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Amendments

Title：

Operating Rules for Custody and Investment of Funds by Securities Firms on Behalf of Customers  CH

Amended Date： 2015.03.31 
Categories： Securities Exchange Market > Borrowing of Money
Article Content Chapter Content Search Article No. Search Legal Basis Amended Article Legislative History Chinese

Title： Operating Rules for Custody and Investment of Funds by Securities Firms on Behalf of Customers(2010.07.13)
Date：
Article 1     These Rules are adopted under Article 23, paragraph 2 of the Regulations Governing Custody and Investment of Funds by Securities Firms on Behalf of Customers.
Article 2     A securities firm conducting business relating to custody and investment of funds on behalf of customers shall do so in accordance with securities and exchange laws and regulations, these Rules, as well as applicable rules, regulations, public notices, and circular letters of the Taiwan Stock Exchange Corporation (TWSE), the GreTai Securities Market (GTSM), and the Taiwan Depository & Clearing Corporation (TDCC).
Article 3     For the proposes of theses Rules, reference to a securities firm conducting business relating to custody and investment of funds on behalf of customers means a securities firm engaging in business activities in which the securities firm, pursuant to an agreement with each customer, keeps custody of customer funds arising from securities business in a cash management account and pool the funds held in custody in that account on behalf of the customer for investing in the name of the securities firm on such subject instruments as agreed with the customer.
    For the proposes of theses Rules, the term "cash management account" means a special account opened and maintained by a securities firm for use in conducting business relating to custody and investment of funds on behalf of customers.
    The cash management account under the preceding paragraph shall be kept separate and segregated from the securities firm's own property. Customer funds and subject investments held in the cash management account may not be used for any other purpose, nor may any creditor of the securities firm make any claim for attachment or otherwise exercise any right against the customer funds or subject investments held in the special account to satisfy any liability or obligation incurred by the securities firm with respect to its own property.
    For the purposes of these Rules, the term "a company that is an interested party of a securities firm" shall have the same meaning as under Article 17 of the Regulations Governing Custody and Investment of Funds by Securities Firms on Behalf of Customers.
    For the purposes of these Rules, the term "total amount of invested funds" does not include profit or loss arising from investment of such funds.
Article 4     To conduct business relating to custody and investment of funds on behalf of customers, a securities firm shall open a New Taiwan Dollar demand deposit account, to be used exclusively for receipt and payment of funds within the scope of that business, at a bank using the account name of "_______ Securities Firm's Customer Cash Management Account."
    The bank under the preceding paragraph shall have a long-term credit rating in the most recent year at or above a prescribed level from a credit rating agencyas listed in Appendix 1.
    When conducting business relating to custody and investment of funds on behalf of customers, a securities firm may only initiate or accept inter-account transfer for the transfer of funds.
Article 5     To apply to conduct business relating to custody and investment of funds on behalf of customers, a securities firm shall fill out an application form and submit it to the TWSE, together with other relevant supporting documentation. When the TWSE has reviewed the application and found it in compliance with relevant eligibility conditions as well as the provisions of these Rules, the TWSE shall forward the application to the competent authority for final approval. Upon approval by the competent authority to conduct business relating to custody and investment of funds on behalf of customers, the securities firm shall, at least three business days before commencing such business, submit the following documents by mail to the TWSE for review of compliance with eligibility conditions and for subsequent forwarding to the competent authority for recordation:
  1. A photocopy of the approval document of the competent authority.
  2. Documentation containing credit rating and regulatory capital adequacy ratio information, current as of the commencement date and covering the period from after the approval of the competent authority up to the reported commencement date.
  3. Documentary proof of the cash management account established at a bank and documentation indicating the credit rating of the bank.
    The securities firm under the preceding paragraph that has received the approval from the competent authority to conduct business relating to custody and investment of funds on behalf of customers may not commence such business unless an amendment to its securities business activity information has been registered with the TWSE. The associated persons of the securities firm performing services of custody and investment of funds on behalf of customers shall possess the qualifications specified in the Regulations Governing Responsible Persons and Associated Persons of Securities Firms as adopted by the competent authority.
Article 6     After the commencement of business relating to custody and investment of funds on behalf of customers, a securities firm shall obtain updated credit rating information and file it with the TWSE each year.
Article 7     After the commencement of business relating to custody and investment of funds on behalf of customers, if either of the following circumstances applies, a securities firm shall on its own initiative stop the operations of such business:
  1. If its credit rating falls below the eligibility condition under the application requirement.
  2. If its regulatory capital adequacy ratio falls below 250% for two consecutive months.

