Chapter I General Provisions
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| Article 1 | These Rules are prescribed in accordance with Paragraph 2 of Article 18 of the Securities and Exchange Law and Paragraph 2 of Article 139 of the Banking Law. |
| Article 2 | The term "securities finance enterprise" as used in these Rules shall mean the enterprise which provides margin loan or stock loan to securities investors, securities firms, or other securities finance enterprises in accordance with these Rules.
Article 3
The operation securities finance enterprises shall be permitted by the Ministry of Finance and approved by the Securities and Futures Commission of the Ministry of Finance (hereinafter called "SFC"). |
| Article 4 | The formation of securities finance enterprises shall be limited to company limited by shares whose paid-in capital shall not be less than NT$4,000,000,000. |
| Article 5 | Securities finance enterprises can operate the following businesses:
1.Margin loan and stock loan of securities trading.
2.Re-finance to other securities firms or other securities finance enterprises.
3.Loan for rights issue and subscription (hereinafter referred to as "subscription loan").
4.Loan to securities firms for underwriting (hereinafter referred to as "underwriting loan").
5.Other related business approved by SFC.
Securities obtained by securities finance enterprises in the process of operating the businesses in the preceding paragraph shall be sent to a centralized securities depositary enterprise for custody. |
Chapter II Business Activities
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Section 1 Margin Loan and Stock Loan of Securities Trading
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| Article 6 | The counterpart of margin loan and stock loan of securities trading handled by securities finance enterprises shall only be the consignors with accounts in the securities firms for securities trading (hereinafter called "Consignors").
Securities finance enterprises handling margin loan and stock loan of securities trading shall sign an agent contract with securities firms and report to SFC for its approval. |
| Article 7 | Securities finance enterprises handling margin loan and stock loan of securities trading shall sign a margin loan and stock loan contract with Consignors, and open a credit account.
The content of contract of the preceding Paragraph shall be prescribed by the securities finance enterprises, and reported to the SFC for its approval.
The following items shall be recorded in the margin loan and stock loan contract:
1.The ratio and the time limit for satisfying the margin call pursuant to the provisions of Article 11.
2.Disposal of the collateral pursuant to the provisions of Article 13.
3.Utilization of the securities and fund, referred to in Article 15, responsibility to deliver the same kind of securities as those utilized and the interest rate on the money derived from the sale of stock loan securities and the margin on stock loans.
4.The interest rate of margin loan and the handling fees of stock loan pursuant to the provisions of Article 16.
5. Other items required by the SFC to be recorded. |
| Article 8 | Securities finance enterprises handling Consignors' opening credit accounts are limited to opening one credit account for one Consignor. The Consignor may only open one credit account through one securities firm handling margin loans and stocks loans.
Securities finance enterprises handling Consignors' opening credit accounts shall make a credit search pursuant to the prescribed terms of opening account.
The terms of opening account referred to in the preceding Paragraph shall be prescribed by the securities finance enterprises, and reported to the SFC for its approval. |
| Article 9 | The settlement of securities traded via margin loan and stock loan shall be handled directly by securities finance enterprises representing Consignors with the stock exchange or the OTC exchange. |
| Article 10 | Securities finance enterprises handling margin loan and stock loan of securities, when providing Consignors margin loan, shall obtain the margin pursuant to the ratio prescribed by the SFC, and take all purchased securities of the margin loan as collateral; when providing Consignors stock loan, it shall receive securities margin pursuant to the percentage prescribed by the SFC, and take the money derived from the stock sale as collateral. |
| Article 11 | Securities finance enterprises handling margin loan and stock loan of securities shall calculate the ratio of the collateral value of each credit account and Consignors' debts every day, and shall immediately inform Consignors to re-submit the shortfall within a time limit if it is lower than the prescribed ratio.
The ratio and time limit for re-submission in the preceding Paragraph shall be prescribed by the securities finance enterprises, and reported to the SFC for its approval. |
| Article 12 | The securities margin of margin purchase and the shortfall amount to be submitted as referred to in the preceding Article may be paid by securities.
The types of securities and the standard of payment in the preceding Paragraph shall be prescribed by the securities finance enterprises, and reported to the SFC for its approval. |
| Article 13 | When margin purchasers or short sellers fail to satisfy the margin call pursuant to Article 11 or fail to satisfy the call beyond the agreed date, the securities finance enterprises shall dispose of their collateral immediately. |
| Article 14 | When a change in stock prices causes the net worth of the collateral value of a client's credit account, after subtracting the debt, to increase, a securities finance enterprise dealing with margin loans and stock loans may not transfer the increased value of funds or securities to their client or use such value to satisfy the margin or securities margin. |
| Article 15 | Securities finance enterprises may utilize the following securities and funds:
1.Margin purchasers' purchased securities derived from the margin purchase.
