||Regulations Governing Securities Firms(2010.09.09)
In case any of the following events occurs, a securities firm shall report to the Commission:
1. Where the business operation is commenced, suspended, resumed or terminated;
2. Where, through operating or engaging in securities business, a securities firm, or any of its directors, supervisors, or employees becomes involved in litigation or arbitration, or is subject to compulsory execution as an obligor, or a securities firm is a bankrupt or is refused services or has a check dishonored by a bank;
3. Where any director, supervisor, or manager has any of the conditions referred to in Article 53 of the Act;
4. Where any director, supervisor, or employee has violated the order promulgated by the Commission in accordance with the Act;
5. Where there is any change in the shareholding of any director, supervisor, manager or shareholder holding more than 10% of the shares of the company; or
6. Where there is any matter required to be reported by the Commission.
For the matters in Subparagraph 1 in the preceding Paragraph, the securities firm shall report in advance; for the matters in Subparagraphs 2 through 4, the securities firm shall report within five (5) days from the date on which it becomes aware thereof or on which the matters occur; for matters in Subparagraph 5, the securities firm shall report by the 15th day of the following month.
Where a securities firm has entered into a contract for using the centralized securities market with the Stock Exchange, matters to be reported and approved as referred to in Paragraph 1 above shall be submitted to the Stock Exchange for transmittal to the Commission. Where a securities firm only entered into a contract for trading securities on over-the-counter market with the GreTai, the said submission shall be made to the Commission through the GreTai. Where no contract has been entered into, the submission shall be made to the Commission through a securities dealers' association.
The term "business day," as used in these Regulations, means a trading day on the domestic securities markets.
Unless a securities firm is concurrently operated by a financial institution and subject to other relevant acts or regulations, its funds not required for business operation shall not be loaned to other persons or used for other purposes; the funds shall be used for the following purposes only:
1. Bank deposits;
2. Purchase of government bonds or financial bonds;
3. Purchase of treasury bills, transferable certificates of deposit, or commercial papers;
4. Purchase of securities in a specific ratio as approved by the Commission, or equity investment in a securities, futures, banking, finance or other related enterprise in a specific ratio as approved by the Commission; and
5. Other purposes approved by the Commission.
The total combined amount of funds utilized under Subparagraph 4 and Subparagraph 5 of the preceding paragraph shall not exceed 40 percent of the firm's capital net worth, and the total amount of equity investments of such funds shall not exceed 40 percent of the firm's paid-in capital, unless approved by the Commission.
When a securities firm duly merges with or acquires a financial institution and the merger or acquisition has been approved by the Commission, the aggregate amount of funds utilization and the aggregate amount of equity investment of the securities firm may be exempt from the restrictions in the preceding paragraph, but the securities firm shall, within six months from the merger or acquisition, make adjustments to bring the excessive portion into compliance with the provisions in the preceding paragraph.
A securities firm trading securities for its own account, unless it is concurrently operated by a financial institution and subject to other relevant acts or regulations, shall do so in accordance with the following rules:
1. The firm shall not hold more than 10% of the total issued shares of any domestic company. The total amount of the cost of the securities issued by any domestic company held by such securities firm shall not be more than 20% of the securities firm's capital net worth.
2. The firm shall not hold more than 5% of the total issued shares of any foreign company. The total amount of the cost of the securities issued by any foreign company held by such securities firm shall not be more than 10% of the securities firm's capital net worth.
3. The total amount of the investment cost of a securities firm in holdings of equity securities issued by a single related party may not exceed 5% of the firm's capital net worth. The total amount of the investment cost of a securities firm in holdings of equity securities issued by all related parties may not exceed 10% of the firm's capital net worth. However, these restrictions are exempted in the handling of exercise and hedging operations for call (put) warrants and structured instruments, and in the hedging of beneficial certificates of exchange traded funds and the underlying baskets of stock represented by such beneficial certificates.
The term "related party" in these Regulations is defined in accordance with Statements of Financial Accounting Standards No. 6, Related Party Disclosures.
A securities firm may hold shares of any single company for one, and only one, of the following purposes: proprietary trading positions, purchase of securities in accordance with the forepart of subparagraph 4, paragraph 1 of the preceding article, or an equity investment approved by the Commission.
If the aggregate of the securities acquired by a securities firm for underwriting purposes, counted in combination with those acquired under the preceding paragraph, exceeds the limit prescribed by the Commission, the portion in excess shall be sold within 1 year after its acquisition in accordance with Article 75 of the Act.
