| Title： |
Guidelines for Reporting on Consignment Trading Errors and Correction of Account Numbers by Securities Brokers(2004.05.06) |
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These Guidelines are promulgated pursuant to Article 87 of the Operating Rules of the Taiwan Stock Exchange Corporation. Reporting on consignment trading errors and correction of account numbers by securities brokers shall be undertaken in accordance with these Guidelines.
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Procedures for reporting on consignment trading errors and correction of account numbers:
securities brokers shall report trading errors occurring in consignment trading and correction of account numbers on the date of transaction or the next business day in accordance with the following rules:
(1) Reporting through computer transmission:
(i) Period for entering information:
Securities firms shall enter each item of information relating to a trading error or correction of an account number into the corresponding field on the computer interface provided for that purpose by the Taiwan Securities Central Depository Co., Ltd. ("the TSCD") at the request of the Taiwan Stock Exchange Corporation ("the TSEC"), beginning from 3:00 p.m. on the date of transaction or 9:00 a.m. on the first business day thereafter. Entry must be completed prior to 5:00 p.m. at the latest.
(ii) Handling of breakdowns:
When accidental breakdowns prevent transmission of information over the computer transmission lines, the securities broker shall first report the breakdown to the TSCD by telephone, and re-enter the information after elimination of the problem.
(iii) When the occurrence of a natural disaster results in an announcement of cancellation of work for government offices or schools by county or city governments, reporting by computer transmission by securities brokers within the affected area shall be undertaken in accordance with the provisions for handling of settlement matters due in the Taiwan Stock Exchange Corporation Measures for Market Closing or Trading During Natural Disasters.
(2) Written reports:
When the electronic reporting on account errors or correction of account numbers by a securities broker for the same principal on the same transaction date reaches a total transaction amount of NT$10 million or more, or total shares (in beneficiary units) of 400,000 shares or more, the broker shall produce a "report form for documentation and handling of account errors" or a "report form for correction of investor account numbers," and shall also attach a report on the reasons for the error or an application for correcting the account number with a copy of the letter of consignment, trading confirmation, and match confirmation for that particular trade stamped with the seal of the company, the company's responsible person, and the party holding the account in question, for submission to the trading department of the TSEC. Submission shall be made, at the latest, prior to 5:00 p.m. on the first business day following the date of transaction. Where the error was attributable to alteration of the account
number by the investor, an "application for correction of account number" showing the account numbers before and after correction, and agreed upon between the investors, shall also be submitted.
(3) The securities broker shall prepare a ledger showing corrections to account numbers for review by higher official bodies, and shall retain a copy for their files.
(4) The securities broker shall open a special error account at its place of business for the repurchasing and re-selling of stock connected with handling account errors. Trades made on that error account may not be altered and shown as trades in an investor's account, nor may trades on an investor's account be altered and shown as trades on the error account.
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Procedures for handling account errors:
(1) A securities broker reporting an error in accordance with Article 2 shall handle the error, on that day or the following business day, through its error account by a repurchase or re-sale of equal volume. However, securities of the same type traded on the same transaction date may be offset, and the securities broker shall enter items of information related to the offset into the respective fields on the computer interface provided by the TSCD during the period specified in Article 2, Paragraph 1, Sub-paragraph 1.
(2) A securities broker handling an error through a repurchase or resale in accordance with the preceding paragraph shall enter the items of information on handling of the error into the respective fields on the TSCD computer interface, at the latest, prior to 5:00 p.m. on the day the error is handled.
(3) A securities broker which, through no fault attributable to itself, fails to repurchase or resell securities within the specified period in Article 3, Paragraph 1, shall produce a record of its handling of the matter to be kept on file with the relevant evidentiary documents.
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The securities broker shall report on errors arising out of the correction of an account number by an investor in accordance with the following procedures:
(1) A securities broker processing an application for correction of an account number from the investor making the original consignment shall do so, at the latest, by 12:00 p.m. of the first business day after the date of the transaction.
(2) A securities broker shall report correction of an account number in accordance with the investor's instructions regarding account numbers before and after correction and the "application for correction of account number" agreed upon between the investors. If the account number prior to correction was the number of a vacated account, the securities broker shall provide verification of such fact.
