Chapter I General Provision |
| Article 1 | These Operating Rules are adopted pursuant to the proviso of paragraph 1 of Article 45 of the Securities and Exchange Act ("the Act") and Point 6 of the Order of Financial Supervisory Commission 28 December 2021Jin-Guan-Zheng-Quan-Zi No. 1100365649.
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| Article 2 | When conducting non-restricted purpose loan business, securities firms shall abide by the Securities and Exchange Act, these Operating Rules, and related Rules, Regulations, Announcements, Explanations of the Taiwan Stock Exchange Corporation ("TWSE"), Taipei Exchange (TPEx), Taiwan Depository & Clearing Corporation ("TDCC").
The non-restricted purpose loan business prescribed under these Operating Rules is limited to financing with securities, claims in outstanding settlement funds receivable or other instruments as collateralsand the scope of collaterals are as follows:
- 1. TWSE or TPEx listed securities, but not including ETF beneficial certificates traded in foreign currency and international bonds, shares subject to an altered trading method, or TPEx managed stocks.
- 2. TPEx traded open-end funds beneficial certificates or physical gold.
- 3. Beneficial certificates of securities investment trust funds or futures trust funds that are domestically offered and that invest domestically (hereinafter as beneficial certificates of open-end securities investment trust funds or beneficial certificates of futures trust funds).
- 4. claims in outstanding settlement funds receivable
- 5. Other collateral approved by the competent authority.
The TPEx traded open-end funds beneficial certificates of the above paragraph refer to beneficial certificates of securities investment trust funds registered for trading on TPEx according to Taipei Exchange Rules Governing the Review of Beneficial Certificates of Open-end Funds for Trading on the TPEx; the beneficial certificates of open-end securities investment trust funds or beneficial certificates of futures trust funds refer to trust funds prescribed under Article 23 of Regulations Governing Securities Investment Trust Funds and Article 8, 9, 10, and 10-1 of Regulations Governing Futures Trust Funds.
The beneficial certificates of open-end securities investment trust funds or beneficial certificates of futures trust funds of the above Paragraph shall be limited to those denominated in New Taiwan Dollar.
The claims in outstanding settlement funds receivable mentioned in paragraph 2, subparagraph 4 refers to the price receivable after a set-off of the prices of the securities under paragraph 2, subparagraph 1 purchased and sold by the securities firm’s clients on the date of application and the preceding business day, less any outstanding amount after the clients have applied before the date of application for lodging the claims in outstanding settlement funds receivable as security.
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| Article 3 | A securities firm that conducts non-restricted purpose loan 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, and operating procedures, division of powers and duties, financing limit controls, and account management, loan counterparty, financing conditions for the conduct of non-restricted purpose loans, as well as related risk management mechanisms.
When a securities firm conducts non-restricted purpose loan, the prospective borrowers shall be decided by the securities firm according to its own internal control system and conduct credit investigation procedures according to the preceding paragraph; as for the stipulations between the parties, a securities firm shall set the applicable financing conditions in accordance with the internal control system of the Paragraph 1 and such conditions shall be stated clearly in the non-restricted purpose loan contract.
For the stipulations between a securities firm and its client, securities firm shall make in accordance with the internal control system set forth in the preceding paragraph and stated clearly in the non-restricted purpose loan contract.
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| Article 4 | For non-restricted purpose loan conducted by securities firms, the financing period applied by clients shall be limited within 6 months. Prior to the expiration of the financing period, the client may apply for extension, and a securities firm may grant an extension for 6 months depending on each client's credit status. Prior to the expiration of 1 year, a securities firm may grant another extension of 6 months upon reviewing such client's credit status, provided the financing period is limited to two business days if claims in outstanding settlement funds receivable are lodged as security.
Save the claims in outstanding settlement funds receivable which are lodged as security, the collaterals provided by the clients of the preceding paragraph may be replaced during the financing period, the application method shall be stipulated by both parties.
If a client makes partial repayment for the loan before the expiration of the financing period, save the claims in outstanding settlement funds receivable which are lodged as security, a securities firm may return to the client the collateral it originally provided on a proportional basis, the returning method shall be stipulated by both parties. However, where it is less than one trading unit, the collateral shall not be returned. Notwithstanding, a securities firm and its client may also agree that after the repayment of the loan, a securities firm may be exempted from returning part of or all the collaterals, and the client may apply for non-restricted purpose loan again in respect of such collaterals not returned.
