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Amendments

Title：

Regulations Governing Securities Firms Accepting Orders to Trade Foreign Securities  CH

Amended Date： 2024.05.08 
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(2020.09.08)
Date：
Article 2     Securities firms accepting brokerage orders to trade ("brokering trades in") foreign securities and exercising rights relating to the securities purchased on orders from principals shall do so in accordance with these Regulations, the laws and regulations of each local securities market, the bylaws of the securities exchange or self-regulating organization, and the contract with the principal.
    Securities firms brokering trades in offshore funds shall do so in accordance with the Regulations Governing Offshore Funds prescribed under authority of Article 16, paragraph 3, of the Securities Investment Trust and Consulting Act; for matters on which those Regulations are silent, relevant provisions of these Regulations shall apply.
    Except in the case of a securities firm brokering trades for high-asset customers, which shall separately be subject to the provisions of Articles 6-1 to 6-4, or in the case of a securities firm brokering trades for professional institutional investors or high net worth juristic person investors, which shall separately be subject to the provisions of Articles 6-2, paragraph 3, a securities firm brokering trades in offshore structured products shall do so in accordance with the Regulations Governing Offshore Structured Products; for matters on which those Regulations are silent, the relevant provisions of these Regulations shall apply.
Article 3-1     The term "high-asset customer" as used herein means a juristic person or natural person meeting all of the following conditions and having filed an application in writing with a securities firm to become a high-asset customer:
  1. The customer provides proof of financial capacity demonstrating a net value of investable assets and/or value of insurance products equivalent to NT$100 million or above; or has a net value of investable assets with the securities firm equivalent to NT$30 million or above and provides a statement of financial capacity declaring a holding of a net value of investable assets and/or value of insurance products equivalent to NT$100 million or above.
  2. The securities firm confirms that the natural person or the person(s) authorized by the juristic person to conduct trades possesses adequate professional knowledge and trading experience with respect to financial products and confirms that the natural person or juristic person has adequate risk-bearing capacity.
  3. The customer fully understands that the securities firm may be exempted from liabilities for providing financial products or services to high-asset customers and to natural person or juristic person professional investors or natural person or juristic person professional customers under relevant laws and regulations, and agrees to sign on as a high-asset customer.
    As used in the preceding paragraph, the term "investable assets" means financial assets such as cash deposits, domestic or foreign securities or short-term bills (including bonds or short-term bills purchased through RP/RS transactions), structured products, and gold passbooks. The term "net value" means the amount of the customer's investment principal after deducting the amount of collateralized financing or pledged loans. If a financial asset has an open market price or reference price, the net value shall be calculated as the amount of its value measured at its market price or reference price after deducting the amount of collateralized financing or pledged loans. The term "value of insurance products" means the policy value of investment-linked insurance or non-forfeiture value of non-investment-linked life insurance.
    A customer that already has the status of a natural person or juristic person professional investor, or of a natural person or juristic person professional customer under the Taipei Exchange Regulations Governing Over-the-Counter Trading of Financial Derivatives by Securities Firms, and that meets either of the conditions of paragraph 1, subparagraph 1 and is confirmed by the securities firm as having adequate risk-bearing capacity may file an application in writing with the securities firm to become a high-asset customer.
    With respect to the eligibility requirements that shall be met by high-asset customers, a securities firm shall fulfill its responsibility for due diligence and obtain reasonable and credible supporting evidence from a customer and conduct review and grant approval in accordance with its know-your-customer procedures and customer acceptance criteria.
    A natural person or juristic person having the status as a high-asset customer under paragraph 1 or 3 shall be deemed to have the status of a natural person or juristic person professional investor under relevant laws or regulations governing the financial products or services provided by the securities firm. However, when a securities firm undertakes financial derivatives transactions with a high-asset customer, the customer shall meet the eligibility requirements for professional customers and counterparty restrictions prescribed by the Financial Supervisory Commission (FSC) or the Central Bank of the Republic of China (Taiwan) (the "Central Bank") in regulations governing securities firms conducting financial derivatives business.
    The securities firm shall carry out follow-up review at least once every 2 years in accordance with the adopted follow-up review procedures to ensure that a given customer continues to meet the eligibility requirements for high-asset customers. The securities firm shall regularly evaluate the net value of investable assets the customer has with it. If the securities firm discovers that the customer's net value of investable assets is below the standards of financial capacity required for high-asset customers, it shall obtain the customer's written confirmation on whether the customer wishes it to continue to provide additional financial products or services applicable for high-asset customers.
    A high-asset customer may file an application in writing with the securities firm to terminate the customer's status as a high-asset customer.
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 further forwarding to the FSC for approval. It shall also require permission from the Central Bank.
Article 6-1     To provide services to high-asset customers for brokering trades in foreign securities, a securities firm shall meet the following conditions and shall submit the required documentation to the securities dealers association for review and further forwarding to the FSC for approval before conducting such brokerage trading:
  1. Regulatory capital adequacy ratio: its regulatory capital adequacy ratio reported for the half-year prior to the application shall exceed 200 percent.
  2. Its financial position shall meet any of the following conditions:
    1. Its CPA audited and attested financial report for the most recent period shows a net worth of NT$10 billion or more and also not less than its paid-in capital.
