| Title： |
Guidelines for the Commission Agency Services of Securities Firms for Investment in the Money Market of Settlement Money Payable to Clients from Securities Transactions Undertaken on Behalf of Clients(2014.08.22) |
| Date： |
|
Chapter I General Provisions
|
| Article 1 | These Guidelines are established pursuant to the requirements under the Financial Supervisory Commission ("Competent Authority") order no. Jin-Guan-Zheng-Juan-Zi 1030023274 dated June 23, 2014.
|
| Article 2 | In providing commission agency services for investment in the money market of the settlement money payable to the client from securities transactions undertaken on behalf of the client (" Money Market Fund Investment Services of Securities Firms"), the securities firm shall act in accordance with securities and exchange laws and regulations, these Guidelines, and the applicable policies, regulations, public announcements, and directives of the Taiwan Stock Exchange Corporation ("TWSE"), GreTai Securities Exchange ("GTSM"), and the Chinese Securities Association ("CSA").
|
| Article 3 | For purposes of these Guidelines, the " Money Market Fund Investment Services of Securities Firms" shall mean services of the securities firm as engaged by the client where the securities firm may, before paying the settlement money of the securities transactions undertaken on behalf of the client that are payable to the client below to the savings account the client opens with a financial institution, first deposit the money, as agreed, in the "Securities Firm Money Market Fund Investment Account" ("Investment Account") and invest such funds in the money market in the securities firm's name:
- settlement money payable to the client from securities trading undertaken by the securities firm in the centralized securities exchange market or GTSM on behalf of the client;
- money payable to the client from the exercise of a call/put warrant by the securities firm;
- money payable to the client from bond transactions or repurchase agreements/reverse repurchase agreements of bonds between the securities firm and the client;
- money payable to the client from transactions between the securities firm and the client of financial products as defined in the GreTai Securities Market Regulations Governing Over-the-Counter Trading of Financial Derivatives by Securities Firms;
- settlement money payable to the client from the trading of foreign securities by the engaged securities firm and re-consignment thereof; and
- others as required by the Competent Authority.
The securities firm shall allocate and utilize the settlement money payable to the client from securities transactions described above, pursuant to its agreement with the client, and shall not keep these funds.
|
| Article 4 | The "Securities Firm Money Market Fund Investment Account," or "Investment Account," shall be separated from assets owned by the securities firm. Neither the funds in the Investment Account nor the underlying investment shall be used for any other purposes. With regard to liabilities of the securities firm incurred from its own assets, no creditor of the securities firm may claim to impose an attachment of or exercise any other rights in the funds in the Investment Account and the underlying investment.
For purposes of receipt and payment of money in connection with the Securities Firm Money Market Fund Investment Services of Securities Firms, a designated New Taiwan Dollar current account shall be opened with a bank under the name of "XX Securities Firm Money Market Fund Investment Account."
In handling Money Market Fund Investment Services of Securities Firms, the engaged securities firm shall always and only transfer funds between bank accounts.
|
| Article 5 | When applying for provision of the Services, the securities firm shall meet the following conditions and qualification criteria and complete an application form to be submitted, together with other required documents, to the TWSE. If the TWSE determines the securities firm satisfies the qualification standards and the requirements under these Guidelines in its review, it will forward the application to the Competent Authority for approval:
- Type of securities firm: A qualified securities broker;
- Self-owned capital adequacy ratio: The self-owned capital adequacy ratio declared prior to the application shall be more than 200%;
- The most recent financial report audited or reviewed by the CPA shows no accumulated losses and complies with the provisions of Articles 13, 14, 16, 18, 18-1 and 19 of the Rules Governing Securities Firms; and
- Legal compliance:
- Has not been subject to the penalties under Article 66, paragraph 1 of the Securities and Exchange Act or under Article 100, paragraph 1, subparagraph 1 of the Futures Trading Act within the last three months;
- Has not been subject to the penalties under Article 66, paragraph 2 of the Securities and Exchange Act or under Article 100, paragraph 1, subparagraph 2 of the Futures Trading Act within the last six months;
- Has not been subject to an order of suspension of business by the Competent Authority within the most recent year;
- Has not been subject to a decision on withdrawal or revocation of the business license by the Competent Authority within the last two years; and
- Has not been subject to a decision on suspension of or restriction on trading by the TWSE, GTSM or Taiwan Futures Exchange Corporation according to their operating rules or business regulations.
The restrictions under subparagraph 4 of the preceding paragraph may be waived for a securities firm failing to satisfy the conditions therein if its violation of law has been specifically corrected and so acknowledged by the Competent Authority.
A securities firm permitted by the Competent Authority to provide Money Market Fund Investment Services of Securities Firms may not so provide until after it has submitted a photocopy of the approval document issued by the Competent Authority, with the service commencement date stated, to the TWSE three business days in advance.