For the non-restricted purpose loan prescribed under Paragraph 1, a securities firm shall notify its client in writing or through communication, electronic methods agreed by its clients 10 business days prior to the expiration of the financing period, the notification methods shall be clearly stated in the non-restricted purpose loan contract.
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| Article 5 | To apply for conducting non-restricted purpose loan business, a securities firm shall fill out an application form and submit it together with the related documents to 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 has been approved by the competent authority to conduct non-restricted purpose loan business, a securities firm shall apply for change of registration of securities business scope with the TWSE before beginning the non-restricted purpose loan business; and the personnel handling non-restricted purpose loan shall possess the qualifications prescribed under the Regulations Governing Responsible Persons and Associated Persons of Securities Firms.
After a securities firm has been approved by the competent authority to conduct non-restricted purpose loans, if its regulatory capital adequacy ratio falls below 150% for 2 consecutive months, it shall suspend such lending business, which may be resumed only after the securities firm is in compliance with regulations for 3 consecutive months and is approved by the competent authority; the same requirement shall apply to a securities firm that has already received approval to conduct such non-restricted purpose loan but has not yet commenced it.
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| Article 6 | The clients of non-restricted purpose loan of a securities firm are limited to the following:
- An R.O.C. national who has reached their 20th year of age with full capacity to make juridical acts.
- Domestic juristic person organized and registered under the R.O.C. law.
- Onshore overseas Chinese and foreign nationals.
Before applying for non-restricted purpose loan, a client shall already open a securities trading account with the securities firm and shall open a securities depository account with TDCC (hereinafter as Centrally Deposited Account) or open a central government securities account with central government securities settlement bank to proceed with book-entry transfer of the collaterals.
In case that the client in the first paragraph is a director, supervisor, manager of a TWSE or TPEx listed company, or a shareholder holding more than 10% of the total outstanding shares of the company (hereinafter as Insider) and the client intends to use the shares of the company he/she belongs to as financing collateral or provide these shares as additional collateral, pledge shall be created over these share for the above purpose.
Shares held by the Insider shall include such shares held by his/her spouse, minor child/children or those held in another's name.
In case where a client becomes an Insider after he/she has signed the non-restricted purpose loan contract, the provisions of paragraph 3 shall apply to all transactions that take place subsequently as well as the collateral he/she has provided.
Matters relating to creation of pledge, removal of pledge, and exercise of pledge under paragraph 3 shall all be processed in accordance with the Operating Rules of the Taiwan Depository & Clearing Corporation (TDCC) and the TDCC Instructions on Participant's Pledge and Delivery of Securities for Book-Entry Transfer.
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| Article 7 | A securities firm that conducts non-restricted purpose loan may charge its clients interest and processing fees for the loans; the interest rate and fee rate shall be decided by each securities firm. The interest rate shall be calculated on a per annum basis and be posted at its place of business.
When there is an adjustment to the interest rate and fee rate of the preceding paragraph, for the portion of funds already financed but not yet repaid, from the adjustment date, such portion shall be calculated, collected and paid according to the post-adjustment rates.
The interest of paragraph 2 shall be calculated based on the number of days from the financing date of the securities firm until the day before the settlement date.
The client shall be responsible for costs relating to creation of pledge.
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| Article 8 | A securities firm conducting non-restricted purpose loans may not accept as collateral the securities or other commodities listed below:
- Pledged securities or other commodities.
- 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.
- Assets or beneficiary rights trusted by or entrusted to the clients according to trust related regulation.
For the collateral provided by the clients, the client shall warrant the completeness of the right to the collateral. If there is defect or legal dispute to the collateral, a securities firm shall not grant the loan.
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| Article 9 | Collateral that a securities firm obtains in conducting non-restricted purpose loans and for which a client has issued a collateral transfer agreement may not be transferred for any other purposes except for the purposes listed below, and shall be deposited in central custody:
- As collateral for securities borrowing through the securities lending system of the TWSE.
- As collateral for securities borrowing or refinancing through a securities finance enterprise.
If the collateral in the preceding paragraph is provided in the form of a fund purchased in the securities firm's name in accordance with the latter part of paragraph 1, Article 17 or in the form of a client’s claims in outstanding settlement funds receivable, the securities firm may not further use such collateral for security purposesor use the same for other purposes.
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