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A securities firm conducting securities business money lending shall do so in accordance with securities trading laws and regulations, these Operating Rules, and the relevant bylaws, regulations, public announcements, and circular letters of the Taiwan Stock Exchange Corporation (TWSE), the Taipei Exchange (TPEx), and the Taiwan Depository & Clearing Corporation (TDCC).
Lending of money in connection with securities business ("securities business money lending") in these Operating Rules refers to any monetary financing business undertaken, pursuant to an agreement between a securities firm and a customer, to facilitate the settlement of customer purchases of securities and other commodities. The scope of such financing includes the following:
- TWSE or TPExlisted stocks (including stock warrant certificates, certificates of entitlement to new shares, and certificates of payment for shares), call (put) warrants, beneficial certificates, depositary receipts, central book-entry bonds, municipal bonds, ordinary corporate bonds, financial bonds, convertible bonds, bond conversion entitlement certificates, beneficial interest securities, and asset-backed securities, excluding ETF beneficial certificates traded in foreign currency.
- TPEx traded beneficial certificatesof open-end funds and physical gold.
- Subscription for beneficial certificatesof open-end securities investment trust funds and of future trust funds.
- Public subscription or competitive auction of new sharesbefore theirTWSE or TPEx listing (including cash capital increase).
- Others as approved by the competent authority.
For purposes of the preceding paragraph, TPEx traded beneficial certificates refer to the beneficial certificates of securities investment trust funds registered for trading on the Taipei Exchange under the Taipei Exchange Rules Governing the Review of Beneficial Certificates of Open-end Funds for Trading on the TPEx; securities investment trust funds refer to the trust funds in Article 23 of the Regulations Governing Securities Investment Trust Funds; and futures trust funds refer to the trust funds in Articles 8, 9, 10 and 10-1 of the Regulations Governing Futures Trust Funds.
The aforementioned beneficial certificates of securities investment trust funds and those of futures trust funds are limited to domestic investments if denominated in New Taiwan dollars.
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In securities business money lending conducted by a securities firm, a customer applying for a financing period not exceeding 6 months shall file an application prior to 12 noon on the first business day after the transaction date of its securities purchase. If the customer posts collateral in the form of securities or other commodities that it purchases or holds, the securities firm or custodian institution shall transfer the customer's collateral to the loan collateral account opened by the securities firm at the TDCCor central government securities settlement bank. A customer postinga collateral in foreign currency for an offshore overseas Chinese or foreign national shall deposit the collateral in the foreign currency loan collateral account opened by the securities firm at thebank permittedby the Central Bank of the Republic of China (Taiwan)to engage in foreign exchange business. Collateral financing shall be calculated according to the standards provided in Article 18.
No collateral is required from the above new applicant posting,for money lending purposes, collateral in the form of securities or other commodities or foreign currencies that it purchases,if themaintenance ratio of the financing collateral combined with the collateral for the purposes of calculation of said ratio pursuant to Article 23 is 166 per cent or above.
Subject to the customer posting securities or other commodities or foreign currenciesthat it holdsas collateral, a securities firm conductingsecurities business money lending may accept the customer’s application for financing in the form of public subscription or competitive auction of new shares (including cash capital increase). The financing scope includes the bond for competitive auction and the award price after award less the bond, and the subscription price deducted by the bank on the day immediately preceding the lot drawing for subscription, provided the customer shall maintain sufficient collateral in the securities firm’s collateral account at the time of the customer’s application and on the date of disbursement by the securities firm, with a collateral maintenance ratio not lower than the minimum prescribed by Article 23, paragraph 3; transfer to the collateral account in paragraph 1 of new shares allotted is not required, provided the securities firm must strengthen its credit check and KYC in respect of applying customers and its internal control and regulation, to control risks.
Subject to thecustomer posting securities or foreign currenciesthat it holdsas collateral, a securities firm conductingsecurities business money lending may accept the customer’sfinancing application for subscription for beneficial certificates of open-end securities investment trust funds and those of futures trust funds and directly deliver such beneficial certificates to the customer.
In securities business money lendingconducted by a securities firm, if a customer posts as collateral the beneficial certificates of open-end securities investment trust funds and those of futures trust funds that are purchased on the customer’s order in the securities firm’s name, the authorized securities firm shall keep a registration log for management purposes and inform relevant information to the TDCC, and the requirement in paragraph 1 that the securities firm transfer the collateral provided by the customer to the securities firm’s loan collateral account at the TDCCdoes not apply.
When a securities firm lends money to a customer to pay for the settlement price, and the customer has yet to obtain the securities that it has purchased, other securities,foreign currencies, or commodities that the customer holds shall be used as collateral.
When the customer of the preceding paragraph submits the application to borrow money by a method other than in person, the provisions of Article 13, paragraphs 2 and 3 shall apply mutatis mutandis.
Before the expiration of the financing period in paragraph 1, the customer may file an application to extend the period, and the securities firm may grant a 6-month extension depending on the customer's creditworthiness. After the expiration of one-year period, the securities firm may review the customer's creditworthinessand then grant the customer's application for a 6-month extension.
Collateral referred to in paragraph 1 shall be limited to the following:
- TWSE and TPEx listed securities, excluding ETF beneficial certificates traded in foreign currency,and shares subject to an altered trading method or TPEx managed stocks.
- TPEx traded beneficial certificates of open-end funds or physical gold.
- Beneficial certificates of open-end securities investment trust funds and those of futures trust funds that are offered and invest domestically.
- Offshore overseas Chinese and foreign nationals may post foreign currenciesas collateral. Currencies received are limited to U.S. Dollar, Euro Dollar, Japanese Yen.British Pound, Australian Dollar, and Hong Kong Dollar. The foreign currency collateral account shall be opened with a bank permitted by the Central Bank of the Republic of China (Taiwan) to engage in foreign exchange business.
- Other collateral approved by the competent authority.
Collateral posted by a customer under the preceding paragraph may be replaced during the financing period. The method for applying for replacement shall be stipulated between the parties.
When a customer makes partial repayment prior to the expiration of the financing period, the securities firm shall return to the customer the securities it originally posted as collateral on a proportional basis, provided that increments of less than one trading unit may not be returned. Notwithstanding, the customer may agree with the securities firm that subject to repayment bythe customer of the loaned funds, the securities firm is exempt from returning the collateral in whole or in part, and the customer may apply to the securities firm for a loan pursuant to paragraph 1 in respect of the collateral that is not returned.
For each loan of money using the financing method set out in paragraph 1 herein, the securities firm shall notify the customer in writing 10 business days before the expiration of the financing period.
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