| Title： |
Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers(2009.01.05) |
| Date： |
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Article 1
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These regulations are promulgated pursuant to Article 36, paragraph 2 of the Rules Governing Securities Firms and Article 85, paragraph 3 of the Operating Rules of the Taiwan Stock Exchange Corporation ("this Corporation").
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Article 2
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A securities firm shall not recommend any trade in securities to unspecified multiple persons.
When recommending a trade in securities to a specific customer, a securities firm shall be fully aware of and evaluate the customer's investment knowledge, investment experience, financial status, and degree of investment risk tolerance.
Before recommending a trade in securities, a securities firm shall first appoint a responsible associated person to explain to the customer the potential risks of trading securities, and then sign a recommendation contract with the customer.
This Corporation shall separately prescribe the content that must be included in the recommendation contract.
When recommending trades in securities to institutional investors as set forth in paragraph 6, a securities firm shall not be subject to the restrictions in paragraph 3.
The term "institutional investors" as used in the preceding paragraph includes domestic and foreign banks, insurance companies, bills finance companies, securities firms, fund management companies, government investment institutions, government funds, pension funds, mutual funds, unit trusts, securities investment trust companies, securities investment consulting companies, , trust enterprises, futures commission merchants, futures service enterprises and other approved institutions.
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Article 3
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A securities firm shall not do any of the following when recommending trades in securities to customers:
1. Cite any information that contains any untruth, falsehood, concealment, or is otherwise sufficient to cause mistaken confidence on the part of others.
2. Guarantee specific results regarding any recommended securities.
3. Fail to clearly inform or indicate that the information provided is a forecast.
4. Fail to base recommendations on research reports
5. Recommend customers trade in securities placed under altered trading method by this Corporation
6. Use results of past recommendations in promoting its recommendation business.
7. Use non-public information obtained through its own trading or underwriting.
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Article 4
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A securities firm shall disclose in its research reports if it has in the past year served as the lead or a co-underwriter for the issuer of any securities recommended, or has in the past year issued call (or put) warrants for any securities recommended by it.
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Article 5
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A securities firm concurrently operating securities proprietary trading or securities underwriting business shall maintain the independence of its recommendation business, to avoid impairing fair price formation of the securities it recommends, and to avoid damaging the rights and interests of customers to whom it makes recommendations.
A securities firm may refrain from recommending securities held by its proprietary trading division. If it nevertheless must recommend such securities, its brokerage department shall not conduct any trade in the opposite direction within five business days following the implementation of the recommendation.
The securities firm's proprietary trading division may trade securities in order to meet the hedging needs for the issuance of call (put) warrants or trading of financial derivative products, and in order to subscribe or redeem the beneficial certificates of exchange-traded fund (ETF), without being subject to the restrictions in the preceding paragraph.
A securities firm shall not recommend that a customer trade in any security in which the securities firm conducts stabilization operation trading.
When the underwriting department [of a securities firm] underwrites securities, the brokerage department shall not recommend trading in such securities during the period from the signing of the underwriting agreement with the listed company to the deadline for payment.
When the underwriting department [of a securities firm] acquires securities on a firm commitment basis, the brokerage department shall not recommend purchase of such securities before the [firm commitment underwriting obligations] have been completed in accordance with regulations.
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Article 6
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In recommending trade in securities to customers, a securities firm may issue under its own name research reports that it has prepared itself or outsourced, and shall disclose any relevant conflicts of interest of the securities firm or the personnel who wrote or reviewed the research report.
A research report referred to in the previous paragraph shall be written by a qualified securities investment analyst of a securities investment consulting enterprise or by a qualified senior associated person registered with this Corporation; provided, if a research report referred to in the preceding paragraph is obtained from a foreign securities institution, a qualified senior associated person registered with this Corporation may be substituted as a reviewer.
A research report obtained from a securities firm's overseas parent company (or headquarters) or an affiliated enterprise of the overseas parent company (or headquarters) shall not be subject to the restrictions of the preceding paragraph.
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Article 7
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In recommending trade in securities to customers, a securities firm shall, after having the research report signed by the responsible person of the securities firm, have the recommendations thereunder made by an associated person who handles consigned securities trading business.
The approving signatory, recommending person, and handling process shall be regulated under the Rules Establishing Standards for the Internal Control Systems of Securities Firms.
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Article 8
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Research reports shall be timely renewed and use may be resumed only after carrying out the procedures in Article 7.
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Article 9
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When making oral recommendations to customers, securities firm personnel shall have a full understanding of relevant research reports.
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Article 10
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When making recommendations by publishing or distributing publications, a securities firm shall clearly indicate the author, publisher, and date of the information on all distributed written material, and furthermore shall include the language "This recommendation material is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor." and "May not be reprinted without permission."
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Article 11
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When recommending a trade in securities to a customer, a securities firm shall retain a record, and shall keep the record at its place of business.
A securities firm shall retain records referred to in the previous paragraph for no less than two months; provided that where there is any dispute, it shall retain them until the dispute is eliminated.
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Article 12
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After recommending trade in securities to customers, research reports and cited materials shall be retained for no less than one year.
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Article 13
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(deleted)
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Article 14
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These Regulations and any amendments hereto shall be implemented after ratification by the competent authority.
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