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Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities(2007.03.05) |
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Article 3
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Upon approval by the competent authority to conduct securities trading margin purchase and short sale business, a securities firm shall submit the following documents by letter to the TSEC for recordation two days before commencing such business:
1. A photocopy of the permit from the competent authority.
2. A description of the system of internal controls over securities trading margin purchase and short sale operations.
3. A roster of the responsible and associated persons of the department in charge of these operations and documents certifying their qualifications.
The responsible and associated persons under the preceding paragraph shall be registered with the TSEC before they may engage in such business. Any change of personnel in such positions shall be registered within five days.
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Article 7
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In conducting securities trading margin purchase and short sale operations, a securities firm may not use retained short sale proceeds and short sale margins for purposes other than those listed below:
1. As a source of funds for conducting margin purchase business.
2. As collateral for refinancing of securities from securities finance enterprises.
3. As a source of funds for conducting money lending in connection with securities business.
4. As collateral for borrowing securities through the TSEC securities lending system.
5. For deposit with bank.
6. To purchase short-term bills.
In conducting securities trading margin purchase and short sale operations, a securities firm may not use securities received from such operations for purposes other than those listed below and shall deposit the securities with a central securities depository:
1. As a source of securities for conducting short sale business.
2. As collateral for refinancing of funds or securities from securities finance enterprises.
3. As a source of lendable securities in conducting securities lending business.
4. As collateral for borrowing securities through the TSEC securities lending system.
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Article 8
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A securities firm shall enter into a margin agreement with, and open a margin account for, a customer before accepting any order from the customer to carry out a margin purchase or short sale of securities.
The margin agreement under the preceding paragraph shall be prepared by the TSEC in conjunction with the GreTai and submitted to the competent authority for ratification.
A put warrant issuer, or a securities firm or bank engaged in structured products business, may, to meet hedging needs, open a margin account with which to sell securities short.
An enterprise exclusively or concurrently engaged in futures proprietary trading (dealing) that is also an equity options market maker may, for its risk mitigation or hedging needs, open a margin account with which to sell securities short.
In the case of a privately placed securities investment trust fund managed by a securities investment trust enterprise ("SITE"), the custodian of the trust fund may apply to open a margin account, in which the amount limit for margin purchases and short sales shall not exceed 50 percent of the size of the fund, and which shall be controlled by the TSEC as a segregated account. If that limit is exceeded, the TSEC shall through the securities firm notify the SITE to lower the balance to 50 percent within two business days from the date on which it receives the notice from the securities firm. If the SITE fails to do so within the time limit, the TSEC may instruct the securities firm to dispose of the collateral on the next business day, by the mutatis mutandis application of Article 39, paragraph 3, to the extent required to achieve compliance.
In the case of a discretionary investment account, the combined total of the amount limit for short sales under the preceding paragraph and other sales of borrowed securities [borrowed directly from securities holders or otherwise] may not exceed 50 percent of the account's net asset value.
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