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Article 6
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A securities firm applying for approval to keep custody of and invest funds on behalf of customers shall meet each of the following qualifications:
- It shall hold the qualification of securities broker.
- Its financial status shall meet one of the following conditions:
- Its most recent financial report, audited by a certified public accountant, must show a net worth of not less than NT$10 billion and no less than its paid-in capital.
- Its most recent financial report, audited by a certified public accountant, must show total assets of not less than NT$20 billion, and net worth of not less than NT$6 billion and not less than its paid-in capital, and it must have had profit each year for the most recent 3 years.
- Its CPA audited or reviewed financial report for the most recent period shows no accumulated deficit, and its financial condition meets the provisions of Articles 13, 14, 16, 18, 18-1 and 19 of the Regulations Governing Securities Firms.
- Its regulatory capital adequacy ratio during the half-year period preceding the date of application exceeds250%.
- The securities firm may not have been subject to any of the following circumstances:
- During the preceding three months, a sanction under Article 66, subparagraph 1 of the SEA or under Article 100, paragraph 1, subparagraph 1 of the Futures Trading Act.
- During the preceding half year, a sanction imposed by the competent authority ordering the securities firm to remove from office any of its directors, supervisors, or officers or to replace any of its responsible persons or other related persons.
- During the preceding year, a sanction imposed by the competent authority involving suspension of business activities.
- During the preceding two years, a sanction imposed by the competent authority involving voidance or revocation of permission for business.
- During the most recent year, a sanction imposed pursuant to the operating rules or corporate bylaws of the Taiwan Stock Exchange Corporation, GreTai Securities Market, or Taiwan Futures Exchange that suspended or restricted its trading.
Where a securities firm fails to meet any qualification of subparagraph 5 of the preceding paragraph, but the violation has been specifically corrected and the correction is recognized by the competent authority, it may be exempted from the restrictions of that subparagraph.
After a securities firm has been approved by the competent authority to conduct the business of custody and investment funds on behalf of customers, if its regulatory capital adequacy ratio falls below 250 percent for two consecutive months, it shall suspend such business, and may resume it only after it achieves compliance with regulations for three consecutive months and applies to and receives approval from the competent authority; if the securities firm has already received approval but has not yet commenced such business, it may commence only after it achieves compliance with regulations for three consecutive months and applies to and receives approval from the competent authority.
When a securities firm suspends this business pursuant to the preceding paragraph, it shall, on the following business day, transfer customer funds in custody in the cash management account to the securities transfer accounts opened by customers to conduct the transactions of Article 10, paragraph 1, subparagraph 1, and within the following 5 business days, the securities firm shall close out any investment instrument already made with customer funds and transfer the proceeds to the abovementioned securities transfer accounts of the customers.
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Article 11
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A securities firm shall invest the funds in the cash management account only in the following investment instruments:
- Treasury bills, negotiable certificates of deposit, and commercial papers with a time to maturity of less than ten days.
- Government bonds with a time to maturity of less than ten days.
- Repo-style transactions involving treasury bills, negotiable certificates of deposit, and commercial papers.
- Repo-style government bond transactions.
- Repo-style transactions involving listed (or OTC listed) straight corporate bonds and general financial bonds.
- Money market funds.
- Quasi-money market funds under bond funds.
- Other investment instruments approved by the competent authority.
The issuer, guarantor, acceptor, or underlying of the negotiable certificates of deposit or commercial papers under subparagraphs 1 and 3 of the preceding paragraph shall have a short-term credit rating at or above a prescribed level from a credit rating agency as listed in Appendix 1.
The issuer or the underlying of the listed (or OTC listed) straight corporate bonds and general financial bonds under paragraph 1, subparagraph 5 shall have a long-term credit rating at or above a prescribed level from a credit rating agency as listed in Appendix 2.
A securities firm shall invest the funds in the cash management account under the name of "○○ Securities Firm's Customer Cash Management Account."
The profits and losses resulting from investments in the same investment instruments under paragraph 1 shall be allocated back to the customers in proportion to their investment amount and other stipulated terms and conditions.
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Article 23
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A securities firm shall keep custody of and invest funds on behalf of customers in accordance with the operating rules of such business operations.
The operating rules referred to in the preceding paragraph shall include procedures for commencement and termination of the business by the securities firm, ratio limits on amounts of transactions with interested parties and information disclosure, reporting of the amount of transactions the securities firm handles, the method for transfer from the source of the funds to be kept under custody and used for investment, the rules for funds investment, the distribution of profits and losses from investments, account management and data transmission for payments and receipts of funds and investments, the application for withdrawal of funds by customers, and other matters as required by the competent authority. The operating rules shall be jointly drafted by the Taiwan Stock Exchange and the GreTai Securities Market and submitted to the competent authority for approval.
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