| Title： |
Regulations Governing Margin and Stock Loans by Securities Firms(2000.08.08) |
| Date： |
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Article 1
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These Regulations are prescribed in accordance with Paragraph 2 of Article 60 of the Securities and Exchange Law.
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Article 2
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A securities firm dealing with margin loan and stock loan shall be approved by the Securities & Futures Commission under the Ministry of Finance ("SFC") and have such to be stated in the certificate of license.
The term "margin loan" means that a securities firm provides monetary financing to its customers; the term "stock loan" means that a securities firm lends securities to its customers.
The SFC may, depending on domestic economic and financial status and condition of securities market, restrict securities firms from applying for dealing with margin loan and stock loan.
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Article 3
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A securities firm applying for dealing with margin loan and stock loan shall meet the following requirements:
1.The most recent financial report audited by the certified public accountant indicates a net worth of more than NT$200 million;
2.Having operated securities brokerage business for more than one (1) years;
3.The most recent financial report audited by the certified public accountant indicates a net worth of each share being more than the par value, and financial status meeting the requirements under Regulations Governing Securities Firms;
4.Having not been issued a warning by the SFC according to Item 1 of Article 66 of the Securities and Exchange Law within the last three (3) months;
5.Having not been punished by the SFC by ordering the securities firm to discharge its director(s), supervisor(s), or manager(s) according to Item 2 of Article 66 of the Securities and Exchange Law within the last six (6) months;
6.Having not been punished by the SFC by suspending its business operation according to Item 3 of Article 66 of the Securities and Exchange Law within the last year;
7.Having not been punished by the SFC by revoking the permit for establishing a branch office according to Article 57, Paragraph 1 of Article 59, and Item 4 of Article 66 of the Securities and Exchange Law within the last two (2) years;
8.Having not been punished by the stock exchange, OTC Exchange or Futures Exchange by imposing a penalty or suspending or restricting trades in accordance with its rules within the last one (1) year;
9. Self-owned capital adequacy ratio is no less than 200%; and
10.Other requirements prescribed by SFC.
The SFC may, depending on the domestic economic and financial status and conditions of securities markets and business of securities firms, adjust the requirement in Item 1 of the preceding Paragraph.
Securities firms that have been punished by Items 4 through 8 in Paragraph 1 and have not made substantial improvements within the established time period will not receive approval from the SFC for any applications.
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Article 4
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A securities firm dealing with margin loan and stock loan shall prescribe business rules and set up a special unit and appoint full-time associated persons to take care of the business.
The business rules referred to in the preceding Paragraph shall state the operation procedures for handling margin loan and stock loan, division of powers and responsibilities, credit account management and credit investigation of customers.
The person responsible for the business referred to in Paragraph 1 above and the associated persons shall pass the training and test of the agency specified by SFC.
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Article 5
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A securities firm dealing with margin loan and stock loan shall file an application together with the following documents to the SFC for its approval:
1.Photocopy of company license;
2.Articles of incorporation;
3.Business rules;
4.Latest CPA-audited and certified annual financial report; if at the time of application, it has been more than six (6) months since the commencement of the fiscal year, a CPA-audited and certified financial report of the first half year shall also be submitted;
5.Minutes of board of directors meeting;
6.Supporting document showing that the applicant meets the requirement under Item 7 of Paragraph 1 of Article 3 herein;
7.Other documents as required by SFC.
When a financial institution concurrently dealing with securities business files an application in accordance with the provision of the preceding Paragraph, it shall also submit an approval letter issued by the Ministry of Finance.
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Article 6
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A securities firm dealing with margin loan and stock loan shall pay an additional operation bond in the amount of NT$50 million.
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Article 7
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A securities firm dealing with margin loan and stock loan shall complete corporate amendment registration within three (3) months from the date of the SFC approval and file an application together with the following documents to the SFC for replacement of certificate of license:
1.Photocopy of company license;
2.Documents showing payment of additional operation bond;
3.Certificate of license of securities firm;
4.List of responsible person and associated persons handling margin loan and stock loan and their certificates of qualification; and
5.Other documents as required by the SFC.
If a securities firm fails to apply for replacement of the certificate of license within the period referred to in the preceding Paragraph, the approval shall be revoked. However, if the securities firm has justifiable reasons, it may apply for extension prior to the expiration of the said period. Only one extension shall be allowed, and the extended period shall not be more than three (3) months.
