|
Article 1
|
These Rules are adopted pursuant to the provisions of Article 158 of the Securities and Exchange Act and the "Main Content of the Regulations for Brokerage Contracts of Securities Brokers" promulgated by the competent authority.
|
|
Article 2
|
Where any of the following conditions apply, securities brokers shall refuse to open an account for a principal:
1. The principal has either no legal capacity or limited legal capacity, and is acting without the representation of a statutory agent.
2. The principal is an officer or employee of the Taiwan Stock Exchange Corporation or the competent securities authority.
3. The principal has been declared bankrupt and restoration of rights has not been effected.
4. The principal is under an order of interdiction and without the representation of a statutory agent.
5. The principal is opening an account for a juristic person but cannot provide evidence of authorization.
6. The principal is a securities broker that has not received approval from the competent authority or the stock exchange.
7. The principal has engaged a director, supervisor, or employee of a securities firm to act as agent in opening an account at said firm.
8. The same principal in discretionary investing opens more than one account with the same discretionary trader at the same business location of the same securities broker, provided that this restriction shall not apply when the principal is a government-sponsored fund such as a civil servants' retirement/disability fund, labor retirement fund, labor insurance fund, or postal remittance fund, and that when engaging the same discretionary trader to undertake discretionary investment, the principal opens different discretionary investment accounts at the same business location of the same securities broker so as to correspond to the different respective discretionary trading contracts employed.
Where any of the following conditions apply, securities brokers shall refuse to open an account for a principal and shall refuse to accept orders for trades or subscriptions to securities on an already-opened account:
1. When the Taiwan Stock Exchange or the GreTai Securities Market has sent a general notice to securities brokers that the principal has breached contract through failure to perform settlement obligations on time, and less than five years have passed while conclusion of the case is still pending.
2. An indictment has been issued against the principal by the public prosecutor for violation of the Securities and Exchange Act or for forgery or alteration of listed or OTC securities, where a judgment is still pending or where not more than five years have passed following issuance of a final and conclusive judgment by the court.
3. Where the principal has breached a futures trading contract and less than five years have passed while conclusion of the case is still pending, or where the principal has violated regulations for management of futures trading and not more than five years have passed since the issuance of a final and conclusive criminal judgment by the judicial authorities.
|
|
Article 2-1
|
When an overseas Chinese or foreign national has not effected registration with the Taiwan Stock Exchange pursuant to Article 77-4 of the Operating Rules of the Taiwan Stock Exchange Corporation, securities brokers shall refuse to open an account for a principal.
Where any of the circumstances under Article 11 of the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals apply with respect to the registration under the preceding paragraph, the Taiwan Stock Exchange Corporation will not allow registration, and where registration has already been effected, will cancel the registration, and will notify the securities broker which has already opened an account that it may not accept orders for purchase.
The securities broker shall cancel that account after the automatic settlement of the balance in the account and announce the conclusion of the case to the Taiwan Stock Exchange.
|
|
Article 3
|
Securities brokers accepting orders for securities trades must first execute a brokerage contract with the principal, and shall not effect securities trades on behalf of those who have not yet executed such a contract.
Securities brokers shall abide by the following provisions when executing a brokerage contract with a principal:
1. Where the principal is a natural person, with the exception of the following circumstances, that person shall bring their National Identity Card, personally place their seal on the brokerage contract, open an account, and place a photocopy of their National Identity Card on file:
(1) Where the principal has limited or no disposing capacity, the principal's statutory agent or guardian shall bring his/her own and the principal's National Identity Card, open an account, personally place their seal on the brokerage contract, and place a photocopy of their own and the principal's National Identity Card on file. Where the principal has not yet obtained a National Identity Card, a household registration or household membership list may be used; the a statutory agent acting as guardian shall also supply proof of guardianship.
(2) Where the principal is a person working overseas for a juristic person, the principal may engage an agent to open an account by personally bringing their own and the principal's National Identity Cards, a power of attorney notarized by an ROC overseas representative office or other authorized institution, and documents provided by the juristic person evidencing the fact of employment overseas.
