Chapter 1 General Provisions |
| Article 1 | These Guidelines are established in accordance with the proviso of Article 92, Paragraph 1 of the Operating Rules ("Operating Rules") of the Taiwan Stock Exchange Corporation ("TWSE") and the proviso of Article 82, Paragraph 3 of the Taipei Exchange Rules Governing Securities Trading on the TPEx ("TPEx Trading Rules").
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| Article 2 | Pursuant to Article 38, Paragraph 2 of the Regulations Governing Securities Firms, a securities firm that retains customers' settlement funds in the securities firm's settlement account ("Settlement Account") with customers' consent shall comply with securities exchange laws and regulations and the rules, regulations, public notices and letter directives of the TWSE, TPEx, Taiwan Depository & Clearing Corporation (“TDCC”) and Taiwan Securities Association ("TSA").
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| Article 3 | A securities firm that retains customers' settlement funds in the securities firm's Settlement Account with customers' consent shall set up a separate account ledger for each customer, record therein the itemized receipts and payments of funds on a daily basis, and retain the record.
A securities firm that retains customers' settlement funds in the securities firm's Settlement Account with customers' consent shall open a special NTD account in the name of its head office, and may open only one such account with the same bank.
The contract between the securities firm and the bank for the retention of customers' settlement funds in the Settlement Account shall state the following:
- No cash withdrawal from the Settlement Account is permitted. Transfers of funds are limited to accounts with account numbers agreed upon in advance between the securities firm and the bank and, if to be made to a customer, are limited to securities book-entry accounts opened by the customer for TWSE or TPEx securities trading ("Securities Book-entry Accounts") or one savings account of the customer itself as agreed upon with the customer ("Customer Savings Account"). With the exception of a customer's Securities Book-entry Accounts and the Customer Savings Account, all agreed accounts and account numbers shall be reported in writing to the TWSE and TPEx in advance; changes shall be notified to the TWSE and TPEx immediately by the securities firm and the bank.
- Where the total amount transferred from the Settlement Account to the Securities Book-entry Account or Customer Savings Account of the same customer in one day reaches NTD50 million, the bank shall immediately notify the TWSE and TPEx. The bank shall also notify the TWSE and TPEx immediately if withdrawal against the preceding subparagraph is involved in a transfer of funds, in addition to refusing to pay.
- No overdraft, pledge, or exercise of other rights in respect of the Settlement Account is permitted.
- The securities firm agrees the bank may furnish information concerning transactions in the account mentioned in the preceding paragraph as required by the Financial Supervisory Commission, TWSE and TPEx for the inspection of the securities firm's business.
After having stated the following in the contract as referred to in the preceding paragraph, a securities firm may deposit partial funds from the account under term deposit:
- No funds from the Settlement Account ledger deposited under term deposit may be deposited from the account in the form of certificate of deposits or under other arrangement.
- The securities firm shall agree with the financial institution with which funds from the Settlement Account ledger are deposited under term deposit that these funds may be released at any time.
- Upon early termination or expiration of the term of contract in respect of funds from the Settlement Account ledger deposited under term deposit, all principals and interests shall be transferred back to demand deposit through fund transfer.
Where a securities firm is acting in accordance with the preceding paragraph, the percentage ratio of deposited funds shall be kept at such level at which an adequate liquidity of the account is maintained, and the securities firm shall appoint designated staff to control and manage liquidity and security of the account.
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| Article 3-1 | Subject to customer consent, a securities firm may purchase R.O.C. government bonds and treasury bills with funds in a Settlement Account or transfer the funds to other banks in the form of time deposits, and conduct sale and purchase transactions or transfers in the name "ΟΟSecurities Firm Ledger Account," provided the amount of Settlement Account funds deposited by the securities firm in a bank savings account may not be lower than 20% of the total amount of funds of the Settlement Account.
The amount of transfer mentioned in the preceding paragraph to other banks is limited to the portion of time deposits in the Settlement Account exceeding $1 billion.
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| Article 3-2 | The trading of R.O.C. government bonds or treasury bills by a securities firm in accordance with the preceding article shall be handled in the following manner:
- Transaction proceeds shall not be withdrawn in cash and shall be made by transfer.
