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Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities(2007.08.09) |
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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, for which the outstanding balance of long and short margin positions may 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.
The combined total of the outstanding balance of short margin positions under the preceding paragraph and other sales of borrowed securities [borrowed directly from securities holders or otherwise] may not exceed 50 percent of the size of the fund.
In the case of a discretionary investment account managed by an SITE or a securities investment consulting enterprise (SICE), or of discretionary investment business conducted by a securities broker concurrently operating a SICE, the custodian institution for discretionary investment assets may open a margin account on behalf of its customer, for which the outstanding balance of long and short margin positions may not exceed 50 percent of the net asset value of the discretionary investment account.
The combined total of the outstanding balance of short margin positions under the preceding paragraph and other sales of borrowed securities may not exceed 50 percent of the net asset value of the discretionary investment account.
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Article 9
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A securities firm may allow a customer to open one and only one margin account. The threshold requirements for opening such an account shall be set out by the TSEC in conjunction with the GreTai and submitted to the competent authority for ratification.
When securities firms accept margin account opening applications submitted on behalf of customers by custodian institutions for discretionary investment assets, a customer may not simultaneously open or maintain a margin account of its own and a discretionary investment margin account with the same securities firm.
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Article 16
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All notices that a securities firm is required to give to a customer under these Rules shall be delivered by mail or by personal delivery against a receipt signed by the customer.
Where a notice mailed by a securities firm is not delivered in time as a result of failure by the customer to give notice as required under the preceding article or due to some other reason attributable to the customer, the notice shall be deemed effective from the day of the first delivery attempt by the post office.
In the case of a notice given by personal delivery against a receipt signed by the customer, the customer's signature or seal impression on the receipt shall match the specimen signature or seal appearing on the margin agreement, and shall be dated personally by the customer.
For matters for which a securities firm is required to give notice to a customer under these Rules, if the customer is a discretionary investment account, notice shall be given to the discretionary investment manager and to the custodian institution.
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Article 38
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Failure by a customer to make timely deposit of margin purchase margin or short sale margin under Article 19 constitutes an event of default, in which case the securities firm shall immediately carry out settlement procedures on behalf of the customer, cancel the margin account and brokerage account, and report the event of default to, and carry out the settlement procedures on behalf of the customer with, the TSEC or the GreTai; on the basis of the securities firm's report, the TSEC or GreTai will forward notice to all securities finance enterprises and securities firms.
For securities or consideration it receives for carrying out settlement procedures on behalf of a customer under the preceding paragraph, a securities firm shall, on the next business day on the TSEC centralized exchange market or through the GreTai automated trade matching system, engage another securities broker to dispose thereof; if the order quote is not executed, it shall continue to be quoted from the next business day.
If an event of default under paragraph 1 occurs to a discretionary investment account, the preceding two paragraphs shall apply, unless the cause is unauthorized trading, in which case the provisions of Article 91-1 of the TSEC Operating Rules shall be followed.
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Article 41
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A securities firm to which the TSEC or GreTai has forwarded a message under Article 38, paragraph 1 or Article 39, paragraph 1 or 2 that a customer is in default with a securities finance enterprise or with another securities firm, shall take the following measures as the circumstances merit:
1. Where a customer is in default under Article 38, paragraph 1 hereof, Article 76, paragraph 3, subparagraph 1 or 3 of the TSEC Operating Rules, or Article 47, paragraph 2, subparagraph 1 or 3 of the GreTai Trading Rules, the securities firm shall promptly notify the customer to close out all outstanding margin purchases and short sales on the next business day and thereafter cancel the brokerage account and margin account; if the customer fails to close out all outstanding margin trades within this time limit, the securities firm shall, by the mutatis mutandis application of Article 39, paragraph 3, close out the trades for the customer starting the next business day.
2. Where a customer is in default under Article 39, paragraph 1 or 2 hereof, the securities firm may not accept any order from by the customer to carry out a margin purchase or short sale, and shall cancel the customer's margin account promptly after the customer has closed out all outstanding margin purchases and short sales.
Unless the cause is unauthorized trading and handling measures are not required to be taken, if any event of default under the preceding paragraph occurs to a discretionary investment account or to a customer's own account, the provisions of the preceding paragraph shall apply to the customer' own account and any other discretionary investment account of the customer.
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