(3) When the principal has specified a trading volume of NT$1 million or less per day and has not yet opened a margin trading account, the broker may accept an account-opening application from the principal through the Internet, by letter, or by another method; however, the principal's personal signature and stamp are still required on the account contract, and the signature and seal-stamp must be verified by the broker before the contract will be legally effective. The broker may determine what type of credit check shall be performed in connection with opening this type of account; however, a new credit check must be carried out at the time of any subsequent adjustment to the then-current limit on trading volume, in accordance with relevant regulations.
2. When the principal is a juristic person, procedures shall be carried out by an authorized person holding copies of evidentiary documents, including a copy of the juristic person's registration, a copy of the tax authority notice for issuance of a uniform invoice number and establishment of a withholding entity, a legally valid power of attorney and a copy of the authorized person's National Identity Card.
When the principal, the principal's statutory agent, or other authorized person executes a brokerage contract, a sample signature card or seal impression card for the principal, the principal's statutory agent, or another authorized person shall be kept on file, and an identical signature or seal shall be used when trading, subscribing to, or authorizing another as agent to trade or subscribe to securities, or to complete settlements and related procedures. The principal or the principal's statutory agent shall issue a power of attorney when engaging an agent to handle on its behalf any procedures relating to brokerage trading, subscription to securities, or settlement, and a signature specimen card or seal impression card of the agent may be kept on record for handling such matters.
The brokerage contract shall specify the name, sex, age, address, birthplace, profession, and national identity card number of the principal (or of the principal's agent, if any). For juristic persons, the contract shall specify the name, address, and government uniform invoice number of the juristic person; in addition, the articles of incorporation, operating rules, and relevant public announcements of the Taiwan Stock Exchange Corporation, as well as the regulations of the ROC Securities Dealers Association, shall be recognized as a part of the contract.
The broker may engage in securities trading on behalf of the principal only after the principal opens a centralized securities depository account and a deposit account at the principal's designated financial institution.
The requirement in the preceding paragraph concerning the opening of a deposit account shall not be applicable to those specified in the following subparagraphs:
1. Offshore overseas Chinese or foreign nationals; securities investment trust funds; insurance enterprise; overseas Chinese or foreign nationals converting holdings of convertible corporate bonds into stocks or overseas depository receipts into the underlying securities, having opened a deposit account at the custodian institution (or custodian bank), may receive or deliver the price by account transfer (remittance).
2. A trust enterprise with depository participant status may receive or deliver the price by account transfer (remittance) through the collective investment trust fund account managed by the trust enterprise.
3. A depository institution of overseas depository receipts, when accepting orders for redemption and sale of shares held, may receive the price by account transfer (remittance) through the deposit account at its custodian bank.
4. A securities investment consulting enterprise (SICE) or a securities investment trust enterprise (SITE) that has been engaged by a principal to conduct discretionary trading of securities may receive or deliver the price by account transfer (remittance) through a deposit account opened with the custodian institution.
5. A domestic bank or insurance company, if it has obtained a rating of twA- or above from Taiwan Ratings Corporation, or a rating, from a credit rating institution approved or recognized by the competent authority, that is equivalent to twA- or above from Taiwan Rating Corporation, may receive or deliver the price by account transfer (remittance) during the valid period of the above-mentioned rating.
|
|
Article 4
|
A securities brokers shall comply with the following provisions in brokerage trading of securities:
A broker must receive an order placed by a principal or principal's agent by means of letter, telegraph, telephone, the Internet, dedicated line, closed dedicated network, other or electronic trading method approved by this Corporation, or placed in person, before the broker may fill out and print the trading order form prescribed under Article 87 of the Securities and Exchange Act in order to execute a trade. The term "electronic trading" means trading by use of telephone voice menu system, the Internet, dedicated line, closed dedicated network, or other electronic trading method approved by this Corporation.
