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Amendments

Title：

Regulations Governing Securities Firms Accepting Orders to Trade Foreign Securities  CH

Amended Date： 2020.09.08 
Article Content Content Search Article No. Search Legal Basis Amended Article Legislative History Chinese

Title： Regulations Governing Securities Firms Accepting Orders to Trade Foreign Securities(2014.12.27)
Date：
Article 4     To operate the business of brokering trades in foreign securities, a securities firm shall comply with the provisions of Article 41-1 of the Standards Governing the Establishment of Securities Firms, and shall forward the required documentation to the securities dealers association for review and to be further forwarded to the Financial Supervisory Commission (FSC) for approval. It shall also require permission from the Central Bank of China.
Article 7     Except where otherwise provided by law or regulation, a securities firm may enter into a brokerage contract with a principal for trading of foreign securities. If any of the following circumstances exists, the securities firm shall not accept the opening of an account by a principal, and if an account has been opened, such account shall be cancelled:
  1. The party is a minor acting without the representation of a statutory agent
  2. The party has been adjudged bankrupt and not reinstated.
  3. The party has been declared by a court to be under guardianship, where such declaration has not yet been voided.
  4. The party has been declared by a court to be under assistance, and the consent of the assistant or permission of the court has not been given.
  5. The party has been authorized by a juristic person to open an account, but is unable to produce a power of attorney from such juristic person authorizing the account opening.
  6. The party has a record of breaching a securities trading contract, and the case has not been settled while less than 5 years have passed.
  7. The party has been sentenced under the Securities and Exchange Act to a penalty of equal or greater severity to the imposition of a criminal fine, and 3 years have not elapsed since the completion of sentence execution, the expiration of suspension of sentence, or the pardon of such punishment.
Article 9     A securities firm that enters into a brokerage contract with a principal for the trading of foreign securities shall do so in accordance with the following provisions:
  1. When the principal is a natural person, the principal shall provide an original of his/her National Identity Card or passport along with originals of other documents sufficient to verify their identity. They shall personally sign the brokerage contract and provide a photocopy of the identification document.
  2. When the principal is a minor, their statutory agent shall personally appear to execute the contract, and present the identification documents of subparagraph 1 for him or herself and for the principal, along with a photocopy, for recordation.
  3. When the principal is a juristic person, an authorized appointee shall present a photocopy of the principal's juristic person registration documents, a photocopy of the notification from the tax authority establishing its uniform ID number as a tax withholding entity (profit-seeking enterprises are exempt from the requirement to provide the abovementioned photocopy of the notification), a power of attorney, and photocopies of the national IDs of the juristic person's representative and the authorized appointee and execute the contract. These requirements do not apply when the principal has entrusted a custodian institution to open an account on its behalf or submits verification that the custodian institution is authorized to perform settlements on its behalf.
    Upon signing the brokerage contract, the principal shall prepare a chop or signature specimen card for the securities firm, and process securities trading orders, settlement and other related procedures using the identical chop or specimen.
    A securities firm may accept an account-opening application from a principal through the Internet, by letter, or by another method other than in person. In addition to verifying the identity of the principal, the securities firm shall impose limits on the amount of brokerage trading that may be conducted by the principal, and shall comply with the regulations prescribed by the securities dealers association governing relevant procedures and amounts.
Article 10     Unless the principal is a professional institutional investor, a securities firm accepting orders to trade foreign securities shall, at the time the principal opens the account, send an employee to explain the possible risks of various types of foreign securities and provide a copy of the risk disclosure statement to the principal. Both the employee responsible for explaining the risks involved and the principal shall sign the risk disclosure statement for record.
    The risk disclosure statement of the preceding paragraph shall contain the following items, and shall comply with the relevant self-regulatory rules of the securities dealers association:
  1. The possible risks of various types of foreign securities differ with the investment target and the investment exchange market. The investor shall understand the differences and risks of the stocks, warrants, beneficiary certificates, bonds, and depositary certificates to be invested in, and shall pay attention to changes in the sovereign rating of the country of the invested foreign securities market.
  2. Investing in foreign securities involves foreign securities exchange markets and hence requires following the local laws and exchange market regulations, which may differ from the Securities and Exchange Act of the R.O.C.
  3. Investing in foreign securities involves foreign currency exchange. In addition to any actual losses from the transaction, there is the risk of fluctuating exchange rates.
  4. In investing in foreign securities, the information securities firms provide to the investor according to Articles 21 and 22 of these Regulations, including research reports on the stock market or individual stocks, notification from the issuer of stock, or other information concerning the rights and benefits of the investor, are handled according to the procedures prescribed by foreign laws. The investor itself shall understand and judge accordingly.