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Article 8
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A securities firm shall not deal with margin loan and stock loan until the certificate of license is replaced.
When a securities firm deals with margin loan and stock loan, it shall terminate the agency business for margin loan and stock loan; provided that if the balance of the margin loan and stock loan of the customers represented by it has not been settled, it may act as the agent until the balance has been settled.
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Article 9
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1: Per Ruling Ref. No. (84)-Taiwan-Finance-SEC-(4)-02435 dated October 21, 1995 and in accordance with Paragraph 2 of Article 3 of these Regulations, SEC has adjusted the requirement regarding net worth in connection with securities firms' application for dealing with margin loan and stock loan to NT$200,000,000.
2: Per Ruling Ref. No. (84)-Taiwan-Finance-SEC-(4)-02417 dated October 21, 1995 and in accordance with Paragraph 3 of Article 13 of these Regulations, SEC has adjusted the total amount of margin loan and stock loan and stock loan extended to customers in connection with securities firms' dealing with margin loan and stock loan to not more than 250% of the net worth respectively.
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Article 10
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When dealing with margin loan and stock loan, a securities firm shall sign an agreement for margin loan and stock loan with its customer and open a credit account.
Contents of the agreement for margin loan and stock loan referred to in the preceding Paragraph shall be prescribed by stock exchange and OTC exchange and reported to the SFC for approval.
The following matters shall be stated in the agreement for margin loan and stock loan:
1.The ratio and time limit to make up difference under Article 17;
2.Disposition of the collateral under Article 18;
3.Prohibition from using the money derived from short selling price and margin for short sale for other purpose and payable interest rate under Article 21;
4.Centralized custody of customers' securities and delivery of securities of the same type when said securities are used according to relevant provisions under Article 22.
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Article 11
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When a securities firm accepts a customer's application for opening a credit account, each customer shall open only one credit account. The conditions for opening an account shall be prescribed by stock exchange and OTC exchange and reported to the SFC for approval.
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Article 12
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When accepting a customer's application for opening a credit account, a securities firm shall conduct a credit investigation.
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Article 13
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When the consignment agreement for securities trading between a securities firm and its customer has been terminated, the securities firm shall cancel the credit account.
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Article 14
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When a securities firm deals with margin loan and stock loan, the total amount of monetary financing extended to the customers shall not be more than 250% of its net worth; the total amount of securities extended to customers shall not be more than 250% of its net worth.
If a securities firm is concurrently operated by a financial institution, the net worth referred to in the preceding Paragraph shall be calculated based on the specially allocated operations capital; provided that the amount shall not be more than the highest net worth of the securities firm referred to in the preceding Paragraph in the same period and the limitation set by the SFC.
The ratio referred to in Paragraph 1 above may be adjusted by the SFC, depending on the domestic economic and financial status and the conditions of securities market and business of securities firms.
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Article 15
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When a securities firm deals with margin loan and stock loan, the total amount of monetary financing for each type of securities shall not be more than 10% of its net worth; the total amount of stock loan for each type of securities shall not be more than 5% of its net worth.
If a securities firm is concurrently operated by a financial institution, the net worth referred to in the preceding Paragraph shall be calculated based on the specially allocated operations capital.
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Article 16
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When a securities firm dealing with margin loan and short stock loan extends monetary financing to a customer, it shall collect the margin for margin purchase based on the ratio prescribed by the SFC, and all the securities procured through margin purchase shall be used as collateral; when extending stock loan to a customer, the securities firm shall collect a margin for short sale in accordance with the percentage prescribed by SFC, and the proceeds from the short selling shall be used as collateral.
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Article 17
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A securities firm dealing with margin loan and stock loan shall calculate the ratio of the value of collateral in each credit account to the customer's debt on daily basis. If the ratio is lower than the required ratio, the securities firm shall immediately notify the customer to make up the difference within a prescribed time limit.
The ratio and time limit for payment of the maintenance margin referred to in the preceding Paragraph shall be prescribed by stock exchange and OTC exchange and reported to the SFC for approval.
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Article 18
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In the event that a customer of a securities firm fails to pay the maintenance margin in accordance with the provision of Paragraph 1 of the preceding Article or fails to settle the transaction within the agreed time limit, the securities firm shall dispose of the collateral.