    If a securities firm under either of the circumstances of the preceding paragraph does not stop the operations of the business contemplated herein, the TWSE shall notify the securities firm to promptly stop those operations.
    A securities firm shall, on the next business day following its stop of business operations contemplated herein, transfer all customer funds held in custody in the cash management account to the account for book-entry transfer of securities and funds opened by each relevant customer for engaging in securities trading on the exchange or over-the-counter market, and shall within the next five business days close out all transactions in subject instruments already made through the cash management account and transfer the resultant proceeds to the account for book-entry transfer of securities and funds opened by each relevant customer for engaging in securities trading on the exchange or over-the-counter market.
    If the securities firm stops the business operations contemplated herein, it shall promptly send a notice by mail to the TWSE to that effect and shall submit a regulatory filing to the TSEC on a daily basis reporting the progress and status of action taken under the preceding paragraph.
Article 8     To apply to resume business operations relating to custody and investment of funds on behalf of customers, a securities firm shall submit an application to the TWSE when it meets the required eligibility conditions for both credit rating and regulatory capital adequacy ratio, and it may resume such business operations only when the application has been reviewed by the TWSE and then forwarded to and approved by the competent authority.
    Article 5, paragraph 2 shall apply mutatis mutandis to a securities firm submitting a regulatory filing for the commencement of business for which it has received approval under the preceding paragraph.
Article 9     A securities firm may only accept customer funds from any of the following sources in its conduct of business relating to custody and investment on behalf of customers:
  1. Trading balance payable by the securities firm to the customer for execution of the customer's order to buy or sell securities on the exchange or OTC market.
  2. Amount payable by the securities firm to the customer for exercise of a call/put warrant.
  3. Trading balance payable by the securities firm to the customer for trading bonds or engaging in a repurchase or reverse repo transaction ("repo-style transaction") with the customer.
  4. Trading balance payable by the securities firm to the customer for trading with the customer any of the financial instruments defined in the GreTai Securities Market Rules Governing Over-the-Counter Trading of Financial Derivatives by Securities Firms.
  5. Trading balance payable by the securities firm to the customer for execution, either by the securities firm or by its sub-broker, of the customer's order to buy or sell foreign securities.
  6. Such other sources as the competent authority may designate.

    A securities firm shall, pursuant to its agreement with a customer specifying part or all of the sources/types of customer funds described in the preceding paragraph and the corresponding amount limit, transfer and attribute any balance of such funds arising from such types from time to time, for inclusion within the scope of business hereunder.
    Upon review of the settlement status of a customer's trade involving any of the agreed types of customer funds under the preceding paragraph, the securities firm shall forward the incurred balance of funds to the cash management account it maintains with a bank, on the same day on which it receives the balance transferred to it.
Article 10     A securities firm conducting business relating to custody and investment of funds on behalf of customers shall, when the funds held in custody in the cash management account reach the minimum investment level as agreed with a customer, make use of the funds for such type of subject instrument as specified by the customer, in the name of "_______ Securities Firm's Customer Cash Management Account."
    A securities firm may invest funds under the preceding paragraph only in subject instruments falling within the following scope:
  1. Treasury bills with a maturity of ten or less days, negotiable certificates of deposit, and commercial papers.
  2. Government bonds with a maturity of ten or less days.
  3. Repo transactions in three instruments, namely treasury bills, negotiable certificates of deposit, and commercial papers.
  4. Repo transactions in government bonds.
  5. Repo transactions in exchange-listed or OTC-listed straight corporate bonds and general bank debentures.
  6. Money market funds.
  7. Quasi-money market funds within the category of bond funds.
  8. Any other subject instrument as approved by the competent authority.