- The selection, allocation ratio, and term of the purchase should be set forth in the operating procedures expressly stipulating relevant control measures, and a specialist should be assigned to control the liquidity and security of the account.
- The receipt and payment of funds, records, and certification of receipt and payment in regard to each sale and purchase transaction shall be entered fully and accurately on a daily basis.
The transfer of time deposits to other banks by a securities firm in accordance with the preceding article shall be conducted in the following manner:
- Funds shall be moved by way of account transfer. No cash withdrawal, overdraft, pledge, or other rights may be exercised in respect of the funds.
- Time deposits transferred into other banks may be terminated at any time, in which case all funds may only be transferred back to the original securities firm's Settlement Account by way of account transfer, and cannot be used for other purposes.
- The accounts and account numbers of other banks designated for deposit transfer shall be reported to the TWSE and TPEx in writing in advance, with any changes to be notified immediately to the TWSE and TPEx.
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| Article 4 | Customers' settlement funds retained in a securities firm's Settlement Account may not be utilized for purposes other than paying monies due from customers, purchasing R.O.C. government bonds and treasury bills, or transfer the funds to other banks in the form of time deposits, and shall be separated from and independent of the securities firm's own assets.
No creditor of a securities firm's liabilities in said firm's own assets may claim to attach or exercise other rights in customers' settlement funds retained in the securities firm's Settlement Account and the relevant investment objects.
Customers' settlement funds retained in a securities firm's Settlement Account are account-specific trust assets held for the benefit of customers and shall be immediately returned to customers when the securities firm petitions for bankruptcy or commences liquidation.
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| Article 5 | The bank in Article 3 of these Guidelines shall meet the following conditions:
- If it is an R.O.C. bank (including subsidiaries of a foreign bank that are organized and registered in the R.O.C. under the Company Act), its equity ratio, tier 1 capital ratio and capital adequacy ratio shall conform to the following conditions:
- They may not be lower than the minimum ratio prescribed in Article 5, Paragraph 1, Subparagraphs 1 and 2 of the Regulations Governing the Capital Adequacy and Capital Category of Banks.
- The minimum ratio prescribed in the preceding item may not be lower than the increased ratio after a raise by the Financial Supervisory Commission pursuant to Article 5, Paragraph 2 of the Regulations Governing the Capital Adequacy and Capital Category of Banks.
- In the event of a branch in the R.O.C. of a foreign bank, the credit ratings of its head office shall meet any of the following standards:
- Long-term obligations are rated BBB- or above and short-term obligations A-3 or above by Standard & Poor's Ratings Services.
- Long-term obligations are rated Baa3 or above and short-term obligations P-3 or above by Moody's Investors Service, Inc.
- Long-term obligations are rated BBB- and short-term obligations F3 by Fitch Ratings Ltd.
- Long-term obligations are rated twBBB- and short-term obligations twA-3 by Taiwan Ratings Corporation.
- Long-term obligations are rated BBB- (twn) and short-term obligations F3 (twn) by Fitch Ratings Limited, Taiwan Branch.
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| Article 6 | A securities firm that retains customers' settlement funds in the Settlement Account with customers' consent shall conform to the following conditions and qualification requirements except where, in the event of non-compliance with Subparagraph 2, it has made specific improvement and obtained the approval of the competent authority:
- The net value specified in the latest financial reports duly audited or approved by the CPA may not be lower than the paid-in capital.
- Legal compliance:
- Not having been subject to the disposition in Article 66, Subparagraph 1 of the Securities and Exchange Act or in Article 100, Paragraph 1, Subparagraph 1 of the Futures Exchange Act in the last three months.
- Not having been subject to the disposition in Article 66, Subparagraph 2 of the Securities and Exchange Act or in Article 100, Paragraph 1, Subparagraph 2 of the Futures Exchange Act in the last six months.
- Not having been subject to the disposition of the competent authority in the form of business termination in the past year.
- Not having been subject to the disposition of the competent authority in the form of revocation or nullification of the business permit in the last two years.
- Has established a legal compliance unit and supervisor in accordance with the internal control system establishment guidelines of various service enterprises in the securities and futures markets.
- The regulatory capital adequacy ratio reported in the half-year period prior to application has been over 150%.
