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Regulations Governing Securities Firms(2007.12.17) |
| Date： |
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Article 19-1
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The Commission 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.
When a securities firm engages in the business of trading foreign securities for its own account as referred to in paragraph 1, if such trading is neither an investment of proprietary funds nor done to meet hedging needs, it shall obtain approval from the Central Bank, and any trading of foreign bonds for its own account shall be done in compliance with the provisions of the GreTai.
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Article 19-3
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A securities firm meeting the qualifying requirements listed below may operate derivative financial product trading business at its business premises, and shall do so in accordance with the provisions of the GreTai:
1. It must be an integrated securities firm that concurrently engages in brokerage, underwriting, and dealership business
2. Its long-term credit rating must meet the requirements of the Commission. If it is a securities subsidiary of a domestic financial holding company or is an ROC branch office of a foreign securities firm, it may obtain a credit rating as a group holding company, and the holding company shall provide an unconditional and irrevocable guaranty.
3. It must have reported a regulatory capital adequacy ratio meeting the requirements of the Commission for each of the most recent 6 months.
4. It must be free of any of the following circumstances:
(1) Any sanction, during the preceding 3 months, under Article 66, subparagraph 1 of the Securities and Exchange Act or Article 100, paragraph 1, subparagraph 1 of the Futures Exchange Act.
(2) Any sanction, during the preceding 6 months, equal to or greater than those under Article 66, subparagraph 2 of the Securities and Exchange Act or Article 100, paragraph 1, subparagraph 2 of the Futures Trading Act.
(3) Any sanction imposed by this Commission during the preceding year requiring a suspension of business.
(4) Any sanction imposed by this Commission during the preceding two years voiding approval for any part of its business.
(5) Any sanction during the preceding year whereby the GreTai, the Taiwan Stock Exchange Corporation, or the Taiwan Futures Exchange Corporation, acting pursuant to its operating rules or bylaws, has suspended or restricted the firm's trading privileges.
Any securities firm in non-conformance with the conditions of subparagraph 4 of the preceding paragraph but which has effected specific improvement and has satisfied this Commission thereof shall not be subject to the restrictions of that subparagraph.
Except in trading with a qualified institutional investor, "derivative financial product trading" in paragraph 1 is limited to convertible bond asset swaps, structured instruments, equity derivatives, credit derivatives, interest rate derivatives, and bond derivatives transactions.
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Article 19-4
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Securities firms operating derivative financial product trading business that involves foreign exchange operations shall obtain approval from the Central Bank of China.
Securities firms operating business referred to in the preceding paragraph and engaging in related hedge trades shall handle exchange settlement matters in accordance with the Regulations Governing the Reporting of Foreign Exchange Receipts and Disbursements or Transactions and related provisions.
A securities firm may, in the capacity of customer, conduct hedge trading through a designated bank approved by the Central Bank to conduct derivative foreign exchange product business, or through an overseas financial institution.
For a securities firm operating business referred to in paragraph 1, matters relating to settlement of funds, payment and receipt of fees, 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.
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 operating business referred to in paragraph 1 shall submit a monthly operations statement to the foreign exchange authority and the GreTai by the fifth day of the following month.
A securities firm operating trading business in structured instruments linked to foreign financial products shall submit a monthly operations statement on its trading business in structured instruments linked to foreign financial products to the foreign exchange authority and the GreTai by the fifth day of the following month.
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Article 19-5
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A securities firm operating equity-linked derivative financial product trading business at its place of business may not make any use of such trading to carry out mergers or acquisitions or unlawful trades on its own behalf or in cooperation with its clients.
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Article 19-6
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Derivative financial product trading business operated by a securities firm may not be linked to any of the below-listed underlyings, unless it is in trading with a qualified institutional investor and an application has been made under Article 19-7:
1. Securities privately placed domestically or abroad.
2. Securities issued overseas by domestic enterprises or certificates of beneficial interest issued overseas by domestic securities investment trust enterprises.
3. Any Taiwan stock index compiled by a domestic or foreign institution and related financial commodities, provided that this restriction shall not apply to an index compiled by the GTSM or the Taiwan Stock Exchange Corporation, either singly or in cooperation.
4. Any product involving or subject to the Act Governing Relations Between Peoples of the Taiwan Area and the Mainland Area or an act or regulation adopted under that Act.
5. Any foreign exchange product involving a requirement of approval by the Central Bank.
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Article 19-7
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A securities firm that will engage with a qualified institutional investor in a derivative financial product trade involving a linked underlying set out in Article 19-6, subparagraph 1 to 4 shall submit an application to the GreTai with the relevant documentation. The GreTai will forward the application to this Commission, and such a trade may take place only subsequent to this Commission's first issuance of an approval to a securities firm for such a trade. An application must be submitted to the Central Bank for any trade of a derivative financial product set out in Article 19-6, subparagraph 5.
The term "qualified institutional investor" as used in Article 19-3, paragraph 3, Article 19-6, and the preceding paragraph means domestic and foreign banks, insurance companies, bills finance companies, securities firms, fund management companies, government investment institutions, government funds, pension funds, mutual funds, unit trusts, securities investment trust companies, securities investment consulting companies, trust enterprises, futures commission merchants, futures service enterprises, and other institutions approved by this Commission.
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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 regulatory capital adequacy ratio is lower than the requirement set by this Commission 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 regulatory capital adequacy ratio has already been corrected.
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Article 32-1
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As needed for hedging in the issuance of put warrants and the operation at its place of business of structured instruments and equity derivatives, a securities firm may borrow and sell, or sell short, the underlying securities , exempt from the restriction that the selling price of the securities borrowed or sold short may not be lower than the closing price of the previous business day.
A securities firm selling securities by borrowing them as referred to in the preceding paragraph shall enter into a loan contract with the lender of the securities. The following particulars shall be specified in the loan contract:
1. Name, volume, period, and rate of the loaned securities.
2. Means of exercise of shareholders' rights of the loaned underlying securities.
3. The means of reimbursement by the securities firm of the rights/dividend value to the lender for ex-rights/ex-dividend dates of the loaned securities (including the means of calculation, whether reimbursement is to be made in cash or securities, and the reimbursement date).
4. Means stipulated between the parties for return of the securities upon expiry of the contract (including whether or not the securities may be refunded as cash).
5. Means stipulated between the parties for handling of breach and related matters of damages.
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Article 35-1
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For trades of a certain dollar amount or greater, or suspected to involve money laundering, the securities firm shall keep trade documentation sufficient for a full and complete understanding of the trade, records of verification of the customer's identity, and reporting records, and shall comply with the Money Laundering Control Act.
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