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Rules Governing Securities Firms(2003.12.31) |
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Article 10
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A securities firm accepting consignment for trading securities on the centralized securities exchange market shall deposit a settlement/ clearing fund with the Stock Exchange in the following manners:
1. Before commencement of business operation, the securities firm shall pay a basic amount of NT$15 million; after commencement of business operation, it shall lodge the deposit based on a specified percentage of the trading value of the securities which it has been consigned for trading within 10 days after the close of each quarter until the end of the then-current year. The said percentage shall be separately determined by the SFC.
2. From the year following the commencement of business operation, the original basic amount shall be reduced to NT$7 million and combined into the amount equal to the above-mentioned percentage of the trading value of securities which it has been consigned for trading for the previous year on a yearly basis. At the end of January of each year, the insufficient or excessive amount of the fund shall be deposited or withdrawn from the Stock Exchange.
Before the commencement of business operation, a securities firm trading securities for its own account on the centralized securities exchange shall deposit a settlement/clearing fund of NT$10 million in a lump sum with the Stock Exchange.
A securities firm trading securities for customers' accounts and its own account on centralized securities exchange shall deposit an aggregate of the amounts referred to in the preceding two Paragraphs.
Before commencement of business operation of each domestic branch office, a securities firm shall pay a settlement/clearing fund of NT$3 million in a lump sum to the Stock Exchange; provided that from the year following the business operation, the original amount shall be reduced to NT$2 million.
A joint liability system shall be adopted for the settlement/ clearing fund deposited by securities firms, and a special management committee of the fund shall be set up. The management rules shall be drafted by the Stock Exchange with input from the securities dealers' association and reported to the SFC for approval. This provision shall apply to the amendment of the said rules.
The special management committee of the fund may, depending on the degree of operational risk of securities firms, notify the securities firms to pay additional settlement/clearing fund and report such to the SFC for recordation. The detailed rules for the above fund shall be drafted by the special management committee of the fund and reported to the SFC for approval. This provision shall apply to the amendment of the said rules.
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Article 14-5
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A securities firm offering and issuing securities shall comply with the provisions of the Criteria Governing the Offering and Issuance of Securities by Securities Issuers or the Criteria Governing the Offering and Issuance of Overseas Securities by Issuers in addition to the provisions of these Rules.
The SFC shall separately prescribe the required application forms and rules applicable to issuance of securities by securities firms that have not publicly issued stock.
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Article 19-1
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The SFC shall prescribe the total amount limits, and methods for calculation thereof, on the positions held in foreign securities and the expenditures on derivative financial product hedging transactions of a securities firm trading foreign securities for its own account.
A securities firm shall not hold more than 5 percent of the total issued shares of any foreign company. The total amount of the cost of the securities issued by any foreign company that a securities firm holds shall not exceed one-half of the total amount limit under the preceding paragraph.
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Article 19-2
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Exchange settlement matters for securities firms trading foreign securities for their own accounts and engaging in derivative financial product hedging transactions shall be handled in accordance with the Regulations Governing the Reporting of Foreign Exchange Receipts and Disbursements or Transactions.
A securities firm may carry out hedging transactions only in the status of a customer with a designated bank or foreign financial institution permitted by the Central Bank of China to handle derivative foreign exchange products.
A securities firm trading foreign securities for its own account shall open a segregated foreign exchange account in the selected foreign currency at a designated foreign exchange bank, from which it shall conduct all deposits and remittances in connection with payment and receipt of settlement money and offshore fees.
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Article 19-3
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A securities firm may operate derivative financial product trading business at its business premises, and shall do so in accordance with the provisions of the GreTai.
"Derivative financial product trading" in the preceding paragraph includes convertible bond asset swaps, structured notes, New Taiwan Dollar interest rate derivatives, and forward bond transactions.
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Article 19-4
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A securities firm engaging in structured note trading operations that have linked foreign-currency financial products shall obtain approval from the Central Bank of China.
"Structured notes" in the preceding paragraph means principal-guaranteed contracts and equity linked contracts.
A securities firm engaging in structured note trading operations involving linked foreign financial products denominated in foreign currency shall open a foreign exchange deposit account at a designated foreign exchange bank, from which it shall conduct all deposits and remittances in connection with payment and receipt of settlement money and offshore fees.