  5. To trade foreign securities, a brokerage contract for the trading of foreign securities shall be signed. The investor shall clearly understand the content regarding the currency used, exchange rates, and other items involving calculations for the settlement/clearance fund and other costs in the contract.
  6. The warnings in the risk disclosure statement are extremely simplified and cannot convey the details of all the risks involved in investing and the factors influencing the market situation. Therefore, before the transaction, the principal, in addition to thoroughly analyzing the risk disclosure statement, must exhaustively deliberate on other possible influential factors and accurately estimate the risks involved, to prevent losses resulting from a transaction that he is unable to shoulder.
    After receiving approval for brokerage trading in a foreign securities market, a securities firm shall provide a written a risk disclosure statement in accordance with the regulations of the competent authority governing the given foreign market for reference by customers.
Article 11     When a securities firm brokers trades in foreign securities that are not traded on a centralized market and that have the character of financial derivatives products for principals that are non-professional investors, the securities firm shall establish a product suitability system, which at the least shall include product assessment procedures, know-your-customer procedures, and assessments of customer characteristics in order to thoroughly ascertain the degree of the principal's investment experience, the status of the principal's assets, the principal's trading objectives, and the principal's understanding of the product and suitability for trading the given product. The securities firm shall also establish internal operating procedures for matters relating to protection of principals' rights and interests, including product suitability, product risk notifications and disclosures, and the handling of trading disputes, and shall operate in accordance with those operating procedures.
Article 13     A securities firm accepting orders to trade foreign securities shall require the principal or the principal’s representative or agent to complete an order ticket face to face, or an associated person may complete a written or an electronic order ticket in accordance with the order given by the principal or the principal's representative or agent using letter, telegram, facsimile, telephone or other electronic means, and shall retain a record of the customer's orders in accordance with regulations.
    The order ticket referred to in the preceding paragraph shall contain the following particulars:
  1. Account number and account holder name.
  2. Order method (face to face, letters, telephone, telegram, facsimile, or other electronic means).
  3. Date, time, and valid period of the order.
  4. The international stock code.
  5. The type and the volume or total purchase amount of the securities.
  6. Order price.
  7. Currency of settlement.
  8. Chop of the associated person.
  9. Chop of the principal.
    The principal or its representative or agent may also use the Internet or other electronic forms of transaction to place orders; where orders are made by means of such media, the securities firm may be exempt from producing and filling out an order form, provided that it shall immediately print records of order tickets in the sequence received for the purpose of verification.
    When a securities firm accepts an order that is not made in electronic form but produces an order ticket in electronic form, or when it accepts an order in electronic form, it shall print out records of the trading orders in the chronological order of their receipt, which shall be signed or stamped after close of market by the person handling the brokerage trades. When the records of trading orders are retained in conformance with the following provisions, however, the records need not be printed out and signed or stamped:
  1. The orders are stored on electronic media that cannot be edited or erased, and the compilation of records is completed on the date of their transaction.
  2. A full index and management procedures for the records have been established.
  3. A dedicated person is responsible for their management, and immediate conversion of the electronic data to hardcopy format is possible at any time.
Article 19     A securities firm accepting orders to trade foreign securities shall prepare and submit a trade report to the principal after the transaction. Where the principal has signed a consent form, however, and it has been confirmed that the principal has been notified of the relevant trading information by telephone or e-mail on the confirmed transaction date, the securities firm may be exempt from the requirement for submitting a trade report to the principal.
    The trade report referred to in the preceding paragraph shall contain the following particulars:
  1. Account number and account holder name.
  2. Transaction date.
  3. Settlement date.
  4. International stock code.
  5. Type of transacted securities.
  6. Number of shares or par value thereof.
  7. Unit price and total price
  8. Service charges.
  9. Taxation.
  10. Amount of money to be received or paid.
  11. Currency of settlement.
  12. Exchange rate, applicable where settlement is made in New Taiwan Dollars.
  13. Other matters to be recorded in accordance with the regulations of the foreign securities market.
Article 21     A securities firm that operates the business of brokered trades of foreign securities must establish an account for their settlement with its designated bank.
    For securities firms accepting orders to trade foreign securities, the settlement of the principal's money/securities and the receipt/payment of fees may be conducted in New Taiwan Dollars or in a foreign currency agreed upon by the securities firm and the principal; further, deposit/withdrawal of the money shall be conducted through a New Taiwan Dollar account or a foreign currency deposit account opened by the principal at a bank designated by the securities firm or through a direct remittance of foreign currency to a local financial institution designated by the securities firm in the home country of the given securities market.