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The securities broker shall bear liability for injury to the rights and interests of the investor, or for disputes arising out of the reporting and handling of error accounts or correction of account numbers.
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Handling of violations:
(1) Given the occurrence of any of the circumstances listed below in reporting on account errors or correction of account numbers by the headquarters or an individual branch office of a securities broker, the TSE, pursuant to Article 135 of the Operating Rules of the Taiwan Stock Exchange Corporation, will notify the securities broker to improve its practices:
(i) Failure by a broker to enter information within the prescribed time period on account errors, correction of account numbers, or handling of errors by repurchase or resale through the error account, except for reasonable cause and with the approval of the TSE.
(ii) Failure by a broker to handle an error through repurchase or resale of securities within the prescribed period of time, except for reasonable cause and with the approval of the TSE.
(iii) When, in reporting on corrections to account numbers for a given month, correction of the same account number results in different account numbers two or more times, or corrections of different account errors result in the same subsequent account number two or more times, except for reasonable cause and with the approval of the TSE.
(iv) Failure to report or handle a case in accordance with Article 2, paragraphs 3 or 4.
(v) Reporting of more than ten errors on a given day that are not attributable to correction of account numbers by investors.
(vi) When, in a given month, the total number of errors on consignments reported and not attributable to correction of account numbers by investors exceeds 1/1000th of the total number of confirmed transactions, when that proportion also exceeds the average totals for errors reported by all securities brokers that are not attributable to correction of account numbers by investors.
(vii) When there are four or more written reports for a given month.
(viii) When, on a given day, the total number of errors reported that are not attributable to correction of account numbers by investors equals or exceeds NT$40 million or total shares of 600,000 shares (in beneficiary units).
(2) When in a given year a securities broker has failed to improve its practices following notification by the TSEC in accordance with Article 6, Paragraph 1, the TSEC may issue a warning and handle the matter in accordance with Article 136 of the Operating Rules of the Taiwan Stock Exchange Corporation.
(3) When, on a given day, the total number of errors reported by the headquarters or an individual branch of a securities broker for a single type of stock equals or exceeds NT$50 million, and where such errors are not attributable to correction of account numbers by investors, the TSEC will notify the securities broker to supervise the performance of the negligent sales personnel, and will also impose a penalty of NT$20,000. For each instance in which errors exceed a total amount of NT$10 million, an additional penalty of T$10,000 will be imposed, with an upper limit of NT$100,000 for total fines imposed.
The fines referred to in the preceding subparagraph shall be paid by the securities firm to the finance department of the TSEC within two days after receiving notice from the TSEC.
In handling the penalties referred to in the preceding two subparagraphs, the TSEC may apply mutatis mutandis the following provisions of the Operating Rules of the Taiwan Stock Exchange Corporation: Article 138, Paragraph 1; Article 139, Paragraph 1, Subparagraphs 4 and 5; and Article 145.
(4) When any of the following circumstances occur in reporting of account errors or correction of account numbers by a securities broker, the TSEC, pursuant to Article 144 of the Operating Rules of the Taiwan Stock Exchange Corporation, will notify the securities broker to handle the matter by issuing a warning to the negligent sales or managerial personnel or by temporarily suspending their participation in operations:
(i) When there are written reports of errors on a given day attributable to the negligence of one particular sales employee for one type of stock, with a total amount of corrections equal to or exceeding NT$50 million, the broker will be notified to issue a warning to the negligent sales personnel.
(ii) When, in a given month, there are two or more instances of negligence by the given sales employee as set forth in the preceding paragraph, the TSEC will notify the securities broker to suspend that employee from operations for a period of one month, and to issue a warning to the operations manager for that respective department or to the head of the consignment trading department of the branch office concerned.
(5) Any false or misleading statement made by a securities broker in connection with reporting of account errors or correction of account numbers may be handled by the TSEC by applying, mutatis mutandis, Articles 141 and 145 of the Operating Rules of the Taiwan Stock Exchange Corporation.
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These guidelines and any amendments to them shall be announced and take force upon filing with the competent authorities.
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