When a principal or principal's agent places a securities trading order by letter, telegraph or telephone, the securities broker's officer managing the trade shall fill out the trading order form in either written or electronic form, print the trading order, and stamp it. When the principal places a trading order by an electronic trading method such as voice, the Internet, dedicated line, or closed dedicated network, the securities firm may be exempt from the requirement to produce and fill out the trading order form; however, it shall print a record of requests for trades trading orders in the chronological order received, and for requests for trades made trading orders placed by an electronic trading method such as voice, the Internet, dedicated line, or closed dedicated network, or where trading order forms were filled out in electronic form and not printed out one by one, the officer processing the trade and the department manager, or the employee receiving the trading order, shall add their signatures to the record of requests for trades trading orders. The record of requests for trading orders shall include the principal's name and account number, the time of the order, the type, number, and face value of the securities, the order's price limit, the period of validity, the name or code number of the trader, and the method of request how the order was placed. Orders made in person shall be signed and stamped by the principal or the principal's agent.
When the principal makes a trading request places a trading order over the Internet, the record of requests orders referred to in the preceding paragraph shall also include the principal's Internet address (IP) and digital signature. When the request is made order is placed by phone, the broker shall make use of the telecommunications provider's caller ID service to record the caller's telephone number. When the immediate record of orders is printed, the items listed above may be omitted. An agent must first obtain a power of attorney from the principal before trading on his behalf or signing trading documents. The securities broker shall not be liable for errors that occur when the principal or his agent makes places a trading order by telephone when such errors are not attributable to the fault of the broker.
A securities broker is prohibited from using computer-assigned group codes to handle securities trading orders, and is required to prepare order tickets and trading records in one of following ways, depending on how the trading order is placed:
1. Non-electronic trading methods
(1) Where a securities trading order is placed in person, it shall be done by either principal or by an agent or authorized person of the principal, who shall fill out a letter of authorization and stamp it.
(2) When a principal or principal's agent places a trading order by letter, telegraph, or telephone, the securities broker's associated person handling the trade shall fill out the order ticket in either written or electronic form, print out a record of the trading order, and stamp it. Where order tickets are filled out using an electronic trading method, the securities broker need not print out every single order ticket if it is able to implement delegation of responsibility for the handling of trading orders, and to identify which account executives are responsible for which orders.
2. Electronic trading methods
(1) Where a principal places an order using an electronic trading method, the securities broker need not prepare an order ticket and fill it out on the principal's behalf, but it shall print out records of such trading orders in chronological sequence.
(2) The record of a trading order shall include the principal's name or account number, time of the order, type of securities, number or par value of shares, limit price, expiration time, name or code of the associated person handling the trade, and manner in which the order is placed.
(3) When the principal places a trading order over the Internet, the record of the trading order shall also include the principal's Internet Protocol (IP) address and digital signature. When a trading order is placed by phone, the broker shall make use of the telecommunications provider's caller ID service to record the caller's telephone number. When a trading order record is printed on the spot, the items listed above need not be printed.
(4) Where procedures for the storage of records of trading orders placed by an electronic trading method satisfy the following provisions, such records need not be printed out:
(i) Electronic storage media are used, and preparation of the records is completed on the day of the trade's execution.
(ii) The records are fully indexed, and management procedures are in place.
(iii) A specific person(s) is responsible for records management, and it is possible at any time to convert the electronically stored data to hardcopy format.
Where order tickets placed by an electronic trading method or filled out electronically are not printed out immediately, they shall be stored on electronic media that cannot be edited or erased, and a record of each trading order shall be stamped after market close by a responsible staff member and a department supervisor or the associated person who handled the trade.
With the exception of orders placed by voice, for orders between securities brokers and principals using electronic trading methods, electronic signatures issued by a certification authority shall be used to differentiate and verify documents transmitted during placement of orders, order confirmation, and transaction confirmation. However, this restriction shall not apply for orders placed between a principal and securities broker electronically over a dedicated line if the connection access points are all located outside the Republic of China and the connection method complies with the local laws and regulations of the country(ies) in which they are located. With the exception of orders placed by telephone voice menu system, electronic signatures issued by a certification authority shall be used to identify and confirm order tickets, order confirmations, execution reports, and other such electronic documents transmitted between securities brokers and principals that place orders by an electronic trading method. However, this requirement does not apply if all the network access points between a securities broker and principals that place orders by Direct Market Access are located outside the Republic of China and the network connections comply with the local laws and regulations of the country(ies) in which they are located.
