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Regulations Governing Responsible Persons and Associated Persons of Securities Firms(2015.08.28) |
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Article 4
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Associated persons of a securities firm may not concurrently hold any position at another securities firm either domestically or in a foreign country. This, however, does not apply to legal compliance, internal auditors, risk management personnel, or in-charge accountant of the securities firm concurrently holding a position of the same nature at a securities affiliate enterprise in a foreign country.
An affiliate enterprise as referred to in the preceding paragraph shall be governed by the Affiliated Enterprises chapter of the Company Act.
The following associated persons of a securities firm may not engage in business beyond the scope for which they are registered, nor may their business be concurrently performed by associated persons, unless so prescribed in other laws or regulations:
- Associated persons engaged in proprietary trading of securities.
- Internal auditors.
- Risk management personnel.
Persons engaged in the business of brokerage trading of securities, and persons charged with consulting in connection with asset allocation or financial planning or services in connection with the sale of financial products, may not concurrently handle services that involve account opening for securities trading, clearing and settlement, receipt, payment, and safekeeping of cash and stocks, margin purchases or short sales, underwriting, serving as in-charge accountant, or agency for shareholder services.
In the case of a futures commission merchant that concurrently operates securities business, if any of its associated persons possesses the qualifications for both securities and futures business, then those an associated person, when engaging in the business of account opening, brokerage trading, proprietary trading, clearing and settlement, legal compliance, internal auditing, self-audit, risk management, and in-charge accountant within the scope for which the person is registered, may concurrently handle securities business and futures business of the same nature.
In the case of a futures commission merchant that concurrently operates securities business, a managerial officer of the department that handles brokerage trading, proprietary trading, or clearing and settlement business, who furthermore meets the qualifications set out in Articles 8 and 10 herein, may concurrently serve as a managerial officer of the futures department that handles business of the same nature.
Except as otherwise provided by law or regulation, the provisions of paragraph 3 and the preceding paragraph shall apply mutatis mutandis to financial institutions other than futures commission merchants that concurrently operate securities business.
An agent of a securities firm shall neither execute nor concurrently engage in the business of a senior agent.
A securities firm shall establish internal audit and control mechanisms for any concurrent holding of positions and concurrent handling of services by its associated persons, to ensure the effective execution of the associated person's principal duties and concurrently held duties or concurrently handled services, and for maintaining the normal business operations of the securities firm. The concurrent holding of positions and concurrent handling of services may not involve any conflict of interest or any violation of applicable securities regulations or internal control system provisions, and the rights and interests of customers and shareholders shall be protected.
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Article 11-1
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A responsible person of a securities firm may not serve as a responsible person of a bank, financial holding company, trust company, credit cooperative, credit department of a farmers' (fishermen's) association, bills finance company, futures enterprise, insurance enterprise, or another securities enterprise. However, this restriction shall not apply in the following circumstances:
- When it serves the purposes of an investment relationship between the securities firm and such an institution, there is no overlapping of the chairmen and managerial officers between the two, and the FSC has granted approval.
- When there is a special need and the FSC has granted approval, a responsible person of a securities firm may serve as the chairman of such entities.
- When a securities firm is a subsidiary of a financial holding company, a responsible person of the securities firm may serve as a responsible person of such financial holding company or of another of its subsidiaries, provided that there is no overlapping of managerial officers between the subsidiaries.
- When a securities firm is a juristic-person director or supervisor of a financial holding company, the responsible person of the securities firm, in order to serve as a responsible person of the holding company, may concurrently serve as a director or supervisor of a subsidiary of that holding company.
When there is an investment relationship between a securities firm and a non-financial institution that is a public issuer, no responsible person of the securities firm may concurrently serve as the chairman or a managerial officer of such an investee company.
A securities firm shall establish internal audit and control mechanisms for any concurrent holding of positions by a responsible person of a securities firm to ensure effective execution of the responsible person's principal duties and concurrently held duties, and for maintaining the normal business operations of the securities firm; it may not involve conflicts of interest or violation of securities regulations or the internal control system, and the rights and interests of shareholders shall be protected.
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Article 13
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In the event of any change of responsible person or associated person, the securities firm shall file a registration with the stock exchange, securities dealers association, or over-the-counter stock exchange within 5 days after the change, as specified below. The securities firm shall not be released from liability for the actions of such persons before completion of the registration.
- For the purpose of an amendment registration due to job transfer or promotion of a responsible person or associated person of a securities firm.