    The term "general bank debentures" under the preceding paragraph shall have the same meaning as set forth in the Regulations Governing Issuance of Bank Debentures By Banks.
    The issuer, guarantor, acceptor, or underlying of the negotiable certificates of deposit or commercial papers under paragraph 2, subparagraph 1 or 3 shall have a short-term credit rating at or above a prescribed level from a credit rating agency as listed in Appendix 2.
    The issuer or underlying of the exchange-listed or OTC-listed straight corporate bonds or general bank debentures under paragraph 2, subparagraph 5 shall have a long-term credit rating at or above a prescribed level from a credit rating agency as listed in Appendix 3.
Article 11     No securities firm may use funds from the cash management account to engage in a transaction in an eligible instrument under the preceding article with the securities firm itself or with a company that is an interested party of the securities firm, without having expressly informed the customer concerned of the associated conflict of interest and corresponding control measures and obtained the written consent of the customer.
Article 12     A securities firm using funds from the cash management account for transaction in subject instruments shall, at least three business days prior to each transaction, notify the customer(s) concerned of the projected use of funds, specifying at least the following information, either through a public announcement on a web page or by other means agreed separately with each individual customer, such as via email, fax, or telephone:
  1. In the case of an outright transaction, the type of the underlying instrument.
  2. In the case of a repo transaction, the counterparty and type of the underlying instrument.
  3. In the case of a fund, the name of the fund.
    The securities firm shall keep a record of the content of the notice given pursuant to the preceding paragraph, and shall in its internal control system establish when to give such a notice, what information is to be included in the notice, and how to preserve the record.
Article 13     A securities firm shall distribute any loss or income incurred on any instrument in which it invests within the scope of Article 10, paragraph 2, among customers based on the percentage of their respective investment amount and other agreed terms and conditions, and in the case of income, shall either use the proceeds for further reinvestment together with other existing funds or otherwise return the proceeds to the customers.
    A securities firm conducting business relating to custody and investment of funds on behalf of customers shall be fully responsible for any loss incurred as a result of its operational error and for that matter may not prejudice the interest of the customer.
Article 14     A securities firm maintaining custody of customer funds arising from securities business in the cash management account may not keep the funds in the account for more than ten business days. If by the end of the period the custodied funds still do not reach the minimum investment level as agreed with the customer, the securities firm shall, by 12 noon on the next business day, return and transfer the funds in full to the account for book-entry transfer of securities and funds opened by the customer for engaging in securities trading on the exchange or over-the-counter market.
    A securities firm shall return any bank interest accrued on customer funds it holds in custody in the cash management account to the customers based on the percentage of funds it holds in custody for each customer.
Article 15     A securities firm conducting business relating to custody and investment of funds on behalf of customers may charge management fees at a rate determined between the securities firm and the customers.
    Any bank interest accrued on customer funds held in custody by the securities firm in the cash management account, and any gains or income arising from any investment made by the securities firm in its name using the funds from the cash management account, shall be the income of the customers. The securities firm shall, in the year in which the income is accrued, withhold tax from the payment of income to each entitled customer in accordance with the Income Tax Act and the associated regulatory provisions and issue a withholding certificate accordingly identifying the customer as the taxpayer.
    With respect to the bank interest accrued on customer funds held in custody in the cash management account as described in the preceding paragraph, the securities firm shall, after deduction of necessary fees and applicable taxes, settle account on a half-yearly basis and return any remaining balances to each relevant customer by the end of January and July each year, and the funds so returned may only be transferred to the account for book-entry transfer of securities and funds opened by the customer for engaging in securities trading on the exchange or over-the-counter market.
