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Amendments

Title:

Regulations Governing Securities Firms  CH

Amended Date: 2020.10.29 (Articles 14-6, 21, 32-1, 35-2, 68-1 amended,English version coming soon)
Current English version amended on 2020.02.03 

Title: Regulations Governing Securities Firms(2012.10.11)
Date:
Article 16     A securities firm, unless it is concurrently operated by a financial institution and subject to other relevant laws or regulations, may not purchase real property for non-operating purposes. However, this restriction shall not apply to a securities firm that holds real property for non-operating purposes as a result of a merger, acquisition, branch unit closure, change in or reduction of places of business, or as a result of conducting business, or as approved by the Competent Authority. The sum of the total amount of property and equipment used for operating purposes and the total amount of real property used for non-operating purposes of a securities firm shall not be more than 60 percent of its total assets.
Article 19     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 percent 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 percent of the securities firm's net worth.
  2. The 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 held by such securities firm shall not be more than 10 percent of the securities firm's 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 percent of the firm's 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 percent of the firm's 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.
  4. The total amount of the investment cost of a securities firm in holdings of straight corporate bonds issued by a single securities firm may not exceed 5 percent of the securities firm's net worth. The total amount of the investment cost of a securities firm in holdings of straight corporate bonds issued by all securities firms may not exceed 10 percent of the securities firm's net worth.
    The term "related party" in these Regulations is defined as determined in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Firms.    A securities firm, when holding shares in any single company, may do so either by the method of a proprietary trading position or by the equity investment method in paragraph 1 of the preceding article, but not by both methods.€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 FSC, the portion in excess shall be sold within 1 year after its acquisition in accordance with Article 75 of the Act.
Article 19-1     The FSC 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.
    When a securities firm engages in the business of trading foreign securities for its own account as referred to in the preceding paragraph, if such trading is neither an investment of proprietary funds nor done to meet hedging needs, it shall apply to the Central Bank for permission for any portion involving an inward or outward remittance of funds, and any trading of foreign bonds for its own account shall be done in compliance with the provisions of the GTSM.
Article 19-4     Securities firms operating derivative financial product trading business that involves foreign exchange operations shall apply to the Central Bank for permission for any portion involving an inward or outward remittance of funds.
    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 GTSM by the 5th 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 GTSM by the 5th day of the following month.
Article 19-6     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 TWSE, either singly or in cooperation.
  4. Securities on a mainland area securities market.
  5. Any foreign exchange product involving a requirement of approval by the Central Bank.
Article 26     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 its parent company, all of the subsidiaries of its parent company, and venture capital enterprises managed by its subsidiaries, aggregately hold 10 percent or more of the total shares of the other party.
  2. Where either party and its subsidiaries 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 percent 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 percent 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 the subsidiary's parent company, all subsidiaries of the parent company, and venture capital enterprises managed by its subsidiaries 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 have filed with the Fair Trade Commission for combination and have not had the combination prohibited thereby.
  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 FSC, 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.    The terms "parent company" and "subsidiaries" in these Regulations are defined as determined in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Firms.
Article 31-1     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, and foreign trading markets shall be determined by the FSC.
Article 47     Securities firms applying for merger shall provide the following documents to the FSC:
  1. The application.
  2. Merger plan: shall specify the content of the merger plan (including particulars such as the merger method, evaluation of economic efficiency, post-merger business regions, business items, business development plan, and financial forecasts for the next 3 years) and analyze the forecasted timetable, feasibility, necessity, rationality, and legality and assessment of the factors for consideration under Article 6 of the Financial Institutions Merger Act.
  3. Merger contract: in addition to the particulars required under Article 8, paragraph 2 of the Financial Institutions Merger Act, shall also include material particulars such as treatment of employee equity.
  4. Minutes of the general shareholders meetings of the institutions to survive and to be extinguished. However, a securities firm conducting a merger under Article 18, paragraph 6, or Article 19, of the Business Mergers and Acquisitions Act may substitute the minutes of the board of directors meeting.
  5. Content of the merger resolutions (board of directors meeting minutes) and documentation of publication (notification) of relevant required contract content.
  6. Information on prospective shareholders seeking to purchase shares.
  7. Certified public accountant's opinion on the reasonableness of the share conversion ratio for the merger and valuation method.
  8. An itemized report on the pro forma consolidated regulatory capital adequacy ratio at the end of the month before the merger.
  9. Balance sheets, statements of comprehensive income, inventories of assets, statements of changes in equity, and cash flow statements audited and attested by the certified public accountant for the record date of the merger share swap.
  10. Legal opinion of an attorney at law.
  11. Consent letter, or documentation, of compliance by the TWSE listed or GTSM listed securities firm with the merger-related provisions of the Operating Rules of the Taiwan Stock Exchange or the GreTai Securities Market Rules Governing Securities Trading on the GTSM.
  12. Other documents required by the FSC.
    For a securities firm to be newly created by a merger, in addition to complying with requirements of the preceding paragraph, the promoters of the securities firm to be newly created shall apply to the FSC for approval of establishment, annexing the following documents:
  1. Roster of promoters.
  2. Minutes of the promoters' meeting.
  3. Certification of qualifications of presidents, vice presidents, and assistant vice presidents.
  4. Articles of incorporation of the securities firm to be newly created.
  5. Other documents required by the FSC to be submitted.
    The formats of the documents required under the preceding two paragraphs shall be prescribed by the FSC.
Article 49-1     Securities firms or their subsidiaries investing in securities or futures institutions in the Mainland China area 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 or their subsidiaries investing in non-securities/non-futures institutions in the Mainland China area shall apply to the FSC for permission.
Article 55     An overseas subsidiary of a securities firm may not further invest in any securities-related enterprise in the ROC.
Article 60     (deleted)
Article 61     (deleted)
Article 62     (deleted)
Article 62-1     (deleted)
Article 62-2     (deleted)
Article 62-3     (deleted)
Article 62-4     (deleted)
Article 62-5     (deleted)
Article 62-6     (deleted)
Article 62-7     (deleted)
Article 69     These Regulations shall enter into force from the date of issuance, with the exception of Articles 16 and 47 as amended and issued on 11 October 2012, which shall enter into force from the fiscal year of 2013.