Before the amendment to these Regulations made on 9 September 2010 comes into force, if a securities firm is not in compliance with any requirement of paragraph 1, subparagraph 3, or paragraph 3, it shall make adjustments to bring itself into compliance within one year from date the amendment comes into force.
If any of the following events exists between a securities underwriter and an issuer, such underwriter shall not act as the lead underwriter of the said issuance:
1. Where either party and the subsidiary company in which such party holds more than 50% of the shares aggregately hold 10% or more of the total shares of the other party.
2. Where either party and the subsidiary company in which such party holds more than 50% of the shares appoint more than half of the directors of the other party.
3. Where the board chairman or president of either party is the spouse or a relative within the second degree or closer of the board chairman or president of the other party.
4. Where 20% or more of the total number of shares of either party is held by the same shareholder.
5. Where half or more of the directors or supervisors of either party are the same as the directors or supervisors of the other party; the spouses, children, and relatives within the second degree or closer of the said persons count as "the same".
6. Where either party and related parties hold a total of 50% or more of the total issued shares of the other party. However, where the securities underwriter is a subsidiary securities firm of a financial institution or a financial holding company, this restriction shall not apply if the total shares of the issuing company held by such subsidiary itself, the subsidiary's parent company, and all subsidiaries of the parent company do not exceed 10 percent of the total issued shares of the issuing company, and neither the director nor supervisor seats of the issuing company held by such companies exceed one-third of the director or supervisor seats, respectively.
7. Where the two parties, according to the relevant laws or regulations, must apply for combination, or has approval from the Fair Trade Commission of the Executive Yuan for combination.
8. Where, under the regulations of other laws or in actuality, either party directly or indirectly controls the personnel, financial, or business affairs of the other party.
If an issuer issues straight corporate bonds and the bonds obtain a credit rating of a specified grade or higher from a credit rating agency approved or recognized by the Commission, the lead underwriter is exempt from the restrictions of paragraph 1. If the issuer qualifies as a securities underwriter, it may also act as the lead underwriter.
A securities firm trading securities for its own account shall adopt a trading policy and related procedures. Except as otherwise provided by this Commission, it shall form trading decisions on the basis of analysis reports before executing trades, and shall keep records, and regularly produce review reports. It also shall establish control mechanisms, and adopt procedures for regulating changes in trading decisions.
The written materials referred to in the preceding paragraph shall be recorded in chronological order and kept in files. They shall be preserved for a period of not less than five years.
Securities firms or their overseas subsidiaries investing in securities companies in the Mainland China area, securities investment fund management companies, or futures companies shall comply with the provisions of the Regulations Governing Approval and Management of Securities and Futures Transactions and Investment Between the Taiwan Area and the Mainland Area.
Securities firms that have received approval to invest in securities companies in the Mainland China area are prohibited from doing any of the following:
1. Accepting any order to trade in Mainland China area securities.
2. Recommending that any investor in the Taiwan area invest in any securities traded on any Mainland China securities market or in any securities issued by a Mainland China area company.
A Mainland China securities company, securities investment fund management company, or futures company in which a securities firm or its overseas subsidiaries have invested may not provide services to Taiwan area individuals or enterprises.
When any of the following circumstances occurs in connection with any investment by the securities firm as approved by the Commission, the securities firm shall immediately report the reasons to the Commission along with relevant documentation:
1. Change in business items or material operating policies.
2. Change in authorized capital resulting in a change in the original shareholding ratio of the securities firm or its third-region overseas subsidiary.
3. Material equity investment in another company.
4. Dissolution or suspension of operations.
5. Change in the institution's name.
6. Merger with another financial institution, or assignment to or receipt of assignment from another of all or a major part of assets or operations.
7. Occurrence of reorganization, liquidation, or bankruptcy.
8. Occurrence or foreseeable occurrence of any instance of material loss.
9. Material violation of law or regulation or the voidance or revocation of the business permit by the overseas competent authority.
10. Any other material matter.
For any circumstance under subparagraphs 1 to 7 of the preceding paragraph, the securities firm shall report to the Commission in advance.
Unless otherwise provided by the Commission, a securities firm that has made an equity investment in an overseas enterprise(s) as approved by the Commission shall do the following:
1. Submit to the Commission, within 15 days after the end of each quarter, an operations report on the invested overseas subsidiary(ies), including status of operations, revenues and expenditures, and an efficiency assessment.
2. Submit a report on the operational status of the invested overseas enterprise(s) along with the monthly accounting summary.
3. Report basic company information on the invested overseas enterprise(s) through the information reporting system designated by the Commission.
4. Submit other information or documentation as required by the Commission.