For a securities firm engaging in structured note trading operations involving linked foreign financial products, matters relating to settlement of funds, payment and receipt of fees, foreign exchange settlements, and payment of funds upon early rescission or expiration of contracts shall be carried out according to the following:
1. When denominated in New Taiwan Dollars, all settlement of funds and payment and receipt of fees with a customer shall be carried out in New Taiwan Dollars. The customer's yearly cumulative exchange settlement total shall be applied in foreign exchange settlement matters in accordance with the Regulations Governing the Reporting of Foreign Exchange Receipts and Disbursements or Transactions, with the securities firm attaching the following documents to carry out settlement at a designated foreign exchange bank:
(1) A foreign exchange settlement declaration filled out by the securities firm.
(2) A Power of Attorney from the customer authorizing the securities firm to carry out foreign exchange settlements. If the structured note contract between the securities firm and the customer stipulates authorization of the securities firm to carry out foreign exchange settlement, the securities firm may produce a declaration attesting to such authorization in lieu of the customer's Power of Attorney.
(3) Customer information list, including: case number, customer's account number, customer's name or title, the uniform invoice number of the individual, company, business entity, or organization, national ID number or alien resident certificate number (must be valid for one year or more), date of birth (must be 20 years of age or above), and the amount of the foreign exchange settlement, provided for the bank's information in calculating the customer's total yearly cumulative foreign exchange settlement amount.
2. When denominated in a foreign currency, all settlement of funds and payment and receipt of fees with a customer shall be carried out in foreign currency. The customer's payment of funds may be carried out by transfer from its own foreign exchange deposit account. Where foreign exchange settlement is required, it shall be carried out by the customer at a designated foreign exchange bank in accordance with the Regulations Governing the Reporting of Foreign Exchange Receipts and Disbursements or Transactions.
3. Upon early rescission by the customer or expiration of the contract, the securities firm shall deposit the funds receivable by the customer in its New Taiwan Dollar or foreign exchange deposit account on the settlement date based on the currency stipulated in the contract. A securities firm engaging in structured note trading operations involving linked foreign financial products shall submit a monthly operations statement to the foreign exchange authority and the GreTai, by the fifth of the following month, on its structured note trading operations involving linked foreign financial products and showing payables remitted into clients' designated foreign exchange accounts.
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Article 20
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A securities firm, other than re-investment in SFC-approved businesses, shall obtain corporate stocks for the greatest benefit of the company and may not directly or indirectly participate in the operation of the issuer company or other inappropriate actions.
Except where otherwise provided by law or regulation, a securities firm exercising voting rights of stock it holds in a public company shall dispatch a personnel member to attend and do so as its representative.
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Article 22
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Where a securities firm underwrites securities on a firm commitment basis, the total underwriting amount shall not be more than 15 times the balance of its current assets less current liabilities. Within such amount, the total amount of firm commitment securities underwriting by an overseas branch office of the securities firm shall not be more than 5 times the balance of its current assets less current liabilities.
Where the self-owned capital adequacy ratio of a securities firm is less than 120 percent, the multiple for total firm commitment securities underwriting under the preceding paragraph may be adjusted to 10, and the multiple for total firm commitment underwriting by an overseas branch office thereof may be adjusted to 3. Where it is less than 100 percent, the total firm commitment underwriting multiple may be adjusted to 5, and an overseas branch office thereof shall not underwrite securities on a firm commitment basis.
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Article 24
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A securities firm that underwrites securities shall make a public announcement of the underwriting and shall publish such announcement in local daily newspapers. Matters to be published shall include the method for deciding the offering price and a description of the basis of pricing, conclusions of the assessment report of the securities firm, the place where the prospectus is available and the method to obtain such prospectus.
If the offering price referred to in the preceding Paragraph is decided through negotiations between the securities underwriter and the issuer or holder of the securities, in addition to the matters referred to in the preceding Paragraph, the public announcement shall include financial information based on which the offering price is decided and the audited opinion of the certified public accountants on the financial information. In calculation of the profitability of each share, the financial information based on which the offering price is decided shall fully reflect the dilution effect caused by the increase of issued shares. The calculation basis of information obtained from different sources of different time periods shall be consistent.
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Article 31-1
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For a securities firm trading foreign securities for its own account or engaging in foreign derivative financial product hedging transactions, the scope of the foreign securities, types of foreign derivative financial products, foreign trading markets, and sovereign ratings of the places of transactions shall be determined by the SFC.
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Article 31-2
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A securities firm trading foreign securities for its own account or engaging in foreign derivative financial product hedging transactions shall establish a dedicated unit and adopt handling procedures, which shall be implemented after approval by the board of directors, as shall any amendments thereto.