2.Short sellers' proceeds derived from the short sale.
3.The margin paid by short sellers.
The uses of securities and proceeds referred to in the preceding Paragraph are limited to margin loans and stock loans and re-financing by other securities finance enterprises.
Where utilizing securities pursuant to the provisions of Paragraph 1, the securities finance enterprises shall be responsible to deliver the same category of securities when the margin loan and stock loan position is closed.
Securities finance enterprises shall pay interest on the proceeds derived from the short sale and securities margin to short sellers. The interest rate shall be prescribed by the securities finance enterprises and reported to the SFC for its approval. |
| Article 16 | The interest rates of margin loan and the handling fees of stock loan shall be prescribed by the securities finance enterprises and reported to the SFC for its record. |
| Article 17 | Securities finance enterprises handling stock loan and margin loan shall prescribe the operation method for the business of margin loan and stock loan and implement such with the SFC's approval.
The operation method referred to in the preceding Paragraph shall include the following items:
1. The opening of the credit account.
2. The application for margin loan and stock loan and its repayment.
3. The calculation, additional payment, and handling of collateral.
4. The transfer of securities for collateral.
5. The obtaining of the margin loan shortfall securities.
6. The title transfer of margin loan guarantied securities and securities transferred for collateral.
7. Other items required to be included by the SFC.
Securities finance enterprises handling margin loan and stock loan of securities trading shall comply with the operation method for the business referred to in Paragraph 1. |
| Article 18 | Securities finance enterprises handling margin loan and stock loan of securities trading shall establish the alter and allocation guidelines in dealing with margin loan and stock loan in accordance with the operation method referred to in the preceding Article, and shall publicly disclose on a daily basis the credit extending information regarding those margin loans and stock loans.
The alert and allocation guidelines referred to in the preceding Paragraph shall provide for safety stock amount and calculation formula for each type of stock loan, and when the balance of that stock loan plus the safety stock amount equals the balance of the margin loan, provision of stock loan shall be ceased. |
| Article 19 | Securities finance enterprises providing re-finance to securities firms can utilize the received money. However, this utilization is limited to providing margin loan in the trading of securities and to the re-financing to securities firms.
Securities finance enterprises providing re-financing to securities firms can utilize the received securities. However, the utilization of securities shall be limited to the re-finance to securities firms and the insufficient securities in providing stock loan in the trading of securities.
Securities finance enterprises utilizing securities according to the preceding Paragraph shall deliver the same category of securities when re- finance is paid. |
| Article 20 | Securities finance enterprises handling margin loan and stock loan of securities trading shall not violate these Rules and the amount, time limit of margin loan and stock loan of securities trading, ratio of margin loan, margin for short sales, and standards for securities available for margin loan and stock loan shall be prescribed by the SFC pursuant to the provisions of Article 61 of the Securities and Exchange Law. |
Section 2 Re-Finance to Other Securities Firm
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| Article 21 | Securities finance enterprises and other securities finance enterprises handling re-finance to other securities firms shall be limited to the amount of money or securities needed by the business of margin loan and stock loan handled by securities firms.
The term "re-finance" means that securities firms apply for margin loans or stock loans from securities finance enterprises. |
| Article 22 | Securities finance enterprises providing re-finance to securities firms shall sign a re-finance contract with securities firms, and open an account of re-finance.
The content of the contract referred to in the proceeding Paragraph shall be prescribed by securities finance enterprises, and reported to the SFC for its approval. |
| Article 23 | Securities finance enterprises providing re-finance to securities firms requesting margin loans shall not have a margin ratio higher than the margin ratio of the securities firms to their clients, and shall receive all purchased securities of margin loan as collateral.
Securities finance enterprises providing re-finance to securities firms requesting stock loans shall receive the margin of stock loan whose ratio shall not be lower than the margin ratio of stock loan from securities firms to clients, and shall take the proceeds of the stock loan as collateral.