Prior to retaining customers' settlement funds, the securities firm shall submit the following documents with the commencement date stated to the TWSE, with a copy to the TPEx. The TWSE is deemed to agree to the retention if it does not indicate any disagreement within 10 business days:
- Minutes of the directors' meeting where it is resolved that the securities firm may retain customers' settlement funds.
- A written description of the internal control system through which the proposal for the securities firm to retain customers' settlement funds is raised to and approved by the board of directors.
- Contract for the opening of a special account for the securities firm to retain customers' settlement funds.
- Ledger account contract executed between the securities firm and each bank.
- Latest CPA-audited or -approved financial reports.
- Documents relevant to legal compliance.
- Regulatory capital adequacy ratio reported in the last half-year period.
- Affidavit that the bank receiving and paying the retained settlement funds of customers satisfies all qualification requirements set forth in the preceding article.
Any addition of or change in the information in Subparagraph 4 of the preceding paragraph after the securities firm begins to retain customers' settlement funds shall immediately be reported to the TWSE in writing, with a copy provided to the TPEx.
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| Article 7 | Where the head office of a securities firm has trading halted or restricted by the TWSE pursuant to the Operating Rules or by the TPEx pursuant to the TPEx Trading Rules, the securities firm shall immediately cease to retain customers' settlement funds and shall, before the following business day, transfer the funds back to the customers' Securities Book-entry Accounts or Customer Savings Account for ledger settlement.
When the securities firm ceases to retain customers' settlement funds, it shall give immediate notice to the TWSE and TPEx in writing, reporting on how the circumstance in the preceding paragraph is handled.
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| Article 8 | At the end of the period for which trading is halted or restricted pursuant to the preceding article, the securities firm may submit the documents listed in Article 6 and make a report to the TWSE in writing, with a copy provided to the TPEx, and then resume the retention of settlement funds.
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| Article 9 | A securities firm may, subject to the customer's instructions, use the Settlement Account to receive and pay the business payments listed below, in NTD only:
- Accept orders to trade in securities on the TWSE
- Accept orders to trade in securities at its place of business
- Margin purchase and short sale of securities
- Exercise call (put) warrants
- Consignment and re-consignment trading of foreign securities
- Agency service regarding trading in foreign bonds
- Securities lending
- Securities business money lending
- Non-restricted purpose loans
- Wealth management
- Securities dealing at the securities firm's place of business
- Over-the-counter trading of financial derivatives
- Securities underwriting
- Discretionary investment by way of authorization or trust
- Other business as approved by the competent authority
Upon a written agreement with the customer, a securities firm may transfer to the customer's Settlement Account the yields on its securities, or amounts it may receive from public tender offer, merger, cash refund capital reduction and other stock affairs approved by the competent authorities.
The securities firm shall be responsible for the amount of losses arising out of operational negligence in conducting the businesses in the preceding two paragraphs, without prejudicing the customer's rights and interests.
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| Article 10 | A securities firm that retains funds in the Settlement Account with customers' consent may charge a management fee from customers at a rate to be determined by it with the customers.
The ownership of interest that is incurred from funds retained in the Settlement Account with customers' consent is expressly set out in the contract for the retention of customers' funds in the Settlement Account. The securities firm shall withhold taxes and issue withholding statements according to the Income Tax Act and applicable provisions with the customers as the taxpayer, in the year in which the income occurs.
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| Article 11 | A securities firm that, with customers' consent, retains customers' funds in the Settlement Account and uses such account for purchasing R.O.C. government bonds and treasury bills or transfers the funds to other bank in a form of time deposits shall establish an effective internal control system and, upon confirmation of the legal compliance supervisor and audit supervisor, present said system to the board of directors for approval.
The above-mentioned internal control system shall specify the responsible departments of the securities firm, procedures whereby the securities firm ceases to retain customers' settlement funds and resumes retention, transfer of sources of customers' funds, term of settlement and payment of interest, the handling of management fees and taxes, management of customers' receipts and payments and debits and credits (including review and operating procedures for payment, deposit and reclaim of funds for customers, Settlement Account risk control procedures, and review and operating procedures for agreement and amendment with respect to the Customer Savings Account), notification and audit mechanism regarding customers' reclaim of funds, records required to be retained of customers' enquiries about their funds, premature termination of contract by customers, account management and data transmission regarding receipt and payment of funds, and other matters required by the competent authority to be included.
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