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Handling of trading matters by the disposed firm and the authorized firm:
(1) Ordinary trading matters:
(i) Matters that shall be undertaken by the disposed firm:
(a) The disposed firm shall, with all due haste, post the notice of suspension of business on the announcement board in its trading room, and shall make an announcement to notify its clients of the following matters:
a.1 Beginning from the day of suspension of business, the authorized firm shall undertake all matters relating to the lawful deposit, withdrawal, transfer, and transfer of title of securities.
a.2 The disposed firm shall continue to carry out settlement of funds and securities for trades made prior to the suspension of business, and shall complete settlement and clearing procedures (including supplemental delivery of insufficient depository securities) with the TSEC and the Taiwan Securities Central Depository Co., Ltd. (below referred to as "the TSCD") in accordance with the Operating Rules of the Taiwan Stock Exchange Corporation.
a.3 Clients of the disposed firm who complete account-opening procedures at the authorized firm may place trading orders with the authorized firm on the day of account opening.
(b) During afternoon clearing procedures prior to suspension of business, the disposed firm shall assist the authorized firm in opening accounts and establishing files with respect to brokered trading and centralized securities depository accounts.
(c) Prior to suspension of business, the disposed firm shall, with all due haste, carry out procedures for application for correction of securities in accordance with Article 109 of the Operating Rules of the Taiwan Stock Exchange Corporation, and where such procedures have not been carried out or borrowed securities have not been returned, the disposed firm shall notify the authorized firm to handle those matters on its behalf.
(d) For account errors occurring on the business day preceding the suspension of business, in addition to reporting such errors to the TSEC, the disposed firm shall immediately use a terminal linked to the TSCD to enter correctional information. When the error was not offset through timely repurchase or resale of securities on the day the error occurred, the suspended firm shall entrust the authorized firm to handle the error through an ordinary special account on the date suspension begins.
(e) The disposed firm shall dispatch business personnel to the authorized firm during the period of suspension (said personnel may not enter the operations counter area) to assist its clients in carrying out brokered trades and settlement matters at the authorized firm; in addition, it shall dispatch settlement and clearing personnel to the authorized firm to assist the authorized firm in carrying out matters relating to centralized securities deposit such as the deposit, withdrawal, transfer, and transfer of title of securities.
(f) The disposed firm shall, on the business day prior to the suspension of business, transfer to the authorized firm information on its clients' centralized depository accounts, the balance of deposited securities and changes in the volume of those deposits, and the clients' seal impression cards, and from the date suspension of business begins, withdrawal, deposit, transfer, and transfer of title of securities shall be carried out by the authorized firm on behalf of the disposed firm.
(ii) Matters to be undertaken by the authorized firm:
(a) During the disposed firm's period of suspension, the authorized firm shall undertake centralized securities depository matters, including deposit, withdrawal, transfer, and transfer of title of securities in accordance with the regulations of the TSCD.
(b) The authorized firm shall assist the disposed firm's clients with account-opening procedures, and may accept securities trading orders from clients on the day account-opening procedures are completed.
(c) The authorized firm shall keep good custody of the information transferred from the disposed firm, and shall return the information to the disposed firm upon its resumption of business.
(2) Margin trading matters:
(i) Matters that shall be undertaken by the disposed firm:
(a) For margin loans or stock loans made for clients prior to the date suspension begins, the disposed firm shall carry out settlement in accordance with regulations.
(b) A list of information shall be produced, including a ledger of the balances on margin trades up to and including the last business day prior to suspension, letters of consignment, and seal impression cards, which shall be transferred to the authorized firm for checking and acceptance along with other information.
(c) Applications made by clients for redemptions in cash and redemption of securities in connection with margin trades after the date of suspension shall be transferred to the authorized firm for handling.
(d) Procedures shall be as follows when the disposed firm operates its own securities finance business:
The disposed firm shall notify any clients with established margin trading accounts that an additional account shall be opened for brokered securities trading at the authorized firm before further margin trading orders may be placed with the authorized firm and orders for short purchases and margin sales may be placed based on the balance of margin loans and borrowed securities at the disposed firm.
(e) Procedures shall be as follows when the disposed firm and the authorized firm act as agents for the same securities finance enterprise:
The disposed firm shall notify clients with established margin trading accounts that an additional account shall be opened for brokered securities trading at the authorized firm before further margin trading orders may be placed with the authorized firm.