Where records of trading orders placed by electronic trading methods such as voice, the Internet, dedicated line, or closed dedicated network are saved in accordance with the following provisions, the broker may be exempt from the requirement to print out a record of requests for trades:
1. Use of a digital data storage medium that allows neither modification nor deletion, with complete records produced on the date of transaction.
2. Establishment of a comprehensive directory and procedures for management.
3. Personnel solely responsible for management of the storage medium, and the capability to convert electronic data files to printed format at any time.
Trading order forms which are filled out electronically and not printed one by one shall be stored in an electronic form that cannot be altered or deleted.
|
|
Article 5
|
The period of validity of a brokerage contract shall be determined by the parties to the contract.
|
|
Article 6
|
Execution of brokerage contracts and acceptance handling of trading orders by securities brokers shall be undertaken by registered and qualified responsible persons, managerial officers, and associated persons (those acting as account executives).
|
|
Article 7
|
When securities brokers accept trading orders, they shall undertake the trades in accordance with the particulars of the trading order forms tickets and in the order of their serial numbers.
A principal or principal's agent may give written notice to the securities broker to cancel the trading order or reduce the volume of the trade, except where the trade has already been confirmed.
A principal or principal's agent shall indicate a price limit when placing a trading order, provided that it is acceptable for a juristic person or other institution to authorize a securities firm to decide on the price (within the price fluctuation range designated by the juristic person or institution) and time of order submission, and the securities firm is required to retain a record of the customer's authorization and trading order.
When a principal or principal's agent does not state the period of validity when placing a trading order, the order shall be deemed a day order. For trade orders accepted by securities brokers through the Internet or other electronic means of transaction, the period of validity shall be specified; for orders made over the Internet, the period of validity shall be displayed on the electronic interface where trading order information is entered.
|
|
Article 8
|
Securities brokers shall not accept a trading order under any of the following conditions:
1. Where the broker is given full authorization to select the type of security traded.
2. Where the broker is given full authorization to decide the volume of securities traded.
3. Where the broker is given full authorization to decide the price at which the brokerage trade takes place.
4. Where the broker is given full authorization to decide whether to buy or sell securities.
5. Where the trade involves securities not approved for listing or for which trading has been temporarily suspended.
6. Where the trade involves securities no longer listed.
7. Where the securities trade involves installment payments.
8. Where the principal is given a guarantee of profit or profit sharing is involved in securities trading.
9. Where a securities dealer's trading order has not been approved by the competent authority.
|
|
Article 9
|
At the end of each month, securities brokers shall produce reconciliation statements to be delivered to respective principals before the 10th day of the following month.
|
|
Article 10
|
Securities brokers are obliged to keep all the particulars of a principal's trading order in strict confidence, provided that this restriction shall not apply when responding to inquiries from the competent authority or the stock exchange.
|
|
Article 11
|
Except for securities which, by regulation, are sold by bidding at counters, securities brokers receiving trading orders shall enter each item of the trading order form in order into the stock exchange computer system from their computer terminals, and print the order confirmation after acceptance. After the transaction, the broker shall print a transaction confirmation, and immediately produce a trading report as stipulated under Article 86 of the Securities and Exchange Act for notification of the principal on the date of the transaction.
A securities broker shall exercise the diligence and care of a good custodian in managing the online brokerage operations referred to in the preceding paragraph. Should the occurrence of war, natural disaster, or other force majeure events not attributable to the securities broker hinder the normal operation of online computer connections, the securities broker shall not bear liability for compensation.
|
|
Article 12
|
A securities broker accepting a trading order under normal settlement terms shall collect the securities sold or the purchase price of the securities from the principal when the order is transacted or prior to 12:00 p.m. on the first business day following the date of transaction (or 11:00 a.m. on Saturdays). When the principal is an overseas Chinese or foreign national outside ROC territory, the deadline may be extended to 6:00 p.m. on the first business day after the date of transaction.
When the principal is an overseas Chinese or a foreign national outside ROC territory and during trade confirmation there is a discrepancy between holidays in the two regions, a force majeure condition such as interruption in telecommunications or a natural disaster, a failure to receive settlement instructions by the custodian institution, or an inconsistency between the settlement instructions and the trade report, with evidence that allows verification, then upon the securities broker's report of the occurrence to the Taiwan Stock Exchange, settlement of the price payable on securities sold or the net amount payable after offsetting the prices of securities bought and securities sold may be delayed until 6 p.m. on the third business day after the transaction date.