- For the purpose of canceling a registration in the event of the death, resignation, layoff, dismissal, severance, or retirement of a responsible person or associated person of a securities firm, or a circumstance set out in Article 17.
- For the purpose of voiding a registration when the dismissal of a responsible person or associated person is ordered by the FSC in accordance with the Act, or the registration of said person conforms to any circumstance under paragraph 3 of the preceding article.
Registration of any change in a responsible person or associated person of the overseas branch of a securities firm shall be performed within 10 days after the change.
By the 15th day of each month, the stock exchange, securities dealers association or over-the counter stock exchange shall compile the particulars of changes to registrations as referred to in the preceding paragraph for the previous month and report them to the FSC for recordation.
A securities firm shall file with the stock exchange, securities dealers association, or over-the-counter stock exchange for approval and recordation before any change of an internal auditing associated person of the securities firm described in paragraph 1 may take effect.
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Article 17
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The FSC or training institution shall cancel the registration of an associated person who fails to participate in pre-service or in-service training, or who fails the training and furthermore fails to pass retraining within 1 year.
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Article 18
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Responsible persons and associated persons of a securities firm shall conduct business in accordance with the principles of honesty and good faith.
Except where otherwise provided by law or regulation, responsible persons and associated persons of a securities firm may not engage in the following conduct:
- Engaging in the trading of exchange-listed or OTC-listed stocks with information learned on the job for the purpose of obtaining speculative profit.
- Disclosing information regarding a customer order or other secrets learned as a result of the job, other than in response to inquiries made in accordance with laws or regulations.
- Accepting a customer's trading order with discretionary authority over the type, quantity, price, or purchase or sale of the securities.
- Trading securities with a guarantee to the customer of earning profits or with a promise of sharing profits.
- Trading securities under an agreement with the customer to jointly assume the losses or profits of the transaction.
- Accepting orders from customers to buy or sell securities and concurrently buying or selling the same securities for his or her own account on the opposite side of the trade.
- Subscribing or trading securities in the name of the customer or by using the customer's account.
- Subscribing or trading securities for the customer in the names of other persons or relatives.
- Borrowing or lending of money or securities to or from a customer, or acting as an intermediary for the borrowing or lending of money or securities to or from a customer.
- Fraud, deception, or other misleading behavior when engaging in underwriting, proprietary trading, or brokerage trading of securities.
- Safekeeping securities, cash, chops, or deposit books of customers, or misappropriating any of those things.
- Trading securities for a customer that has not entered into a brokerage contract;
- Trading securities other than in accordance with the particulars and instructions of the order placed by the customer.
- Providing a customer or unspecified persons with information indicating that the price of certain securities will rise or fall in order to solicit the trading of securities;
- Recommending trades in specific stocks to unspecified persons, except as necessary for purposes of securities underwriting.
- Accepting customer settlement by means of offsetting a purchase or sale of securities with a sale or purchase of securities of the same type through the same or a different account. However, this restriction shall not apply to settlement by mutually offsetting margin purchases and short sales in margin trading, nor shall it apply to accepting customer settlement by means of mutually offsetting an equal quantity of cash purchases and spot sales of the same security that have been executed through the same account on the same business day, when done in accordance with laws and regulations.
- Opening an account, or subscribing, trading, or settling securities as agent on behalf of another person, provided that this restriction does not apply if the responsible person or associated person is the statutory representative of the principal.
- Processing the opening of an account, or the subscription, trading, or settlement of securities, for a director, supervisor, or employee of the company on behalf of another person.
- Processing the opening of an account for a person other than the principal for whom the account is being opened. However, this rule does not apply if the FSC has provided otherwise.
- Processing an application for subscription, trading, or settlement of securities from a person who is not the customer or not an agent with a power of attorney from the customer.
- Accepting a trading order despite being aware that the customer is using undisclosed information of a public company that will have a material impact on the stock price of the company or being aware that the customer intends to manipulate the market.
- Any agreement between persons engaging in securities underwriting business and an issuing company or its relevant personnel for purposes of obtaining improper profit.
- Soliciting, acting as an intermediary for, or promoting unapproved securities or derivative products thereof.
- Other conduct in violation of securities laws or regulations or conduct prohibited by the rules prescribed by the FSC.
Persons referred to in the preceding paragraph also may not engage in any conduct prohibited by securities laws and regulations when conducting their duties.
The provisions of the two preceding paragraphs shall apply mutatis mutandis to other employees of a securities firm.
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