The margin of stock loan received by securities finance enterprises in the preceding Paragraph may be paid by securities; the categories and standard of payment shall be prescribed by securities finance enterprises, and reported to the SFC for its approval. |
| Article 24 | Regarding the money or securities required to be delivered or received in the securities trading, securities finance enterprises providing re-finance to securities firms shall do so through the stock exchange, OTC exchange or its consigned clearing and settlement institution. |
| Article 25 | Securities finance enterprises providing re-finance to securities firms shall notify the securities firms to submit additional collateral or margin within the time limit or repay the shortfall if the price decline in the collateral of margin loan causes the ratio of the margin to the market value of collateral to exceed the ratio of the initial loan or the price increase of securities of stock loan causes the margin ratio of stock loan to fall below the initially received ratio. |
| Article 26 | Securities finance enterprises providing re-finance to securities firms can utilize the received securities and money.However, the utilization the securities shall be limited to the re-finance to securities firms and the insufficient securities in providing stock loan in the trading of securities.
Securities finance enterprises utilizing securities according to the preceding Paragraph shall deliver the same category of securities when re- finance is paid. |
| Article 27 | Securities finance enterprises handling the application of re-finance filed by securities firms after clients' closure of his margin position shall get the securities by the manners prescribed in Items 3 and 4 in Paragraph 1 of Article 35 if it does not have sufficient securities on-hand.
The fees of stock loans in the preceding Paragraph shall be paid by securities firms. |
| Article 28 | Securities finance enterprises providing re-finance to securities firm shall prescribe the operation method of re-finance business and report to SFC for its approval.
The operation method referred to in the preceding paragraph shall include clearly the following items:
1.The procedure of opening an account of re-finance.
2.The re-finance application, the procedure of repayment and the way of repayment.
3.The amount of re-financing and the calculation and re-submission of the margin of stock loan.
4.The receipt, re-submission and disposal of collateral of re-finance.
5.The utilization and custody of the securities obtained by way of re-finance.
6.The exercise of ownership rights of stocks and withholding tax on dividend from stocks purchased through the re-finance.
7.The items recorded in the book of re-finance.
8.Termination and resumption of the business of re-finance.
9.The procedure of borrowing securities and auction.
10.Other items to be included under the SFC regulations.
Securities finance enterprises providing re-finance to securities firms shall follow the operation method of business in Paragraph 1. |
| Article 29 | The regulations of Paragraph 4 of Article 15, Article 16, and Article 19 shall apply mutatis mutandis to re-finance by securities finance enterprises to securities firms or other securities finance enterprises.
The regulations of this Section shall apply mutatis mutandis to re-finance by securities finance enterprises to other securities finance enterprises. |
Section 3 Subscription Loan and Underwriting Loan
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| Article 30 | Securities finance enterprises handling subscription loan and underwriting loan, the scope of such loans shall be regulated by the SFC rules.
The ratio and time limit for margin loan handled by securities finance enterprises handling subscription loan and underwriting loan shall be governed mutatis mutandis by Article 61 of the Securities and Exchange Law.
The dollar amount for margin loan referred to in Paragraph 1 may not exceed the issuance price of the securities subject to such loans, and the collateral shall consist of all the securities, certificate of payment of shares price, and other listed or OTC securities obtained through the margin loan. |
| Article 31 | The securities obtained by a securities finance enterprise through handling subscription loan and underwriting loan may not serve as the origin of securities for providing stock loan in the trading of securities or for re-finance to securities firms or other securities finance enterprises. |
| Article 32 | Securities finance enterprises handling subscription loan and underwriting loan shall establish an operation method for subscription loan and underwriting loan business and shall report this to the SFC for approval.
The operation method referred to in the preceding paragraph shall include clearly the following items:
1. The opening of the margin loan account.
2. The terms or conditions for opening the account.
3. The application for margin loan and its repayment.
4. The calculation, margin call, and disposition of collateral.
5. When using other listed or OTC securities as collateral, the types of securities used for collateral and the standard for collateral settlement.
6. The transfer payment of securities for collateral.
7. The title transfer of margin loan guarantied securities and securities transferred for collateral.
8. Other items required to be included by the SFC.
Securities finance enterprises handling subscription loan and underwriting loan shall follow the operation method of business provided in Paragraph 1. |
| Article 33 | The regulations in Paragraphs 1 and 2 of Article 7, Paragraph 2 of Article 8, Article 11, and Article 12 applies mutatis mutandis to securities finance enterprises handling subscription loan and underwriting loan. |
Chapter III Finance
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| Article 34 | Securities and finance enterprises shall provide bond equivalent to 5% of its capital in cash, government bonds, financial bonds, or bank-guaranteed corporate bonds for deposit in the Central Bank of China. |
| Article 35 | Securities finance enterprises can get capital or stocks for liquidity according to the following methods:
1.Obtain Financing from banks or other institutions.
2.Issue commercial paper, corporate bonds.