    2. Its CPA audited and attested financial report for the most recent period shows a net worth of NT$7 billion or more and also not less than its paid-in capital, and it makes specific promises to increase substantive investments, business size, and number of employees in Taiwan in the next 3 years, and the overall implementation plan is approved by the FSC.
  3. Legal compliance:
    1. It has not been subject to any penalty imposed under Article 66, subparagraph 1 of the Securities and Exchange Act or Article 100, paragraph 1, subparagraph 1 of the Futures Trading Act in the last 3 months.
    2. It has not been subject to any penalty imposed under Article 66, subparagraph 2 of the Securities and Exchange Act or Article 100, paragraph 1, subparagraph 2 of the Futures Trading Act in the last 6 months.
    3. It has not been subject to any penalty involving suspension of business activities imposed by the FSC in the last year.
    4. It has not been subject to any penalty involving partial revocation or voidance of business permission imposed by the FSC in the last 2 years.
    A securities firm's failure to meet the conditions of subparagraph 3 of the preceding paragraph may be disregarded if it has made corrections as demonstrated by specific evidence.
    If a securities firm that conducts the business under paragraph 1 with the approval of the FSC has failed to meet any of the applicable requirements for regulatory capital adequacy ratio or net worth set out in paragraph 1, subparagraph 1 or 2 for 2 consecutive months, it shall suspend the conduct of that business and may resume the business only after its regulatory capital adequacy ratio or net worth, as the case may be, has complied with the applicable requirement for 3 consecutive months and approval has been obtained from the FSC.
    A securities firm granted with approval based on paragraph 1, subparagraph 2, item B to provide services to high-asset customers for brokering trades in foreign securities, shall, after the end of a 3-year period starting from the date of approval, report to the FSC within 5 business days on the implementation of its promised plan to increase substantive investments, business size, and number of employees in Taiwan. If the securities firm fails to fulfill its promises and the failure is of material nature, then unless there is a legitimate reason, the FSC may void its approval to conduct brokerage trading in foreign securities for high-asset customers.
Article 6-2     A securities firm brokering trades in offshore structured products for high-asset customers may perform review procedures in accordance with its own internal guidelines for review by category adopted for such purposes, with each category covering offshore structured products with the same issuer and the same product structure or the same product risk rating, without having to be subject to the requirements of the Taiwan Financial Services Roundtable prescribed under Article 20, paragraph 1 of the Regulations Governing Offshore Structured Products.
    An offshore structured product issued by an overseas investee subsidiary or branch of a securities firm or domestic bank that meets the following conditions may be traded by a securities firm brokering for high-asset customers, without being subject to the requirements of Chapter 2 of the Regulations Governing Offshore Structured Products with respect to the issuer or master agent:
  1. The issuer shall be a subsidiary company of a securities firm meeting the qualifying requirements of Article 4, paragraph 1 of the Regulations Governing the Issuance of Exchange Traded Notes by Securities Firms, in which the securities firm holds more than 50 percent of the shares through direct or indirect overseas equity investment, or an overseas branch of a domestic bank granted approval by the FSC under the Regulations Governing Banks Conducting Financial Products and Services for High-Asset Customers or a subsidiary bank of such a domestic bank in which the domestic bank holds more than 50 percent of the shares through direct or indirect equity investment.
  2. The securities firm or domestic bank shall serve as the domestic agent of the offshore structured product, agreeing to be jointly and severally liable with the issuer or guarantor for the obligations of the offshore structured product or otherwise to serve as the guarantor.
  3. The offshore structured product shall meet the requirements of Article 17, paragraph 1, subparagraphs 1 to 3 of the Regulations Governing Offshore Structured Products. However, the credit rating required under subparagraph 1 thereof may be substituted by the long-term debt credit rating of the securities firm or domestic bank to which the issuer belongs.
    A securities firm meeting the conditions required under the preceding article may broker trades in any offshore structured products meeting the requirements of the preceding paragraph for professional institutional investors or high net worth juristic person investors.
Article 6-3     To broker trades in an offshore structured product for high-asset customers under paragraph 2 of the preceding article, a securities firm shall agree with or obtain written confirmation from the domestic agent on the following matters:
  1. During the term of the financial product, in addition to providing product information and marketing materials in English, relevant financial product information, such as the product's material characteristics, risk profile, and reference prices, shall also be provided in Chinese to investors needing to receive such information in Chinese.
  2. Upon occurrence of an investment dispute involving any liability of the issuer or guarantor, the domestic agent shall assist the securities firm in handling relevant matters and act as the agent for service of process and all other document correspondences with respect to the investment dispute.
  3. Upon occurrence of an event with respect to the offshore financial product materially affecting the rights and interests of investors, the domestic agent shall produce a plan to address the issue and shall report the plan to the securities firm within 3 days from its occurrence for forwarding to all relevant high-asset customers.
    The relevant reporting requirements of Article 10 of the Regulations Governing Offshore Structured Products shall apply mutatis mutandis to a securities firm or domestic bank serving as the domestic agent of an offshore structured product under paragraph 2 of the preceding article.
Article 6-4     To broker trades in offshore structured products for high-asset customers, a securities firm shall establish an appropriate product suitability system, which shall at least include a set of product characteristic assessments, know-your-customer procedures, and customer characteristic assessments, to ascertain whether a product is suitable for brokered trading by a customer.
    To broker trades in offshore structured products for high-asset customers, a securities firm shall establish review standards of its product review panel for the launch of products, review procedures, and monitoring and control mechanisms, and submit them to the board of directors for approval. The monitoring and control mechanisms shall include risk identification, measurement, monitoring and control operations, and handling of product investment disputes.