A securities broker accepting an order for margin trading shall collect the legally required margin for margin purchases or deposits for short sales from the principal before 12:00 p.m. on the first business day after the date of transaction (11:00 a.m. on Saturdays).
|
|
Article 13
|
A securities broker shall collect the securities or prices payable from the principal, as well as the commission and securities transaction tax, by book entry through the centralized securities depository account opened by the principal or the principal's account at the designated financial institution, or by account transfer (or remittance) through the depository account of the custodial institution in accordance with Article 3 of these Rules.
|
|
Article 14
|
A securities broker accepting securities in connection with trading orders shall do so in accordance with the regulations governing securities custody operations approved by the competent authority.
|
|
Article 15
|
After a securities broker transacts a brokered trade, it shall collect the commission from the principal in accordance with Article 85, Paragraph 1 of the Securities and Exchange Act. The stock exchange shall report the rate of such commissions to the competent authority for approval.
A securities broker may not arbitrarily raise or lower its commissions, nor offer part or all of the commission as compensation to the referring person connected with the principal's trade, provided that this restriction shall not apply to commissions paid under contract to a foreign financial institution registered and approved for operation of securities business by the competent authority of the country where the institution is located.
The countries of location of such foreign financial institutions as referred to in the preceding paragraph shall be separately prescribed by the Taiwan Stock Exchange Corporation.
|
|
Article 16
|
A securities broker shall collect commissions from the principal according to a published fee schedule, and may not offer part or all of any commission as compensation to the referring person connected with the principal's trade.
Securities brokers accepting trading orders or acting on behalf of others to trade securities through margin purchases or short sales shall handle such trades in accordance with the Regulations Governing Margin and Stock Loans by Securities Firms, the Rules Governing Securities Finance Enterprises, the Operating Rules for Securities Firms Dealing with Margin Purchases and Short Sales, or the Operating Rules for Securities Financing Enterprises Dealing with Margin Loans and Short Sales.
|
|
Article 17
|
After confirmation and settlement of a trading order, a securities broker shall immediately deliver the securities purchased to the principal, or transfer the prices of the securities sold to the depository account in the designated financial institution in accordance with Article 13. For trades that are not confirmed, securities already received shall be immediately returned to the principal.
A securities firm which is obliged to perform a securities transfer or split on behalf of the principal placing a trading order shall do so in accordance with the methods and fee schedules set forth in the Stock Exchange regulations. A securities firm receiving or delivering the principal's securities or funds shall keep precise records and retain vouchers of receipt or delivery.
|
|
Article 18
|
A securities firm which violates the Articles of Incorporation of the Taiwan Stock Exchange, its Operating Rules, or any related announced regulations in accepting trading orders shall be deemed in violation of the brokerage contract, and the principal (or principal's agent) shall immediately report such violation to the stock exchange for investigation and handling.
|
|
Article 19
|
A principal who does not perform settlement of securities or funds within the specified period is in breach of contract, and the trading order executed with the securities broker will be automatically terminated. The securities broker may collect a sum no greater than 7% of the transaction amount as penalty for breach of contract. Accounting procedures for penalties so collected shall conform to the "Regulations Governing the Preparation of Financial Reports by Securities Firms," and a sum equal to the penalty shall be allocated as a loss reserve.
When the principal is an overseas Chinese or a foreign national outside ROC territory and delay of settlement results in borrowing of securities, payments made on their behalf, or other related expenses, the principal shall return those amounts to the securities firm when completing settlement.
When the principal is in breach of contract, the securities broker shall immediately cancel the principal's brokerage trading account and report the breach of contract in accordance with The Taiwan Stock Exchange Corporation's "Guidelines for Securities Brokers in Reporting Breaches of Contract." The securities broker shall then settle the transaction on behalf of the principal.
On the day the principal is determined to be in breach of contract, a securities broker shall request other securities brokers to handle the securities or funds it received through settling the transaction referred to in the preceding paragraph on the centralized trading market of the securities exchange. Surplus remaining from the proceeds from such handling, after offsetting debt and fees resulting from the principal's breach of contract, may be returned to the principal. If there is a shortfall, compensation may be deducted from financial assets already received from or payable to the principal pursuant to other brokerage trades; if a shortfall remains, compensation may be sought from the principal.
