Chapter 7 Risk Management |
| Article 36 | A securities firm may not enter into a securities lending transaction with any party having any of the following relationships with it:
- A director, supervisor, representative of a juristic-person director or supervisor, employee, or shareholder holding more than ten percent of the shares, of the securities firm.
- A juristic-person shareholder of the securities firm that, through a representative, is elected as a director or supervisor of the securities firm under Article 27, paragraph 2, of the Company Act.
- A spouse of a director or supervisor, or of a representative of a juristic-person director or supervisor, of the securities firm.
- A minor child of a person of a status specified in subparagraph 1.
The securities firm shall incorporate the provisions of the preceding paragraph into its internal control system.
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| Article 37 | The maximum limit on the amount of securities loaned to each customer by a securities firm conducting securities lending business shall be regulated by the securities firm. The securities firm shall further adopt internal procedures for credit extension operations and risk control, which shall at least incorporate the following:
- Means of assessment of the maximum amount of securities loaned to individual customers. The assessment shall take the loan amounts extended to approved customers in other loan businesses into consideration. The percentage by which the total value of funds or securities loaned to individual customers in the overall loan business may not exceed the net worth shall be prescribed. Approval of the board of directors is required if the amount of securities to be loaned to individual natural persons reaches the higher of NT$300 million and 1% of the securities firm’s net worth or if the amount of securities to be loaned to individual juristic persons accounts for at least 5% of the securities firm’s net worth.
- Means of assessment of the amount of a single security loaned to individual customers. The assessment shall take the loan amounts extended to approved customers in other loan businesses into consideration.
- Means of identification of securities or customers with a high risk. Special monitoring and approval procedures shall be established in regard to the amount of high-risk securities loaned or the amount of securities loaned to high-risk customers.
- The amount of securities loaned to customers shall be determined according to principles that are both fair and reasonable. Lending of such whole amount to a single customer shall be avoided.
- If the assessment of the maximum amount of securities loaned to individual customers indicates certain individual customers are known or can be determined to be related accounts, which means the credit risks of such customers are related (for example, the risk of providing trading service to such customers), the lines of credit of all such related customers shall be regulated, in consideration of the credit risks.
- The regulation of the lines of credit extended to related accounts as mentioned in the preceding paragraph applies to renewals and adjustments of credit lines by customers which have opened an account and to new accounts, provided in the event of a change in respect of a related account of a customer, such as credit line adjustment or addition of related accounts, the lines of credit of the customer and its related accounts are still subject to combined regulation.
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| Article 37-1 | No director, supervisor, officer, or shareholder with more than 10% shares of an issuer of the subject securities may engage in borrowing and lending transactions or sale of borrowed securities involving such subject securities, whether in its own name or in the name of a domestic or offshore company directly or indirectly incorporated.
With the exception of natural persons and the designated institutional investors mentioned in Article 12-1, paragraph 2 of the TWSE Securities Borrowing and Lending Rules, an SBL participant shall advise the securities firm of the names and nationalities of the top three shareholders in terms of shareholding, each holding up to 30% or more of shares. Juristic-person shareholders shall also advise the names and nationalities of the top three natural-person shareholders in terms of shareholding, each holding up to 30% or more of shares. The government uniform invoice number of a profit-seeking enterprise or national ID number shall further be provided in the event of an R.O.C. shareholder; the national ID number and government uniform invoice number of a tax withholding agent shall be provided in the event of an offshore overseas Chinese or foreigner that has completed registration.
The shares held by a shareholder as mentioned in the preceding paragraph shall include those held by its spouse and minors and in others' name.
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| Article 38 | A securities firm borrowing securities from a customer shall pay a performance bond to the TWSE in accordance with the Regulations Governing Performance Bonds of Securities Firms and Securities Finance Enterprises Engaging in Securities Lending.
The sum of the total monetary value of securities loaned by a securities firm in conducting securities lending business and the total monetary value of securities loaned by it to customers for short sales in conducting securities margin purchase and short sale business may not exceed 400 percent of its net worth.
The monetary value of the loaned securities mentioned in the preceding paragraph is based on the closing price of the date of the loan.
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| Article 39 | The combined total monetary value of loans and provision for short sale of any given type of security by a securities firm conducting securities lending business and securities margin purchase and short sale businesses may not exceed 5 percent of the securities firm's net worth.
A securities firm conducting securities lending business shall immediately cease lending any given type of security when the sum total of the outstanding balance of shares in that security on loan to customers plus the outstanding balance of shares of that security sold short in margin purchase and short sale business reaches the sum total specified in any of the subparagraphs of Article 8, paragraph 1 of the Regulations Governing Securities Borrowing and Lending by Securities Firms.
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