3.Borrow securities from securities owner in public ways.
4.Purchase securities from the stock exchange auction.
The issuance amount of commercial paper of Item 2 of the preceding Paragraph shall not exceed 6 times the net worth of that enterprise, and is limited to providing margin loan in the trading of securities and providing refinancing to securities firms or other securities finance enterprises.
If a securities finance enterprise has deficiencies in its financial or business affairs and was unable to effectively improve upon it within the given time limit, or if there has been a flagrant/serious violation of the regulations, or if the net worth of each stock is below its par value, the SFC will adjust the multiple of the rule in the preceding paragraph according to the seriousness of the situation. |
| Article 36 | The self-owned capital of a securities finance enterprise, other than for business operating needs, may not be loaned to others or used for other purposes. Utilization of this capital is limited to the following:
1. Bank deposit.
2. Purchase of short-term bills.
3. Purchase of government bonds or financial bonds.
4. Purchase of certificates of beneficiary with option of buy-back from securities investment trust businesses.
5. Purchase of bank-guaranteed corporate bonds.
6. Purchase of real properties for business uses.
7. Other uses approved by the SFC.
The scope, ratio, and amount for Items 4 to 6 of the preceding Paragraph will be set by the SFC. |
| Article 37 | Securities finance enterprises shall not have guaranty, endorsement of negotiable instruments or provision of properties as security for others. |
| Article 38 | Where a securities finance enterprise handles the business described in Article 5 for the same person, the same related person, or the same related business and interest-related person, the relevant credit limit, credit total balance, credit terms or conditions, and rules for providing credit to persons within the same category are to be set by SFC.
The securities finance enterprises shall set guidelines for allocating the risks involved in the credit business referred to in the preceding paragraph and in every type of securities credit, and shall establish a credit investigation file for the same person, same related person, or same related business and interest-related person to be inspected.
The same person, same related person, same related business, and interest-related person referred to in Paragraph 1 and 2 are defined as in the Banking Law. |
| Article 39 | Securities finance enterprises shall, within four months of the end of each fiscal year and two months of the end of each semi-annual fiscal year publicly announce and report to the SFC financial reports certified by a certified public accountant, approved by the board of directors and recognized by the supervisor.
Securities finance enterprises shall, within the first ten days of each month report to the SFC the monthly accounting report for the previous month.
The format of the financial reports and monthly report referred to in the preceding two Paragraphs shall be prescribed by the SFC.
Where a securities finance enterprise has any of the following conditions, it shall report to the SFC within two days of the occurrence of the event:
1.The annual financial report recognized by the shareholders meeting is inconsistent with the financial report publicly announced and reported to the SFC.
2.Occurrence of any event with material impact to the rights of shareholders.
Securities finance enterprises shall report the balance of margin loan and stock loan and re-finance to the SFC for its record, and print and send the list to the stock exchange and OTC exchange every day. |
Chapter IV Supervision and Administration of Enterprises and Personnel
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| Article 40 | The examination of the financial affairs and operation of securities finance enterprises shall be handled pursuant to the provisions of Article 18-1 and Article 38-1 of the Securities and Exchange Law and Article 45 of the Banking Law. |
| Article 41 | Securities finance enterprises taking any of the following actions shall report to the Ministry of Finance for its permission and the SFC for its approval in advance.
1.Amendment of Articles of Incorporation.
2.Termination or resumption of business.
3.Dissolution or merger.
4.Transfer or assumption from another of the entire or a substantial portion of business or property.
5.Establishment or revocation of branch offices or other business office.
6.Change of business operation location.
7.Re-investment.
8.Offering or issuing securities.
9.Other items required to be approved pursuant to the SFC's stipulations. |
| Article 42 | Where any one of the following situations occurs, securities finance enterprises shall report to the Ministry of Finance and the SFC:
1.The resolution of shareholders or board of directors.
2.The change of position of directors, supervisors or managers. |
| Article 43 | Any change of business personnel of securities finance enterprises shall be printed in a report and collectively reported to the SEC for its record each month. |
| Article 44 | The directors, supervisors, managers and business personnel of securities finance enterprises shall not engage in the following actions:
1.To engage in securities trading directly or indirectly based on the information learned from the position.
2.Disclose the secret known from the position not in response to a legal inquiry.
3.In handling the business in Article 5, there exist false, deceptive and other acts which are sufficient to mislead others.
4.Other violations of laws or regulations. |
Chapter V Supplementary Provisions |
| Article 45 | These Rules shall be effective from the date of promulgation. |