Chapter Content

Title:

Operating Rules for Securities Firms Handling Non-Restricted Purpose Loan 

Amended Date: 2021.04.01 
Categories: Securities Exchange Market > Borrowing of Money
   Chapter III Borrowing and Return
Article 16    The collateral financing calculation standards for a securities firm that operate non-restricted purpose loan business shall be as follows, save in the event of fractions of one trading unit or of one unit of beneficial rights.
  1. The value of TWSE and TPEx traded securities, except for central book-entry bonds, municipal bonds, common corporate bonds and financial bonds, is 60% of the closing price of the business day immediately prior to financing. However, for securities not eligible for margin purchase and short sale, the value shall be calculated as 40% of the closing price of the business day immediately prior to financing.
  2. The value of beneficial certificates of open-end funds traded on the TPEx is 60% of the net asset value of each unit of beneficial rights of the business day immediately prior to financing. The value of physical gold is 60% of the closing average at the closing of the business day immediately prior to financing.
  3. The value of beneficial certificates of open-end securities investment trust funds or futures trust funds is 60% of the net asset value of the business day immediately prior to financing. The value of physical gold is 60% of the closing average of the business day immediately prior to financing.
  4. The value of central book-entry bonds is 80% of the face value.
  5. The value of municipal bonds, common corporate bonds and financial bonds is 60% of the face value.
    A security firm may adopt a stricter standard of the calculation standard of preceding paragraph in accordance with the market status of the collateral market and the client credit risk.
    If there is no closing price of the business day immediately prior to financing prescribed under subparagraph 1 of paragraph 1, the price shall be replaced with the price calculated according to the principles prescribed in Article 58-3, paragraph 2, subparagraph 2 of the Operating Rules of the Taiwan Stock Exchange Corporation or Article 57, paragraph 1 of the Taipei Exchange Rules Governing Securities Trading on the TPEx.
    The financing calculation standard of the collateral set forth in paragraph 1 may be adjusted by TWSE in consultation with TPEx based on the conditions of the collateral.
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Article 17    For the collateral in the form of securities or other commodities provided by a client applying non-restricted purpose loan, a securities firm or custodian institution shall transfer the client's collateral to the collateral account opened by the securities firm at the TDCC or central government securities settlement bank. Such collateral account, excluding that for securities on which pledge shall be created under Article 6, paragraph 3, may be shared with the loan collateral account of Article 16, paragraph 1 of the Operating Rules for Securities Business Money Lending by Securities Firms. If a collateral is purchased in the securities firm's name, the authorized securities firm shall keep a registration log for management purposes.
    After a securities firm completes the process set forth in the preceding paragraph, it shall transfer the financing amount to the client's designated financial institutes account. The account shall be the client's own account and the transfer fee shall be born by the client.
    The financial institutes account of the preceding paragraph shall be stated clearly in the non-restricted purpose loan contract. If there is any change to such financial institutes account, Article 13 of these Operating Rules shall apply.
    For the transfer of the financing amount set forth in paragraph 2, a securities firm may make in a lump sum or separately per client's application by calculating, once or separately, the finance limit for the collateral provided by the client according to Article 16 and the transfer method shall be stipulated by both parties.
    For the application of paragraph 1, if a client submits the loan application by a method other than in person, the client shall submit a consent letter for exemption from affixing signature or seal on the loan application. If a securities firm has verified and retained the record of the consent letter on file, the securities firm may proceed with loan application related matters accordingly without requiring the client to affix signature or seal on the loan application.
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Article 18    When a client repays the loan by cash or by selling the collateral, it shall fill out a Non-Restricted Purpose Loan Repayment Application Form.
    When repaying the loan by cash, the client shall deposit (transfer) the repayment amount into the designated financial institute account, or authorize the securities firm in the non-restricted purpose loan contract to deduct the financing amount from the financial institute account. A securities firm or custodian institute shall transfer the collateral and supplementary collateral to the client's designated account from the collateral account opened according to paragraph 1 Article 17 on the next business day. If the collateral and supplementary collateral is not owned by the client, the security firm shall transfer to the owner's depository account or central government securities account. For the collateral on which pledge is created under Article 6, paragraph 3, the securities firm may remove the pledge on the collateral before transferring it to the account designated by the client.
    When repaying the loan by selling the collateral, the client shall agree in writing that the securities firm sells the collateral in the designated account opened with the securities firm, and related handling fee and tax shall be born by the client. After the transaction is completed, the securities firm shall calculate the financing principal and interest amount payable by the client, if the selling price is higher than such amount, a security firm shall return the surplus to the client. If the selling price is not sufficient to repay the loan, a securities firm may deduct the shortfall from any returned amount from other financing transaction. If it is still not sufficient to repay the loan, within the scope of debt repayment, the securities firm may dispose the account balance in the client warranted finance account or other credit account, and any surplus shall be returned to the client. If it is still not sufficient to repay the loan, the securities firm may collect the debt according to the laws and regulations. The handling fee for transferring the surplus amount shall be born by the client. In case of creation of pledge under Article 6, paragraph 3, the securities firm shall proceed to exercise the pledge.
    A securities firm shall engage a securities firm to place a sell order on the TWSE or the TPEx for the sale prescribed in the preceding paragraph in accordance with the amount and price prescribed by the client. Nevertheless, the sale of central book-entry bonds, municipal bonds, common corporate bonds or financial bonds may be handled through price negotiation at the business place of the securities firm.
    When repaying the financing amount by selling the collateral under Paragraph 3, both parties may agree in the non-restricted purpose loan contract that the client may repay the financing amount with the proceeds from placing an order to sell the securities in the securities trading account opened with the securities firm in writing, correspondence, or electronic methods. In case of creation of pledge under Article 6, paragraph 3, the securities firm shall proceed to remove the pledge.
    If the collateral sold by the client for repayment is beneficial certificates of open-end securities investment trust funds or beneficial certificates of futures trust funds, the repayment shall be made after the securities firm's redemption.
    Where a client repaying the financing amount according to paragraph 1 has agreed with the securities firm that part of or all of the collaterals need not to be returned according to paragraph 3 of Article 4, the securities firm may follow such agreement.
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Article 19    When the competent authority approves and announces suspension of trading or termination of the TWSE listing or TPEx trading of a security that a client has posted as collateral; when the principal of central book-entry bonds, municipal bonds, common corporate bonds or financial bonds is repaid partially; when the beneficial certificates of open-end securities investment trust funds and those of futures trust funds are combined or when the deed of the trust terminates or expires, then the aforementioned suspension date, termination date, repayment date, combination date, or termination or expiration date of the deed of trust shall be deemed as the expiration date of the financing period. After being notified by the securities firm, the client shall repay the financing amount and the interest by the tenth business day before the aforementioned suspension date, termination date, repayment date, combination date, or expiration date of the deed of trust, provided that this requirement shall not apply if trading is suspended due to differences in rights and obligations under new and old securities caused by split or reverse split of ETF beneficial certificates or replacement of securities necessitated by capital reduction or other causes of a TWSE or TPEx listed company, or the client has replaced the collateral, or in cases where the issuing company of a TPEx listed security is applying to convert the security to a TWSE listed security, or where the securities of both the surviving and non-surviving listed (or TPEx) companies in a merger or the beneficial certificates of open-end securities investment trust funds and of futures trust funds being the surviving beneficial certificates of open-end securities investment trust funds and of futures trust funds after merger qualify as the collateral under Article 2, paragraph 2.
    When during the collateral period, the client replaces collateral it provided with the collateral under Article 2, paragraph 2, the securities firm may accept that collateral until the expiration date of the financing period.
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