||Operating Rules for Securities Business Money Lending by Securities Firms(2007.03.13)
In securities business money lending conducted by a securities firm, if a customer posts collateral in the form of securities that it holds, the additional collateral securities that the customer shall provide to cover a collateral shortfall under Article 23 shall be limited to common shares of TSEC Taiwan 50 Index, TSEC Taiwan Mid-Cap 100 Index, or TSEC Taiwan Technology Index component companies, exchange-traded funds and common shares of their component companies, common shares of MSCI Taiwan Index component companies announced by Morgan Stanley Capital International, government strip bonds, or other collateral approved by the competent authority.
The valuation percentage for calculating the collateral value of additional collateral securities under the preceding paragraph shall be subject, mutatis mutandis, to Article 18, paragraph 1.
Securities to which either of the circumstances listed below applies may not be used as additional collateral:
1. Securities comprising less than one trading unit.
2. Where the securities are registered shares of the issuing company acquired by its shareholders or capital contributors as a result of that company's conduct of a capital increase from earnings, capital increase through contributions by that company's employees out of their bonuses to the industry in which they serve, or capital increase by a venture capital company out of undistributed earnings pursuant to Article 13 of the Statute for Encouragement of Investment or Articles 16 and 17 of the Act for Upgrading Industries, and such shares have not been transferred or reported for taxes.
When calculating a customer's overall account collateral maintenance ratio, a securities firm is not required to apply a haircut to the value of the additional collateral securities.
If the rate of bonus shares or stock dividend shares distributed on collateral or additional collateral securities provided by a customer is 20 percent or higher, except where the Competent Authority has imposed restrictions on trading of the securities, all such new shares shall serve as collateral, and the right to defer income tax shall be waived. The Taiwan Depository & Clearing Corporation shall transfer the shares by book-entry transfer into the segregated loan collateral account opened by each securities firm, and the provisions of Article 33 of the Regulations Governing the Handling of Stock Registration and Transfer Services by Public Companies shall not apply.
Bonus shares or stock dividends referred to in the preceding paragraph may not be used as collateral for borrowing securities from the TSEC securities lending system or for obtaining refinancing from a securities finance enterprise.
The provisions of Article 24 shall not apply to bonus shares or stock dividend shares used as collateral. After ex-rights trading has commenced, the market value of such shares shall be calculated at 60 percent of the closing price or reference price of the exchange-listed or OTC-listed securities. After the shares have been transferred to the securities firm's segregated loan collateral account, the haircut need not be applied to the calculation of their value.
The provisions of Article 18, paragraph 2 shall apply mutatis mutandis to paragraph 1 and the preceding paragraph.
In securities business money lending conducted by a securities firm, with respect to customers posting collateral in the form of securities held by the customer, the securities firm shall calculate for each individual customer the combined total of the amount of money the securities firm has approved for lending to the customer plus the amount of financing it has made available to the customer in margin purchase and short sale business. The combined total of financing to a single natural person may not exceed 1 percent of the securities firm's net worth or NT$60 million; that to a single juristic person may not exceed 5 percent of the securities firm's net worth or NT$1 billion; that to a single group of related parties may not exceed 10 percent of the securities firm's net worth, and that to natural persons within such a group may not exceed may not exceed 2 percent of the securities firm's net worth.