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Taiwan Stock Exchange Corporation Guidelines for Securities Brokers in Reporting Failed Trades and Defaults by Principals(2012.08.31) |
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Procedures for reporting default: A principal that fails to effect settlement within the specified period is in default. Securities brokers shall report the default in accordance with the provisions below, and shall at the same time notify the principal:
- Computer transmission: (1) Period for computer entry: (i) When it has confirmed the occurrence of default by a principal, a securities broker shall immediately enter the default information into the TWSE computer no later than 11 a.m. on the second business day after the trade date. However, when bank operations prevent the broker from learning of any shortfall in the deposit of securities prices until after 11 a.m., the information shall be entered immediately, with a deadline of 8:00 p.m., and the bank notice shall be sent with a letter of report to the TWSE for verification. (ii) If the principal is an offshore overseas Chinese, foreign national, or mainland area investor, when the securities broker reports the principal's failed trade and the principal fails to perform settlement obligation on time, the input time set forth in the preceding subparagraph may not be later than 6 p.m. of the third business day after the trade date. (iii) When a securities broker has confirmed the occurrence of default by the principal of a block trade, the securities broker shall proceed in accordance with the provisions of items (i) and (ii). (iv) When a natural disaster occurs such that local mayors and county magistrates announce closure of schools and public offices, electronic reporting by securities brokers within the affected region shall be undertaken in accordance with the provisions for handling of settlements due in the TWSE Measures for Responding to Natural Disasters. (2) Accidental breakdowns: When accidental breakdowns result in interruptions in the computer transmission lines, securities brokers shall inform the TWSE Trading Department by telephone, and put information required to be input into written form, and after affixing the seals of the company and responsible person, send it via facsimile to the TWSE, which will subsequently carry out supplemental input based on the information contained in the facsimile.
- Default report letter:
In any event of default under Article 91, paragraph 3 of the TWSE Operating Rules or in which a principal participating in bidding-to-purchase under the Taiwan Stock Exchange Corporation Regulations Governing Auction of Listed Securities by Consignment fails to perform settlement obligations on time, the securities broker shall submit to the TWSE for recordation a report by letter meeting the requirements listed below.
- Content of the report by letter:
- The name of the principal.
- The principal's account number.
- The principal's national ID number.
- The principal's address.
- The facts of the default.
- Copies of documents to be attached:
- The front and reverse sides of the principal's national ID card.
- The consignment contract (front and reverse sides).
- The letter of consignment.
- The trading report.
- The settlement receipt form.
- When a securities broker receives a brokerage order to buy or sell securities through an omnibus trading account, if the principal fails to perform its settlement obligations and default occurs, the securities broker shall report the default on the basis of the principal's brokerage account.
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Procedures for announcing default:
- When the TWSE receives a report of default from a securities broker pursuant to Point II, paragraph 1, subparagraph 1, item (i) or (ii), it will inform all securities brokers based on the particulars of the report, which shall handle related matters as follows:
- Receive and review the information on default by the principal at 8:30 a.m. the next morning and immediately proceed as provided in Article 76, paragraph 3 of the TWSE Operating Rules.
- Receive and review the information on default by the principal at 11:30 a.m. on the given morning and proceed as provided in Article 76, paragraph 3 of the TWSE Operating Rules from no later than 12 noon.
- Responsibility for any damage to the rights and interests of the principal or any disputes arising in connection with a report of default under the preceding subparagraph shall be borne by the securities broker reporting the default.
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Procedures for cancellation of default:
- When any of the following circumstances occur in a case of default, the securities broker shall be responsible for verification and shall cancel the default through a letter of report with evidentiary documents attached:
- Failure of the principal to make settlement payments within the stipulated time period resulting from negligence in banking operations.
- Negligence by the broker in mistakenly reporting a principal's default.
- Confirmation that the principal's default did not arise from an arbitration decision, a final judgment of the courts, or any other official document having the same effect as a final judgment.
- Circumstances conforming to the conditions of Article 91, paragraph 4 of the TWSE Operating Rules.
- When the principal, after occurrence of default, submits evidentiary documents showing that failure to complete timely settlement for the given discretionary account was due to the consignee's failure to perform responsibilities arising out of an unauthorized trade by the consignee.
- Other reasons sufficient to demonstrate that the default was not attributable to the principal.
- When securities brokers report cancellation of default and fail to perform complete verification of the grounds for cancellation or to attach evidentiary documents as specified in the preceding paragraph, or when, upon examination, the attached documents and the reasons stated in the report do not appear to satisfy the formal requirements for proving that the default was not attributable to the fault of the principal, the TWSE will not accept or process such report; the securities broker reporting default shall bear full responsibility for any damage to the rights and interests of the principal or for any disputes arising from such a report.
- If the cancellation of default reported by the securities broker contains any false or misleading statements, the TWSE may handle such event in accordance with Article 38 of its articles of incorporation or Article 141 of the TWSE Operating Rules.
- If a securities broker mistakenly reports a default by a principal, the TWSE may handle the matter, according to the circumstances, in accordance with Article 38 of its articles of incorporation or Article 144 of the TWSE Operating Rules.
- When a securities broker has cancelled a case of default and the TWSE has approved the cancellation, the case shall be closed and filed for reference. If the facts of the case have already been reported to other securities brokers, the securities broker may receive and review the information on the cancellation of the principal's default at 8:30 a.m. the next morning.
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