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Directions for Reporting and Handling of Out-Trades and Account Number Corrections by Securities Brokers(2007.10.17) |
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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; provided that for block trades subject to settlement on the trade date, entry shall be completed by no later than 2:30 p.m. on the trade date. 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.
(iv) Reporting mechanism: where out-trades of a single type of securities by a securities broker reach NT$100 million or more, if the broker handles the out-trades by repurchase or resale, the broker shall notify the TSEC Trading Department by 2 p.m. on the date of handling; if the broker does not handle the out-trades by repurchase or resale, the broker shall notify the TSEC Trading Department at the time of reporting.
(2) Written reports:
Except in cases where an investor has already applied and opened two or more trading accounts at the same securities broker under the Registration Guidelines for Offshore Overseas Chinese and Foreign Nationals to Invest in ROC Securities or to Trade ROC Futures and the matter being reported is corrections attributable to the investor of account numbers between accounts opened by the investor, when the electronic reporting of out-trades or account number corrections by a securities broker for the same investor on the same trade date reaches a total transaction amount of NT$50 million or more, or total shares (in beneficiary units) of 1 million 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 attach a copy of the order form, order confirmation, and execution report for that particular trade, and a written explanation of the reasons for the occurrence stamped with the seal of the company, the company's responsible person, and the person handling the matter, and submit them to the trading department of the TSEC. Submission shall be made, at the latest, by 12 noon on the second 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, the report of the out-trade or account number correction may not be based on the omnibus account. The report of the out-trade or account number correction shall be based on the post-allocation securities trading account of the individual principal.
(6) Where an out-trade or account number correction occurs in trading conducted by auction or on-market tender offer, the securities broker shall produce an "Out-Trade Handling Report - Occurrence" or an "Investor Account Number Correction Report," and shall attach a copy of the order form, order confirmation, and execution report for that particular trade, and a written explanation of the reasons for the occurrence stamped with the seal of the company, the company's responsible person, and the person handling the matter, and submit them to the trading department of the TSEC for approval, after which, the TSEC shall input them into the computer system on behalf of the broker; if the error is attributable to alteration of the account number by the investor, an "Application for Account Number Correction" showing the account numbers before and after correction, and agreed upon between the investors, shall also be submitted. For an on-market tender offer transaction that is executed and settled on the same day, the submission must be made no later than 6 p.m. on the next business day.
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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. After an out-trade that occurred in trading conducted by auction or on-market tender offer has been handled through a resale or repurchase, the securities broker shall submit a copy of the order form, order confirmation, and execution report for that particular trade, and a written explanation of the reasons stamped with the seal of the company, the company's responsible person, and the person handling the matter, to the trading department of the TSEC, which shall input them into the computer system on behalf of the broker.
(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; in the case of an on-market tender offer transaction that is executed and settled on the same day, it shall do so, at the latest, by 6 p.m. 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) (deleted)
(iv) Failure to report or handle a case in accordance with Article 2, paragraphs 3 or 4.
(v) (deleted)
(vi) (deleted)
(vii) (deleted)
(viii) (deleted)
(2) When the circumstances of a securities broker's reporting of out-trades or correction of account numbers not attributable to investors are severe, the TSEC may issue a warning in accordance with Article 136 of the Operating Regulations of the Taiwan Stock Exchange Corporation, and may, pursuant to Article 144 of those Operating Regulations, notify the securities broker to suspend its negligent business personnel from executing business activities for one to six months.
(3) The TWSE may apply Articles 141 and 145 of the Operating Rules where a securities broker's reporting of out-trades or correction of account numbers is false or untrue.
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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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