| Title： |
Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers(2016.11.21) |
| 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 professional institutional investors as set forth in paragraph 6, a securities firm shall not be subject to the restrictions in paragraph 3.
The term "professional 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:
- Cite any information that contains any untruth, falsehood, concealment, or is otherwise sufficient to cause mistaken confidence on the part of others.
- Guarantee specific results regarding any recommended securities.
- Fail to clearly inform or indicate that the information provided is a forecast.
- Fail to base recommendations on research reports
- Recommend customers trade in securities placed under altered trading method by this Corporation
- Use results of past recommendations in promoting its recommendation business.
- Use non-public information obtained through its own trading or underwriting.
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Article 3-1
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The researchers at a securities firm, prior to the release of any research report, may not discuss the content of the report to anyone outside of the research department, except for necessary discussions with the review department during the research report review procedures conducted by the securities firm or its overseas parent company (or headquarters), or an affiliated enterprise of the overseas parent company (or headquarters).
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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 shall establish an internal control system to prevent conflicts of interest and, upon its confirmation by the compliance officer or responsible officer and audit officer, present the same to the board of directors for adoption. After the release of a research report by the brokerage department recommending trades in securities to customers, neither the securities firm nor its personnel may conduct any trade in the objects recommended in the report within two hours of the commencement of the trading hours of the market; if said report is released within the trading hours of the market, no such trade may be conducted until two hours after the commencement of the trading hours of the market on the following business day.
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.
The securities firm's performance evaluation method for the researchers may not affect the independence of the researchers.
The scope of the research reports under paragraph 1 may, based on the relevance of the industry to which the securities listed on the TWSE market belong, extend to securities listed on markets other than the TWSE market, provided that if the securities firm does not operate brokerage trading business in those markets, it shall mark in distinctive typeface in such research reports "without recommendation" and may not accept orders from customers to trade in such securities that are "without recommendation."
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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 or the head of the authorized and responsible department, have the recommendations thereunder made by an associated person who handles securities brokerage trading business.
The research report may be delivered directly to the customer through a system or network under the name of the securities firm's overseas parent company (or headquarters) or of an affiliated enterprise of the overseas parent company (or headquarters), without being subject to the requirement of approval by the responsible person or the head of the authorized and responsible department under the preceding paragraph.
If the securities firm delivers the research report by the method under the preceding paragraph, it shall simultaneously deliver the report to the responsible person or the head of the authorized and responsible department and to at least one associated person who handles brokerage trading business and is responsible for making the recommendations, to handle relevant matters.
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Article 7-1
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The research report may be provided to the following non-customers:
- professional institutional investors
- TWSE or TPEx listed companies, upstream and downstream vendors, and specialists that offer or seek advice
- potential customers with an actual need for business development
A securities firm providing a research report to any of the above-mentioned non-customers shall notify the non-customer that no provision of the content of the report to a third party or conflict of interest is allowed, and shall retain a record of the notification. Said firm must further establish an internal control system with regard to the provision of research reports and, upon its confirmation by the compliance officer or responsible officer and audit officer, present the system to the board of directors for adoption.
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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 ("research report"), 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."
In the event the media requests consent from the securities firm to reprint content of the research report, if the securities firm, after taking into account its own and its customers' rights and interests, consents for the media to reprint content of the report, the reprinted content may not involve any prediction of target prices for individual stocks, future operating revenues, or earnings per share, nor may it mention support or resistance points, even without directly mentioning any recommended sale or purchase price.
If any discrepancy exists between a media reprint or reportage and the research report, or there is any failure to fully explain the principles of the analysis such as is likely to cause any misunderstanding by investors, the securities firm shall, within two business days (counting from the following business day), make clarifications on the Market Observation Post System and to the reprinting media. If any reprint of content of the report is done without the securities firm's consent, the securities firm, in addition to making clarifications on the Market Observation Post System, shall remind the reprinting media of the requirement to first obtain consent from the securities firm before doing so, provided that this restriction shall not apply if the reprint does not contain any content prohibited under the preceding paragraph and would not cause any misunderstanding by investors.
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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 years; 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 five years.
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Article 13
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(deleted)
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Article 14
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These Regulations shall take effect after having been submitted to and approved by the competent authority. Subsequent amendments thereto shall be effected in the same manner.
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