    With respect to the gains or income arising from any investment made by the securities firm in its name using the funds from the cash management account, the securities firm shall, after deduction of the management fee specified in paragraph 1 and any applicable taxes and other necessary fees, settle account on a yearly basis and return any remaining balances to each relevant customer by the end of December each year, and the funds so returned may only be transferred to the account specified in paragraph 3. If a customer terminates early the agreement for the business services contemplated herein, the securities firm may return early to the customer the portion of income earned on investment on the part of the customer.
Article 16     A securities firm shall adopt an effective internal control system for the conduct of business relating to custody and investment of funds on behalf of customers.
    The internal control system under the preceding paragraph shall specify matters relating to regulatory filing of the securities firm's credit rating information, the securities firm's operational procedures for commencement, suspension, and resumption of the business contemplated herein, regulatory filing of the monetary amount in which the securities firm conducts the business hereunder, methods of transfer from the various sources of funds for custody and investment, methods of transfer when funds do not reach the agreed minimum investment level, compliance matters for investment of funds, distribution and transfer of income or loss on investment, distribution and transfer of interest on custodied funds, treatment of management fees and government taxes and fees, treatment of funds for settlement of customers' trades, customers' funds withdrawal requests, early termination of agreement by customers, receipt, release/payment, and investment of customer funds, and other matters relating to account administration and information transmission, and any other matters required by the competent authority.
Article 17     A securities firm conducting business relating to custody and investment of funds on behalf of customers shall, upon receipt of a customer's written request for the provision of such business services, first verify that the customer has established and maintains an account for book-entry transfer of securities and funds for the transactions specified in Article 9, paragraph 1, subparagraph 1 before it may accept the request and enter into an agreement with the customer for custody and investment of the customer's funds and subsequently provide such services to the customer.
    The Taiwan Securities Association shall prepare and furnish a template of the agreement for custody and investment of funds on behalf of customers as specified in the preceding paragraph.
Article 18     A customer shall give written notice to the securities firm of any change of name, national ID number, certificate ID number, government uniform invoice number on the profit-seeking enterprise registration certificate, and address or mailing address of the customer, agent, or representative, as supplied in the agreement for custody and investment of funds on behalf of the customer.
Article 19     A securities firm conducting business relating to custody and investment of funds on behalf of customers shall set up a separate sub-account within its cash management account for each customer and record the following therein on a daily basis:
  1. Transfer of customer funds from any specified source.
  2. Transfer of funds not reaching the minimum investment level.
  3. Transaction in subject instruments and the transfer of funds.
  4. Transaction involving further reinvestment of funds as agreed with the customer and the transfer of funds.
  5. Transfer of interest accrued on custodied funds and income arising from investing of funds.
  6. Transaction conducted to meet the customer's need of settlement funds and the transfer of funds.
  7. Transaction conducted to meet the customer's request for early withdrawal of funds and the transfer of funds.
  8. Transaction conducted due to the customer's early termination of the agreement or non-renewal of the agreement upon expiration and the transfer of funds.
    The securities firm shall retain all records and all receipt and payment vouchers relating to any receipt and release/payment of funds under the preceding paragraph and relevant investing activities, and prepare a reconciliation statement on a monthly basis based on daily account records and send it to the customer. Additionally, the reconciliation statement shall provide transaction details and balance details of subject instruments already used, specifying:
  1. In the case of a fund, the name of the fund, total number of units, and net asset value.
  2. In the case of a repo transaction, the counterparty, type of underlying bonds, monetary amount assigned for transaction, interest rate, and duration of agreement.
  3. In the case of an outright transaction, the type, name, face amount, face interest rate, purchase amount, execution price, transaction date, expiration date, and any other relevant information with respect to the underlying instrument.

