledger record of the preceding paragraph, provided that this requirement shall not apply where there is no record of any lending transaction in that month, and the customer has not submitted a written request for such statement.
A securities firm shall obtain a letter of consent signed by the customer agreeing that the securities firm may provide information regarding its individual securities lending and borrowing to the TWSE, GTSM, and institutions designated by the competent authority as needed for collection, computer processing, and international transmission or use in accordance with acts and regulations.
A securities firm borrowing securities from a customer and lodging a performance bond with the TWSE pursuant to Article 19, paragraph 1 and Article 38, paragraph 1 will record the lodgment of performance bond in lieu of the matters in subparagraphs 2 and 3 of the preceding paragraph.
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| Article 10 | A customer shall promptly notify the securities firm in writing or by correspondence or electronic means that is sufficient to identify the customer as the principal itself and confirm its indication of intent if there is a change to the name or identification documents of the customer itself, its agent, or representative, or to the mailing address or contact phone number, recorded on its application to open a securities lending account.
Where a customer fails to make the notice of the preceding paragraph the securities firm shall continue to process transactions based on the original registration information, and the customer shall be solely liable, without recourse, for any resulting legal issues.
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| Article 11 | Required notice of matters by a securities firm pursuant to these Operating Rules shall be effected by mail with personal signature confirmation of receipt by the customer, or other mutually agreed-upon method.
Where a securities firm's notice sent by mail cannot be delivered on time because the customer failed to make notice under the preceding Article, or due to other reason attributable to the customer, such notice shall be deemed effective on the date of the post office's first delivery attempt.
Where the customer signs in person to acknowledge receipt of a securities firm's notice, the customer's signature or seal shall match the signature on the original securities lending agreement or the original seal/signature-of-record, and shall be accompanied by the date.
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