Personnel of the securities firm performing the Services shall meet the qualification criteria under the Rules Governing Responsible Persons and Associated Persons of Securities Firms, promulgated by the Competent Authority.
|
| Article 6 | If, after commencing the Services, the self-owned capital adequacy ratio of the securities firm drops below 200% for two consecutive months, the securities firm shall voluntarily suspend its provision of the Services.
If, upon occurrence of the circumstance described in the preceding paragraph, the securities firm fails to voluntarily suspend its provision of the Services, the TWSE shall request the securities firm to immediately suspend its provision of the Services.
The securities firm shall close the position for its investment in the money market and transfer the money received therefrom to the book-entry account opened by the client for trading of securities on the centralized securities exchange market or GTSM, within one business day following its suspension of the Services.
Upon suspension of its provision of the Services, the securities firm shall immediately report to the TWSE and inform the TWSE of the status of the action as required in the preceding paragraph.
|
| Article 7 | The securities firm shall not submit an application to the TWSE for resumption of the Services unless its self-owned capital adequacy ratio has met the qualification criteria and shall not resume the Services until the Competent Authority has approved its application forwarded from the TWSE.
The provisions of Article 5, paragraph 3 shall apply mutatis mutandis to the securities firm which has obtained approval for resumption and reported the commencement of the Services.
|
| Article 8 | When providing the Services, the securities firm shall utilize the funds in the underlying investment, as agreed, in the name of the "XX Securities Firm Money Market Fund Investment Account" if the settlement money payable to the client has reached the threshold amount for utilization agreed with the client.
The securities firm may utilize the above funds only in the domestic money market that adopts the New Taiwan Dollar.
|
| Article 9 | The securities firm must clearly inform the client of the associated conflict of interest and control measures and obtain the client's written consent, or it may not use the funds in the Investment Account to engage in the transactions described in the preceding article with a company in which the securities firm has a stake.
|
| Article 10 | When providing the Services, the securities firm shall distribute the losses or profits from the same underlying investment of the client according to the ratio of the investment amount of the client and other agreed terms, and add the profits to the original funds for further utilization or for return to the client.
The securities firm providing the Services shall be responsible for any and all monetary losses caused by malpractice without jeopardizing the client's rights and interests.
|
| Article 11 | The securities firm may charge a management fee to the client for the Services provided, at the rate to be determined by and between the securities firm and the client.
|
| Article 12 | The securities firm shall establish an effective internal control system in regard to its provision of the Services. The above internal control system shall state the departments of the securities firm in charge, the procedures for commencement, suspension and resumption of the Services, how the funds used shall be transferred, how the funds less than the threshold amount for utilization as agreed shall be transferred, fund utilization directions, how profits and losses shall be allocated and transferred, management fee, handling of funds for the client's settlement, the client's application for recovery of funds, handling of the client's early termination of the agreement, collection, payment and utilization of money, and other matters relating to account management and data transmission, as well as matters required by the Competent Authority to be specified.
|
Chapter II Separate Management of Client Rights and Interests
|
| Article 13 | The securities firm shall review the book-entry account opened by the client for trading of securities on the centralized securities exchange market or GTSM before agreeing to sign the Agreement for Money Market Fund Investment Services of Securities Firms with the client and then providing the Services.
The template of the Agreement for Money Market Fund Investment Services of Securities Firms in the preceding paragraph shall be established by the CSA and submitted to the Competent Authority for acknowledgement, and shall state the following:
- types of funds for utilization requested by the client;
- the threshold amount for utilization established by the securities firm;
- types of underlying investments;
- terms and conditions of the underlying investments;
- the securities firm shall perform the fund transfers as agreed without making any investment decisions; any and all risks and profits arising from utilization of funds shall be solely borne and enjoyed by the client; and the securities firm may not agree with the client on the sharing of investment profits and losses;
- the agreed order of utilization of underlying investments in the event the client has funding needs;
- the application procedures for the client's recovery of funds;
- how the client may request information about its funds and underlying investments;
- the securities firm shall keep records of the receipt and payment and associated utilization of funds for the Services;
- management fee rate charged by the securities firm;
- the effective date and term of existence of the agreement, and how the agreement may be amended and terminated;
- the client agrees that the securities firm may disclose information about the investment in the money market requested by the client to the TWSE, GTSM, and institutions appointed by the Competent Authority for collection, processing and use as required by law; and
- dispute resolution.
|
| Article 14 | In the event of a change to the name, R.O.C. I.D. Number, Uniform Business Number, Profit-Seeking Enterprise Registration Number, address or mailing information of the client or its agent or representative as stated by the client in the Agremeent for Money Market Fund Investment Services of Securities Firms, the client shall notify the securities firm of the change in an appropriate manner.
|
| Article 15 | When providing the Services, the securities firm shall create separate accounts for individual clients under the Securities Firm Money Market Fund Investment Account" and document the following for each of these separate accounts on a daily basis:
- receipt of the client's funding sources;
- transfer of the amount of funds not meeting the threshold amount for utilization.