Following handling of the breach in accordance with the two preceding paragraphs, the securities firm shall make a report in accordance with the "Guidelines for Securities Brokers in Reporting Breaches of Contract," and shall notify the principal.
Where the aggregate number of [shares represented by] the share certificates of securities received by a securities broker handling settlement on behalf of a principal under Paragraph 2 during the period of a single breach reaches 5 percent or more of the number of shares of the underlying securities already issued, and furthermore reaches or exceeds the average daily trading volume of the underlying securities during the 20 trading days prior to reporting of the breach, the securities broker may adopt either of the following measures to handle the breach:
1. If handling of the breach cannot be completed through reverse transactions during the three consecutive business days from the day following the date of confirmation of the breach by the principal, the securities broker, by reaching a mutual agreement with the principal or by notice to the principal, may, depending on market conditions, in accordance with the content of the agreement or the notice, complete handling of the breach through reverse transactions within 180 days, and report the agreement or notice to this Corporation via letter for recordation.
2. The securities broker may reach an agreement with the principal setting a price(s) to serve as the basis for calculating profit/loss, and submit the written agreement reached between the parties to this Corporation via letter for recordation.
Where a discretionary trader handling a discretionary trading account fails to perform obligations arising out of an unauthorized trade in a timely manner, a securities broker may collect from the trader a sum equal to 2% of the transaction amount for breach of contract. Accounting for breach of contract penalties collected shall be done in accordance with the Regulations Governing Preparation of Financial Reports by Securities Firms, with an equal amount allocated as a breach of contract reserve fund. In writing off the proceeds of amounts received, the securities broker shall return the surplus to the trader after offsetting debt and fees resulting from the trader's breach of contract; where a shortfall remains, compensation may be sought from the trader.
|
|
Article 20
|
Any of a principal's financial assets received by the securities broker in connection with trading orders, as well as monies owed the principal arising out of such trades, shall be deemed debt generated in trading performed for the principal by the securities broker, and may be retained and refunded only after discharge of the principal's debt.
|
|
Article 21
|
Disputes between the principal and the securities broker arising out of trading orders may be submitted for arbitration in accordance with the Securities and Exchange Act, or application may be made for mediation by the ROC Securities Dealers Association.
|
|
Article 22
|
The face value of settlement securities delivered by a principal (or principal's agent) as seller shall in principle conform to the trading unit; however, settlements effected based on prior announcement and at the consent of the securities broker are not subject to such restriction. The principal as seller (or the principal's agent) delivering securities shall bear responsibility for the transfer of rights to the purchaser, and when the securities are registered securities, the form for application for transfer necessary to amend the issuing company's register of shareholders shall be attached to allow the buyer to gain full ownership; the securities delivered shall be certified by a certification institution when so required by law.
When a principal, as seller, requires the securities broker to carry out certification procedures on his behalf, he shall make application to the broker when placing an order and pay the stipulated fee.
When the purchaser's securities broker receives registered securities delivered for settlement, it shall apply to the listed company on behalf of the purchasing principal to effect transfer on the day after the settlement date, or during a period when registration of transfer has been suspended during the period of a shareholders meeting, on the day after the listed company resumes registration of transfers.
A purchasing principal (or principal's agent) who undertakes transfer procedures on his own behalf shall, after receiving the securities, effect the transfer within the period stipulated in the preceding paragraph. When the purchasing principal (or principal's agent) fails to effect transfer within said period, responsibility for any defect in rights in the purchased securities shall be borne by the principal.
|
|
Article 23
|
When a principal delivering securities for settlement is required by law to complete supplemental certification procedures prior to the first settlement, the principal selling securities shall be responsible for effecting the certification prior to the date of settlement.
|
|
Article 24
|
In the event that the stock exchange receives approval from the competent authority to draft regulations governing special trades in securities, brokers shall transact orders for special trades in accordance with the provisions of said regulations.
|
|
Article 25
|
These Rules shall take force upon approval by the competent authority.
|