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Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities(2009.08.20) |
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Article 10
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A securities firm may not entertain an application to open a margin account from any customer to whom any of the circumstances below applies. If an account has already been opened, 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 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 from the next business day.
1. The customer does not meet the account opening threshold requirements.
2. The customer applies to open a margin account using the name of another person.
3. Any circumstance under Article 76, paragraph 1 or 3, of the TSEC Operating Rules or Article 47, paragraph 1 or 2, of the GreTai Trading Rules applies to the customer.
4. A brokerage account previously opened by the customer at the securities firm has been cancelled, or, after a trading order is executed, funds and/or securities payable are not delivered and the case remains pending.
5. (deleted)
6. The customer has previously breached a margin agreement entered into with a securities firm or securities finance enterprise, where the case remains pending.
7. The customer is the subject of a court petition for reorganization, composition, or bankruptcy under the Company Act or the Bankruptcy Act.
8. A clearinghouse for negotiable instruments has blacklisted the customer.
9. The customer belongs to the internal personnel of the securities firm, other than a spouse of an employee.
The provisions of the preceding paragraph apply mutatis mutandis where money and/or securities in a margin account are the subject of a court ruling for provisional attachment, provisional injunction, or compulsory execution.
Where any circumstance in the preceding two paragraphs applies to a juristic person or its responsible person, the responsible person or any juristic person represented thereby is also prohibited from opening a margin account. An account that has already been opened shall be subject to the provisions of paragraph 1.
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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 proceed by the mutatis mutandis application of Article 19 of the Taiwan Stock Exchange Corporation Rules Governing Brokerage Contracts of Securities Brokers and Article 7 of the Account Opening Contract for Over-the-Counter Trading of Securities; also, on the basis of the securities firm's report, the TSEC or GreTai will forward notice to all securities finance enterprises and securities firms.
In the event of any default by the customer as specified under the preceding paragraph, and a balance remains in the customer’s margin account, the securities firm shall, at the latest on the following business day, proceed by the mutatis mutandis application of the handling method under Article 39, paragraph 3 hereof to settle the account, and shall cancel the margin account; if there is no balance, the margin account shall be cancelled.
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 or Article 87-5 of the GreTai Trading 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 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.
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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