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Directions for Reporting and Handling of Out-Trades and Account Number Corrections by Securities Brokers(2006.01.26) |
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These Directions are promulgated pursuant to Article 87 of the Operating Regulations of the Taiwan Stock Exchange Corporation (TSEC). Reporting and correction of out-trades and account number corrections by securities brokers shall be undertaken in accordance with these Directions.
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Procedures for reporting out-trades and account number corrections:
Securities brokers shall report out-trades and account number corrections on the trade date or the next business day in accordance with the following rules:
(1) Reporting through computer transmission:
(i) Period for entering information:
Securities brokers shall enter information relating to an out-trade or account number correction into the computer of the TSEC beginning from 9 a.m. on the trade date. Entry must be completed by no later than 6 p.m. of the next business day. However, where the securities broker is on record as having already made a settlement postponement report, entry shall be completed by 6 p.m. on the third business day from the trade date.
(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 TSEC 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 of out-trades or account number corrections by a securities broker for the same principal on the same trade 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 an "Out-Trade Handling Report - Occurrence" (Form 1) or an "Investor Account Number Correction Report" (Form 2), and shall also attach a report on the reasons for the out-trade or an application for correcting the account number with a copy of the order form, order confirmation, and execution report 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 Account Number Correction" (Form 3) 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 of out-trades. Trades made through that error account may not be changed to appear as trades through an investor's account, nor may trades through an investor's account be changed to appear as trades through the error account.
(5) Where an out-trade or account number correction occurs in securities trading by a securities broker through an omnibus account, before itemized trade assignment, reports may only be made for out-trades by order form number; after itemized trade assignment, reports shall be made based on the trading account of the principal.
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Procedures for handling out-trades:
(1) A securities broker reporting an out-trade in accordance with Article 2 shall handle the out-trade, on that day or the following business day, through its error account by a repurchase or resale of equal volume. However, securities of the same type traded on the same trade date may first be mutually offset; the securities broker shall enter information related to offsets into the TSEC computer during the period specified in Article 2, Paragraph 1, Sub-paragraph 1.
(2) A securities broker handling an out-trade through a repurchase or resale in accordance with the preceding paragraph shall enter the information relating to handling of the out-trade into the TSEC computer at the latest by 6 p.m. on the next business day following the handling of the out-trade.
(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 who originally placed the order shall do so, at the latest, by 12:00 noon of the first business day after the trade date.
(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 account number correction" 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 out-trades or account number corrections.
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Handling of violations:
(1) Given the occurrence of any of the circumstances listed below in the reporting of out-trades or correction of account numbers by the headquarters or an individual branch office of a securities broker, the TSEC, pursuant to Article 135 of the Operating Regulations 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 out-trades, correction of account numbers, or handling of out-trades by repurchase or resale through the error account, except for with reasonable cause and with the approval of the TSEC.
(ii) Failure by a broker to handle an out-trade through repurchase or resale of securities within the prescribed period of time, except for with reasonable cause and with the approval of the TSEC.
(iii) When, in reporting account number corrections not attributable to investors for a given month, correction of the same account number results in different account numbers two or more times, or corrections of different account erroneous account numbers result in the same subsequent account number two or more times, except for with reasonable cause and with the approval of the TSEC.
(iv) Failure to report or handle a case in accordance with Article 2, paragraphs 3 or 4.
(v) Reporting on a given day of more than ten out-trades and account number corrections not attributable to investors.
(vi) When, in a given month, the total number of reported out-trades and account number corrections not attributable to investors exceeds 1/1000th of the total number of confirmed trades, when that proportion also exceeds the average total out-trades and account number corrections not attributable to investors reported by all securities brokers.
(vii) When there are four or more written reports for a given month.
(viii) When, on a given day, the total number of reported out-trades and account number corrections not attributable to 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 Regulations of the Taiwan Stock Exchange Corporation.
(3) When, on a given day, the total number of out-trades and account number corrections not attributable to investors reported by the headquarters or an individual branch of a securities broker for a single type of stock equals or exceeds NT$50 million, the TSEC will notify the securities broker to supervise the performance of the negligent associated person, and will also impose a penalty of NT$20,000. For each additional NT$10 million exceeded, an additional penalty of NT$10,000 will be imposed, with an upper limit of NT$100,000 for the total penalty imposed.
The penalties 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 Regulations 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 out-trades or correction of account numbers by a securities broker, the TSEC, pursuant to Article 144 of the Operating Regulations of the Taiwan Stock Exchange Corporation, will notify the securities broker to handle the matter by issuing a warning to the negligent associated persons or managers or by temporarily suspending their participation in operations:
(i) When there are written reports on a given day of out-trades and account number corrections attributable to the negligence of a single associated person for one type of stock equal to or exceeding a cumulative NT$50 million, the broker will be notified to issue a warning to the negligent associated person.
(ii) When, in a given month, there are two or more instances of negligence by the given associated person as set forth in the preceding paragraph, the TSEC will notify the securities broker to suspend that person 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 brokerage trading department of the branch office concerned.
(5) Any false or misleading statement made by a securities broker in connection with reporting of out-trades or correction of account numbers may be handled by the TSEC by applying, mutatis mutandis, Articles 141 and 145 of the Operating Regulations of the Taiwan Stock Exchange Corporation.
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These Directions and any amendments to them shall be announced and take force upon filing with the competent authorities.
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