The handling procedures under the preceding paragraph shall include all the following items:
1. Trading principles and policies: shall include types of underlyings traded, trading or hedging strategies, setting of position limits.
2. Trading procedures: shall include hierarchy of responsibility, trading process, division of powers and duties of relevant departments, procedures for preservation of trading records.
3. Risk management measures: shall include risk management scope, risk management procedures, methods and frequency of position evaluation, production and review of position evaluation reports, irregularity reports and procedures for follow-up surveillance.
4. Audit procedures: shall include internal audit and self-inspection, frequency and scope of audits, audit reports and procedures for correction and follow-up of deficiencies.
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Article 31-3
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A securities firm trading foreign securities for its own account or engaging in foreign derivative financial product hedging transactions shall not be involved in any of the following:
1. Engaging in margin transactions.
2. Engaging in trading or transactions with any overseas affiliated enterprise; provided, this restriction shall not apply where it consigns the affiliated enterprise to trade or transact on its behalf.
"Affiliated enterprise" in the preceding paragraph shall be as defined in the Affiliated Enterprises chapter of the Company Act.
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Article 31-4
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A securities firm trading foreign securities for its own account or engaging in foreign derivative financial product hedging transactions, and whose self-owned capital adequacy ratio is lower than 200 percent for three consecutive months, may only sell or close out its existing positions, and may not engage in any further trading or transactions, unless its self-owned capital adequacy ratio has already been corrected.
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Article 50
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Securities firms investing in foreign enterprises, unless regulated by other laws, regulations and orders shall meet the following provisions:
1. Have not received any disciplinary warning from the SFC in the most recent 3 months
2. Have not been ordered by the SFC to relieve or replace the duties of its director, supervisor, or manager in the most recent six months.
3. Have not had business suspended as punishment from the SFC within the last year.
4. Have not had the license of branch offices or of a portion of the business invalidated by the SFC as punishment within the last 2 years.
5. Have not had trading terminated or restricted by the Stock Exchange, the GreTai, or the Futures Exchange as punishment under each of their regulations or rules.
6. The self-owned capital adequacy ratio has not been below 200% within the most recent 3 months, and the financial structure is sound and in accordance with the rules of these Regulations.
7. Have complied with Article 7 of the Regulations for Approval and Consideration of Foreign Investment or Technical Cooperation promulgated by the Ministry of Economic Affairs.
8. The total amount invested in foreign enterprises plus the funds that a securities firm establishing an overseas branch office(s) appropriates there for local operations has not exceeded 20% of the securities' firm's net worth. However, when there is special need and approval as a special case has been received, this provision does not apply.
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Article 58-1
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If the business that an overseas branch office of a securities firm would handle under the local securities acts and regulations and customary business practices of the place surpass the business items of the head office, an application for approval, accompanied by the following documents, shall be filed with the SFC in advance:
1. Business item particulars: including the products to be handled, types of transactions, and trading counterparts and markets.
2. Local acts and regulations that must be complied with when engaging in such business.
3. Minutes of the board of directors' (board of governors') meeting.
4. Internal control and risk management plans.
5. Legal opinion by a lawyer.
6. Other documents that the SFC requires to be submitted.
If there is any change in the SFC-approved business items of an overseas branch office of a securities firm, the change shall be reported to the SFC for recordation within 10 days from the day of the change.
The overseas branch offices of a securities firm shall abide by the local securities acts and regulations of the place where they are conducting business.
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Article 58-2
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A securities firm shall implement internal audit procedures in its overseas branch offices in accordance with the securities firm's internal control system.
A securities firm shall dispatch personnel to conduct on-site audits of its overseas branch offices at least once per year. Audit reports shall be submitted to the Stock Exchange and forwarded by it to the SFC for recordation within one month from completion of the audit.
A securities firm whose overseas branch office receives an audit report from a local competent authority or auditing agency shall file the report or any deficiencies discovered in the audit with the SFC for recordation within 10 days from the day next following the receipt of the audit.
Where any material emergency or incident of malpractice, or disposition by a local competent authority, occurs with respect to an overseas branch office, a report shall be filed with the SFC within two days from the day next following the occurrence of the incident or receipt of the disposition notice from the local competent authority.
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Article 58-3
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A securities firm establishing an overseas branch office, after obtaining approval from the SFC, shall apply to the Investment Commission, Ministry of Economic Affairs, for approval (or recordation) in accordance with Article 57. Reporting of any matters relating to outward remittance of capital, registration, or amendment registration shall be handled in accordance with Article 58.
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