|
Article 91
|
Where the principal fails to fulfill its obligations to settle transactions on time, it shall be deemed a breach of contract. In such an event, the securities broker shall, in accordance with this Corporation’s Key Points for Handling the Reporting Procedures of Securities Brokers on Breach of Agreement by Principals, report such breach to this Corporation on or before 6:00 p.m. of the date on which its principal breaches the agreement, and shall simultaneously notify the principal, and forthwith settle the transaction in question on behalf of its principal.
In the event that the listed securities delivered by the principal for settlement are found to be forged (altered) when they are forwarded to the issuing institution (or its office for handling registration and transfer of securities) for verification during or after completion of the process of book-entry and settlement, it shall also constitute a breach of agreement. The securities broker shall forthwith report by letter to this Corporation, and send a copy thereof to the principal. In case the principal is not the owner of such listed securities, the information regarding the owner of such listed securities shall also be reported by letter to this Corporation.
Where the event of default of the principal referred to in the preceding Paragraph falls within any of the following circumstances, the securities broker shall forthwith submit evidentiary documents and report by letter for cancellation of the event of default:
1.Where the listed securities delivered by a principal for settlement of transaction are not self-owned and have been found to be forged (altered) after they were forwarded for verification by the securities broker or the securities central depositary enterprise during the process of book-entry and settlement, and the principal has provided listed securities free of defect within one (1) week after the securities broker completed the default correction procedures with this Corporation.
2.Where the listed securities delivered by a customer for settlement of transaction are not self-owned and have been found to be forged (altered) upon being forwarded for verification by the securities central depositary enterprise after completion of the process of book-entry and settlement, the principal has provided listed securities free of defect within one (1) week after the date on which the securities broker notified the principal following its receipt of the notice from the listed securities central depositary enterprise.
A securities broker which receives listed securities or payments as a result of settlement of transaction on behalf of its principal in accordance with Paragraph 1 of this Article shall consign other securities brokers to dispose or purchase securities on the Exchange beginning from the first business day after the principal's breach of contract. Thereafter, the securities broker shall forthwith report to this Corporation and notify its principal in accordance with the Key Points for Handling the Reporting Procedures of Securities Brokers on Breach of Agreement by Principals. However, those listed securities which belong to the same account and are of the same type and same volume may be offset with each other.
Where the event of default of a principal has been reported to this Corporation by the securities broker pursuant to Paragraph 2 of this Article, the securities broker shall, on the business day immediately following the reporting date, buy back the securities in question from the Exchange. However, if the default can be cancelled after a given period pursuant to Paragraph 3 of this Article, the securities broker may buy back the securities in question on the business day immediately following the expiry of the aforesaid given period.
Where the aggregate number of [shares represented by] the share certificates of securities received by a securities broker handling settlement on behalf of a principal under Paragraph 1 during the period of a single breach reaches 5 percent or more of the number of shares of the underlying securities already issued, and furthermore reaches or exceeds the average daily volume of the underlying securities during the 20 trading days prior to reporting of the breach, the securities broker may adopt either of the following measures to handle the breach:
1. If handling of the breach cannot be completed through reverse transactions during the three consecutive business days from the day next following the date of confirmation of the breach by the principal, the securities broker, by reaching a mutual agreement with the principal or by notice to the principal, may, depending on market conditions, in accordance with the content of the agreement or the notice, complete handling of the breach through reverse transactions within 180 days, and report the agreement or notice to this Corporation via letter for recordation.
2. The securities broker may reach an agreement with the principal setting a price(s) to serve as the basis for calculating profit/loss, and submit the written agreement reached between the parties to this Corporation via letter for recordation.
Based on the report of a securities broker referred to in Paragraph 1 or Paragraph 2 of this Article, this Corporation will forthwith notify each securities broker, which shall act in accordance with Paragraph 3 of Article 76 hereof.
In the event that the principal suffers losses or there is any other dispute arising out of the notification sent by this Corporation to each securities broker based on the report by a securities broker, the securities broker reporting the breach of agreement shall be fully responsible therefor.
|