(f) Procedures shall be as follows when the disposed firm and the authorized firm act as agents for different securities finance enterprises:
f.1 Where the securities finance enterprise for which the disposed firm is agent has not signed an agency contract with the authorized firm, the disposed firm shall notify its margin trading clients of the following procedures:
f.1.1 For margin trading, after clients open a new brokered securities trading account at the authorized firm, clients may only place orders for margin sales and short purchases.
f.1.2 Margin purchases or short sales may only be made after margin trading accounts are transferred to another securities firm having an agency contract with the securities finance enterprise for which the disposed firm is agent, and the related margin sale and short purchase shall also be handled by the said securities firm.
f.1.3 After the date of suspension, clients shall make application with the authorized firm for redemptions in cash and securities.
f.2 When the securities finance enterprise for which the disposed firm is agent has entered into an agency contract with the authorized firm, procedures shall be as under Article 4, Paragraph 2, Subparagraph 1, Sub-Subparagraph 5.
(ii) Matters that shall be undertaken by the authorized firm:
(a) Transaction receipts and forms produced by the authorized firm for brokered margin trades undertaken for clients of the disposed firm shall be stamped with "representing ______ securities firm," and shall be printed and produced separately.
(b) Margin trading clients proceeding to the authorized firm to open accounts shall be assisted in doing so with all due haste. For margin trading, the original account numbers of those clients may continue to be used, and orders for securities trades may be accepted on the day that account-opening procedures are completed.
(c) If the disposed firm is an agent for the same securities finance enterprise as the authorized firm, the authorized firm shall first request authorizing documents from the securities finance enterprise, and shall compile a set of all documents relating to the securities finance enterprise [in the course of representing the disposed firm,] and transfer a copy to the securities finance enterprise.
(d) Procedures for redemptions in cash and securities:
d.1 When the disposed firm operates its own securities finance business, the authorized firm shall establish a special bank account for payment and receipt of funds in connection with clients' applications for cash or securities redemptions, and shall assist clients with related withdrawal or transfer procedures.
d.2 When the disposed firm is agent for a securities finance enterprise in margin trading, the authorized firm shall, after handling clients' applications for cash or securities redemptions, transfer the prices of securities into clients' bank accounts, following the transfer of securities to the custodian accounts of clients by the securities finance enterprise or transfer of the prices of securities into the account of the bank account of the authorized firm by the securities finance enterprise.
(3) Securities lending and borrowing operations in relation to transaction needs and contractual performance shall be handled as follows:
i. Matters that shall be undertaken by the disposed firm:
a. Suspending, from the date of suspension, all securities lending and borrowing transactions, including opening of accounts, securities lending, compensation for entitlements, and return of securities.
b. Transferring transaction information on clients who have opened securities lending and borrowing accounts up to the final business day to the authorized securities firm.
c. Dispatching business personnel to the authorized firm during the period of suspension to assist its clients in carrying out securities lending and borrowing transactions at the authorized firm and subsequent matters.
ii. Matters that shall be undertaken by the authorized securities firm:
a. Accepting and handling, from the date of suspension of the disposed firm, subsequent matters on its client's behalf including return of securities, compensation for entitlements, and withdrawals and exchanges of collateral.
b. Assisting clients of the disposed firm with signing orders for securities lending and borrowing transactions and opening securities lending and borrowing accounts.
c. Returning the balance on processing fees receivable by the disposed firm prior to the date of suspension after deduction of applicable expenses.
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Matters that shall be undertaken by the headquarters or branch office of a securities firm terminating business operations (including when the operating permit is revoked):
(1) When the headquarters of a securities firm terminates business operations:
(i) The firm shall announce matters relating to the termination of business, and shall assist clients, according to their preference, in making account transfer of centralized depository securities to another securities firm.
(ii) The approval and certificate of license originally issued by the competent authority (including those for branch offices, where they exist) shall be returned to the competent authority.
(iii) The original and copies of the Contract for Use of Centralized Securities Exchange Market Computer Linking, the Contract for Centralized Securities Exchange Market Computer Linking, the General Agreement for Securities Lending and Borrowing, and the Contract for Use of Trade Information shall be returned to the TSEC for cancellation.
(iv) Following settlement of trades made on the TSEC exchange, and after final settlement of all accounts, application may be made to the TSEC for return of the already paid-in settlement and clearing fund.
(v) The securities firm has the obligation to preserve and keep in custody account books and vouchers, and shall undertake to do so in accordance with Article 11 of Criteria Governing the Preparation of Financial Reports by Securities Firms and the Required Periods for Preservation of Accounting Statements and Vouchers by Securities Firms. A custodian may be designated by the liquidator, or interested parties may apply to the courts for appointment of a special custodian.
(2) When a branch office of a securities firm terminates business operations (including when the operating permit is revoked), it shall immediately announce matters relating to the termination and assist clients, in accordance with their preferences, in making account transfer of centralized depository securities to the securities firm headquarters, another branch office, or another securities firm. These matters shall be handled in accordance with Subparagraphs 2 and 4 of the preceding paragraph.
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