    The procedures for conducting the settlement money remittance referred to in the preceding paragraph, where the principal designates New Taiwan Dollars or foreign currency, are as follows:
  1. At the time of the transaction, the principal shall designate either New Taiwan Dollars or a foreign currency as the currency for conducting the settlement, provided that a foreign currency shall be designated as the currency for conducting the settlement if the principal is a foreign natural person, a foreign juristic person, or a government fund established with the approval of the government of the ROC, a securities investment trust fund, assets in a special ledger account for investment-linked insurance, or a discretionary investment account.
  2. After buying foreign securities, the principal shall transfer the agreed upon amount, according to the purchase transaction report, into the securities firm's settlement amount before the settlement date.
  3. After the principal sells the foreign securities, the securities firm shall transfer the agreed upon amount, according to the sales transaction report, into a New Taiwan Dollar deposit account opened by the principal at a financial institution designated by the securities firm or into the principal's foreign currency savings account at a bank designated by the securities firm. This restriction, however, shall not apply if the laws or regulations of the local market provide otherwise.
  4. When there are amounts receivable or payable because the principal, using the same account on the same day, has both buying and selling foreign securities transactions, or first sells foreign securities and then, prior to the settlement date, buys foreign securities, the securities firm may, according to the principal's instruction, combine and set off all the received (paid) money in the same currency and then transfer the net received (paid) amount into the account.
  5. Where the principal has designated that foreign currency shall be used in settlement of the settlement money and overseas fees, the receipt/payment shall be carried out in a foreign currency, and may not be carried out in New Taiwan Dollars. Any required foreign exchange settlement shall be carried out by the principal with a banking enterprise in accordance with the Regulations for Receipt/Payment of Foreign Exchange or Report of Foreign Exchange Transactions and may use the foreign currency that the principal holds outside of the Republic of China for direct remittance to the financial institution designated by the securities firms at the location of the various securities exchange markets. Where the principal remits foreign currency that the principal holds outside of the Republic of China directly to the financial institution designated by the securities firms at the location of the various securities exchange markets, and there are therefore amounts payable (including settlement money, distributable dividends, interest, funds for mandatory repurchase, and the processing fees refunded for an account change) to a principal by the securities firm, the securities firm may also remit the given amount into the principal's own designated account.
  6. Where the principal has designated that settlement payments and foreign fees are to be paid in New Taiwan Dollars, remittance shall be carried out in New Taiwan Dollars, and may not be carried out in a foreign currency. Matters involving exchange settlement shall be carried out by the securities firm with a banking enterprise in accordance with the Regulations for Receipt/Payment of Foreign Exchange or Report of Foreign Exchange Transactions, and relevant regulations.
  7. When the principal designates that payment/receipt of settlement payments and foreign fees is to be done in New Taiwan Dollars, calculation of exchange rates shall be negotiated between the principal and the securities firm on the basis of prevailing market rates.
Article 23     The foreign securities purchased by securities firms on orders from principals, except in the case of professional institutional investors, shall be deposited in the name of the securities firm, or in the name of the financial institution as sub-broker, in a depositary in the locale of the site of transaction. Further, such record shall be recorded in detail in the account of the principal and in the reconciliation statement to facilitate review by the principal.
    The securities firm shall report the depositary referred to in the preceding paragraph to the securities dealers association for its record.
Article 25     For a securities firm accepting orders to trade foreign securities, information or research reports on the securities market, industries, or individual securities which securities firms provide to investors shall be limited to those which it has issued or those used by securities firms with prior authorization. Such materials shall be provided in the name of the securities firm and summarily translated into Chinese in order to facilitate review by the investors, provided that with the written consent of the professional investor, or that the recipient of such materials is a professional institutional investor or a foreigner, summary translation of the materials is not required.
    The information and the research report referred to in the preceding paragraph shall not contain any materials that are false, concealed, or fraudulent, or which would be in any other way sufficient to mislead others.
    A securities firm may not claim exemption from liability with regard to the materials or research reports listed in paragraph 1 based on the fact that it did not itself approve those materials for issuance.
Article 27     Securities firms accepting orders to trade foreign securities shall prepare monthly reconciliation statements and send such to the principals for their review before the tenth day of the subsequent month.
    When there is no record of trades for the current month in the account of the principal, the frequency with which reconciliation statements are sent shall be handled in accordance with the regulations prescribed by the securities dealers association.