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Article 19
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The margin for short sale and the maintenance margin to be made up in accordance with paragraph 1 of Article 17 may be satisfied by the transfer of securities.
The types and the standards for transfer of securities referred to in the preceding Paragraph shall be prescribed by stock exchange and OTC exchange and reported to the SFC for approval.
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Article 20
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When a securities firm deals with margin loan and stock loan, if due to price fluctuation the market value of the collateral in the customer's credit account less customer's debit balance increases, the securities firm shall not deliver to the customer the money or securities equivalent to the excess equity or apply such excess against the margins for margin purchase or for sort sales.
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Article 21
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In dealing with margin loan and stock loan, a securities firm shall not use the money derived from short selling and margin for short sale deposited in the customer's account for any purpose other than those listed below:
1.Use of the fund for engaging in margin purchase transactions;
2.Security for stock loans provided by securities financing enterprises; and
3.Bank deposit.
A securities firm shall pay interest to customers for the amounts referred to in the preceding Paragraph. The interest rate shall be prescribed by relevant securities firms and reported to the SFC for recordation.
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Article 22
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In dealing with margin loan and stock loan, a securities firm shall not use the customer's securities for any purpose other than those listed below and shall deposit such securities in central depository:
1.Use of the securities for handling short sale transactions; or
2.Security for the fund or securities re-financed by securities financing enterprises.
A securities firm using the securities referred to in the preceding Paragraph shall deliver securities of the same type upon settlement of the margin purchase and short sale.
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Article 23
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A securities firm dealing with margin loan and stock loan shall cease providing stock loans when the balance of short sale of each security equals the balance of margin purchase.
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Article 24
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The fund or securities required by a securities firm dealing with the business of margin loan and stock loan may be re-financed by a securities financing enterprise.
When a securities firm processes re-finance referred to in the preceding Paragraph, it shall separately perform the obligation of settlement to stock exchange and OTC exchange.
The term "re-finance" means that a securities firm acquires financing of fund or securities from a securities financing enterprise.
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Article 25
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When a securities firm deals with margin loan and stock loan, the standards of interest rate of margin loans and the handling fee for stock loans shall be prescribed by the securities firm and reported to the SFC for recordation.
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Article 26
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When a customer makes full payment and settlement, a securities firm dealing with margin loan and stock loan shall deliver to the customer the stocks acquired by the customer through margin purchase or the money derived from short selling together with the margin or the securities transferred for collateral.
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Article 27
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A securities firm dealing with margin loan and stock loan shall establish separate accounts based on the credit account and enter the following matters on daily basis:
1.Matters regarding margin loan and stock loan
2.Collateral; and
3.Margin calls for collateral and the disposition thereof.
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Article 28
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Regarding a securities firm's dealing with margin loan and stock loan, the stock exchange and OTC exchange shall prescribe the rules for business operation, setting forth the exercise of the rights to the stocks acquired through margin purchase or short sale, withholding of income tax on dividends, and the disposition of other relevant matters. Such rules shall be reported to the SFC for approval before implementation.
A securities firm shall deal with margin loan and stock loan in accordance with the operation rules referred to in the preceding Paragraph.
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Article 29
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In dealing with margin loan and stock loan, a securities firm shall not violate these Regulations and the permissible amount of margin loan and stock loan, term, margin loan ratio, percentage of margin for short sale, and the criteria for eligibility of securities for margin purchase and short sale under Article 61 of the Securities and Exchange Law.
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Article 30
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Regarding a securities firm's dealing with margin loan and stock loan, during the valid period of margin loan and stock loan relation, if the trading in the securities market is completely suspended or trading of certain types of securities is suspended due to natural disasters or other abnormal events and the time for resumption of the transaction has not been decided, the securities firm shall notify its customers to clear the margin purchase and short sale in the following manners within the agreed period:
1.The securities acquired through margin purchase shall be redeemed by cash, and the said securities shall be withdrawn by the customer.
2.The securities sold through short sale shall be covered by spot securities, and the money derived from short selling and margin shall be withdrawn by the customer. However, if the securities cannot be covered by spot securities, the securities firm may apply for open bidding with the stock exchange or OTC exchange. The open bidding cost shall be borne by the relevant short sale customer.
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