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Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities(2012.12.25) |
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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.
- The customer does not meet the account opening threshold requirements.
- The customer applies to open a margin account using the name of another person.
- Any circumstance under Article 76, paragraph 1 or 3, of the TWSE Operating Rules or Article 47, paragraph 1 or 2, of the GTSM Trading Rules applies to the customer. However, if any circumstance under Article 76, paragraph 3, subparagraph 1 of the TWSE Operating Rules or Article 47, paragraph 2, subparagraph 1 of the GTSM Trading Rules applies to the customer, and the information has been forwarded by the TWSE or the GTSM at 11:30 a.m. the given morning, the securities firm shall notify the customer on the following business day.
- A brokerage account previously opened by the customer at the securities firm has been cancelled.
- The customer falls in any of the circumstances listed below with the securities firm and the case has not been closed:
- Failure to perform a settlement obligation on time under Article 91 of the TWSE Operating Rules or Article 87 of the GTSM Trading Rules.
- Breach of the margin agreement it has entered into with the securities firm.
- Default under Article 33 of the Operating Rules for Securities Lending by Securities Firms.
- Violation under Article 28 of the Operating Rules for Securities Business Money Lending by Securities Firms.
- The customer is the subject of a court petition for reorganization, composition, or bankruptcy under the Company Act or the Bankruptcy Act.
- A clearinghouse for negotiable instruments has blacklisted the customer.
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.
A securities firm may not entertain an application to open an account from a customer to whom any of the circumstances below applies at another securities firm, securities finance enterprise, or securities exchange, and where the case has not been closed. If an account has already been opened, the securities firm may not accept orders for margin purchase or short sale trades; after the customer has closed out its margin purchase and short sale trades, the securities firm shall immediately cancel the margin account.
- Breach of a margin agreement it has entered into with a securities firm or securities finance enterprise.
- Default under Article 33 of the Operating Rules for Securities Lending by Securities Firms.
- Violation under Article 28 of the Operating Rules for Securities Business Money Lending by Securities Firms.
- Event under Article 42, 45, or 49 of the TWSE Securities Borrowing and Lending Rules.
- Default or violation under the securities finance enterprise's securities settlement financing operating rules or securities lending operating rules.
Where any circumstance in the preceding three 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 paragraphs 1 and 3.
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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 Trading of Securities on the GTSM; also, on the basis of the securities firm's report, the TWSE or GTSM 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 any of the following circumstances applies to a customer, and a balance remains in the customer's margin account, the securities firm shall immediately notify the customer to close out all margin purchase and short sale trades on the next business day, after which it shall cancel the customer's margin account; if the customer fails to close out all 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:
- Failure to perform a settlement obligation on time under Article 91 of the TWSE Operating Rules or Article 87 of the GTSM Trading Rules; provided that this does not apply to an event of default under paragraph 1.
- Default under Article 58 of the Operating Rules of the Taiwan Futures Exchange Corporation.
- Default under Article 33 of the Operating Rules for Securities Lending by Securities Firms.
- Violation under Article 28 of the Operating Rules for Securities Business Money Lending by Securities Firms.
If an event of default under paragraph 1 or 3 occurs to a discretionary investment account, the preceding three paragraphs shall apply, unless the cause is unauthorized trading, in which case the provisions of Article 91-1 of the TWSE Operating Rules or Article 87-5 of the GTSM Trading Rules shall be followed.
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Article 41
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A securities firm to which the TWSE or GTSM has forwarded a message that a customer is in default with a securities finance enterprise, another securities firm, or a futures commission merchant shall take the following measures as the circumstances merit:
- Where a customer is in default under Article 38, paragraph 1 hereof, Article 76, paragraph 3, subparagraph 1 or 3 of the TWSE Operating Rules, or Article 47, paragraph 2, subparagraph 1 or 3 of the GTSM Trading Rules, the securities firm shall immediately notify the customer (provided that if the default information is forwarded by the TWSE or the GTSM at 11:30 a.m. on the given morning, the securities firm shall notify the customer on the next business day) to close out all outstanding margin purchases and short sales on the next business day and thereafter cancel the margin account. Where the customer fails to close out all outstanding margin trades within the 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.
- Where a customer is in default under Article 39, paragraph 1 or 2 hereof, or in any of the circumstances listed below, the securities firm may not accept any order from 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:
- Default under Article 33 of the Operating Rules for Securities Lending by Securities Firms.
- Violation under Article 28 of the Operating Rules for Securities Business Money Lending by Securities Firms.
- Default or violation under the securities finance enterprise's operating rules for margin purchases and short sales, operating rules for securities settlement financing, or operating rules for securities lending.
If a customer's participation in securities borrowing and lending transactions is halted or terminated due to any event under Article 42, 45, or 49 of the Taiwan Stock Exchange Corporation Securities Borrowing and Lending Rules, the securities firm shall handle the matter pursuant, mutatis mutandis, to subparagraph 2 of the preceding paragraph.
Unless the cause is unauthorized trading and handling measures are not required to be taken, if any event of default under the preceding two paragraphs occurs to a discretionary investment account or to a customer's own account, the provisions of the preceding two paragraphs shall apply to the customer' own account and any other discretionary investment account of the customer.
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