- transactions and transfers of money of underlying investments;
- transactions and transfers of money for funding settlement money to the client;
- transaction and transfers of money for the client's early redemption of funds; and
- the client's early termination of the agreement and transfers of money.
The securities firm shall keep records of the receipt and payment and associated utilization of funds described in the preceding paragraph and the evidence of receipt and payment, and create monthly reconciliation statements covering the daily account details to be sent to the client. Also, the transaction details of investments made and balance information described in the reconciliation statement shall include the titles, total number of investment units, and net worths of funds.
With regard to the preceding paragraph, the securities firm shall include in the reconciliation statement any transactions with a company in which the securities firm has a stake.
|
| Article 16 | The securities firm shall keep complete and thorough records and prepare the following statements on a daily basis in respect of the Services:
- a daily statement reflecting the receipt and payment of funds in the Securities Firm Money Market Fund Investment Account;
- a daily statement reflecting the utilization of funds and transfers of money in regard to the Securities Firm Money Market Fund Investment Account,; and
- a detailed statement for individual clients showing the allocation and utilization of funds in regard to the Securities Firm Money Market Fund Investment Account.
Upon completion of the production of the statements in the preceding paragraph, the statements may be stored on electronic media; provided, however, that the storage media shall disable the revision and deletion functions and is able to convert electronic files into written form at any time.
The securities firm shall transmit the daily statements described in paragraph 1, subparagraphs 1 and 2 above for the current month, at the end of a month to the TWSE.
Statements, evidence and documentation relating to the Services shall be kept for at least five years, or a longer term as required under other applicable laws; provided, however, that in the event of a dispute, these documents shall be kept for as long as the dispute remains unresolved.
|
| Article 17 | Where the client needs the settlement money payable, the securities firm shall directly dispose of the relevant underlying investments to satisfy the client's needs according to the order of utilization agreed with the client.
When transferring funds for payment of the settlement money in the preceding paragraph, the securities firm shall transfer the proceeds from the disposition of the underlying investment to the Securities Firm Money Market Fund Investment Account, before the funds are further transferred to the book-entry account opened by the client for trading of securities on the centralized securities exchange market or GTSM, or the relevant settlement account maintained by the securities firm, to complete the settlement for the client.
|
| Article 18 | If the client needs to recover its funds, it shall complete an "Application for Recovery of Funds Invested in the Money Market" before its request will take effect.
Upon receipt of the above application, the securities firm shall dispose of the applicable underlying investment based on the order of utilization agreed with the client for up to the amount to be recovered by the client, to complete the procedure for the client's application for recovery of funds.
Transfers of funds by the securities firm to satisfy the client's needs as in the preceding paragraph shall be made to the Securities Firm Money Market Fund Investment Account within the time limit as agreed with the client, before the funds are further transferred to the book-entry account opened by the client for trading of securities on the centralized securities exchange market or GTSM.
|
| Article 19 | If the client needs to terminate the Services, it shall complete an "Application for Termination of Agreement," to which the provisions under Article 6, paragraph 3 shall apply mutatis mutandis.
In the event of cancellation of the client's consigned trading account, the equity contract shall terminate ipso facto upon expiry, rescission of the contract for, or redemption of the underlying investment.
|
Chapter III Rules Governing Underlying Investments
|
| Article 20 | Where performance of the Services by the securities firm requires consent of the beneficiary of the funds pursuant to law that exceeds the scope of the client's authorization under the agreement with respect to the Services, the securities firm shall separately obtain the client's written consent.
|
| Article 21 | The securities firm shall establish the method as to how evidence, records or documents such as transaction confirmations, account statements and relevant notices sent from the fund companies shall be kept as part of its internal control system, and regularly check the balance of beneficiary units transacted with the funds in the Investment Account against the number of beneficiary units in inventory and keep a written confirmation.
|
| Article 22 | The total amount of funds in the Investment Account the securities firm uses in transactions with companies in which the securities firm has a stake shall not exceed NTD 5 billion or fifty percent of the sum of the used funds, whichever is higher.
|
Chapter IV Supplementary Provisions |
| Article 23 | In the event of a violation of these Guidelines by the securities firm, its responsible person or employees, the TWSE, GTSM and the CSA may take actions according to their applicable policies and rules.
|
| Article 24 | These Guidelines shall take effect after having been submitted to and approved by the Competent Authority. Subsequent amendments thereto shall be effected in the same manner.
|