    The securities firm shall make a notation in the reconciliation statement indicating any transaction under subparagraphs 1 to 3 of the preceding paragraph that is conducted with the securities firm itself or with a company that is an interested party of the securities firm.
    The securities firm shall obtain a letter of consent signed by each customer agreeing that the securities firm may provide the relevant information regarding its custody and investment of funds on behalf of the customer to the TWSE, the GTSM, and any institution designated by the competent authority for their collection, computerized processing, and international transmission or use of the information in accordance with applicable laws and regulations.
Article 20     A securities firm shall keep detailed and accurate records for its conduct of business relating to custody and investment of funds on behalf of customers, and shall prepare the following statements on a daily basis:
  1. Daily statement of receipt and payment of custodied funds through the cash management account.
  2. Daily statement of transactions and transfers involving investment of funds through the cash management account.
  3. Statement of funds custodied, invested, and transferred through the cash management account with respect to each customer.

    The statements prepared and completed under the preceding paragraph may be stored in electronic form. The electronic statements shall be prepared and stored in a way that they cannot be edited or erased and can be readily converted into written form.
    The securities firm shall at the end of each month transmit to the TWSE the current-month information regarding daily statements of receipt and payment of custodied funds, and daily statements of transactions and transfers involving investment of funds, through the cash management account.
    All statements, vouchers, and documents relating to the business contemplated hereunder shall be preserved for a minimum of five years, or for a longer period if so required by any other applicable law or regulation regarding the period of preservation for such materials. Notwithstanding the foregoing, in the event of dispute, the materials shall be preserved until resolution of the dispute.
Article 21     A securities firm investing in any of the eligible instruments specified in Article 10, paragraph 2 may, if so agreed with the customer, further reinvest the funds received upon sale, expiration, early termination, or redemption, as the case may be, of the subject instrument,.
    With the exception of a subsequent repo transaction with the same counterparty or a switching of shares between funds, any funds falling within the scope of the preceding paragraph shall be transferred to the cash management account before further reinvesting.
Article 22     If a customer lacks sufficient funds to settle a trade, the securities firm shall on its own initiative cover the customer's settlement obligation with the custodied funds of the customer not yet reaching the minimum investment level, and, if still insufficient, then dispose of subject instruments in the order of priority as agreed with the customer to cover the settlement obligation.
    For the purposes of transferring the needed settlement money under the preceding paragraph, the securities firm shall first forward the proceeds received on disposal of subject instruments to its cash management account, and then promptly transfer the proceeds to its relevant settlement account and settle the obligation on behalf of the customer.
    The securities firm shall promptly give notice to the customer for clarification of responsibilities when it finds that the customer still lacks sufficient funds for settlement of trade even after action has been taken under paragraph 1, or when the proceeds from disposal of subject instruments cannot be timely transferred to the account by the due time for settlement of the customer's obligation.
    For the purposes of paragraph 1, the account with respect to which further action is to be taken due to a customer's lacking of sufficient settlement funds may only be one that involves a source of funds specified in Article 9, paragraph 1 and as agreed between the securities firm and the customer.
Article 23     To withdraw money, a customer shall complete and submit a Customer Request for Withdrawal of Custodied or Invested Funds on the date of the withdrawal request.
    Upon request by the customer under the preceding paragraph, the securities firm shall transfer the requested withdrawal amount from the customer's custodied funds not yet reaching the minimum investment level, and, if still insufficient, then dispose of any subject instrument in the order of priority as agreed with the customer, to meet the customer's withdrawal request.
    The securities firm processing transfer of funds under the preceding paragraph in response to the customer's withdrawal request shall, by the due time as agreed with the customer, forward the funds as transferred separately to the securities firm's cash management account, to the account for book-entry transfer of securities and funds opened by the customer for engaging in securities trading on the exchange or over-the-counter market.
Article 24     For an early termination of agreement to become effective, the customer shall submit a completed Request for Termination of Agreement on the date of the request.
    Article 7, paragraph 3 shall apply mutatis mutandis with respect to the securities firm's processing of the customer's funds still held in custody in the cash management account and of any subject instrument involving the customer's funds and any subsequent transfer of funds upon the customer's request for early termination of the agreement or non-renewal of the agreement upon expiration.
Article 25     A securities firm using funds from the cash management account to engage in outright transactions shall do so in compliance with the following:
  1. 1. It may not invest in any negotiable certificate of deposit or commercial paper issued by the securities firm itself or by a company that is an interested party of the securities firm.
  2. 2. The total amount of its investment in negotiable certificates of deposit or commercial papers issued by one single company may not exceed 10% of the total amount of invested funds.
  3. 3. The total amount of its investment in negotiable certificates of deposit or commercial papers guaranteed or endorsed by any bank or bills finance company may not exceed 10% of the total amount of invested funds.
Article 26     A securities firm using funds from the cash management account to engage in repo transactions may not engage in any single transaction that involves a period of more than 180 days.
Article 27     A securities firm using funds from the cash management account to engage in repo transactions shall do so with counterparties that have, during the most recent year, a long-term credit rating at or above a prescribed level from a credit rating agency as listed in Appendix 1.
Article 28     A securities firm using funds from the cash management account to engage in repo transactions may not engage in any transaction with one single counterparty resulting in a combined outstanding balance in excess of 100% of the counterparty's net worth as shown in its latest CPA-audited and attested financial report.
Article 29     A securities firm using funds from the cash management account to engage in outright transactions or in repo transactions in any of the three instruments of treasury bills, negotiable certificates of deposit, and commercial papers with the securities firm itself or with a company that is an interested party of the securities firm shall, by the end of the month following the transaction date, disclose to the customers the index rate for transactions in Taiwan's short-term bills (SIRIS) of a corresponding maturity as published by the TDCC on the transaction date, or if no such index rate is available, the index rate for quotations for Taiwan's short-term bills (TAIBIR) of a corresponding maturity.
    A securities firm using funds from the cash management account to engage in bond repo transactions with the securities firm itself or with a company that is an interested party of the securities firm shall, by the end of the month following the transaction date, disclose to the customers the average interest rate for repo transactions on the OTC market as published by the GTSM on the transaction date.
Article 30     A securities firm using funds from the cash management account to engage in repo transactions may not enter into any new transaction with a counterparty whose credit rating no longer meets the requirement in Article 27. Notwithstanding the foregoing, if a repo transaction with the counterparty involves pooling of funds from two or more customers, as described in Article 31, and if the transaction is subject to early termination due to early termination of agreement by any of the customers involved, the securities firm may for and only for that transaction enter into a subsequent repo-style transaction agreement with the counterparty expiring on the same date as the original agreement.
Article 31     When a securities firm uses funds from the cash management account to engage in repo transactions, if a repo transaction involves pooling of funds from two or more customers, and if the transaction is subject to early termination due to early termination of agreement by any of the customers involved, the securities firm shall obtain written consent from the counterparty to the transaction. In the case of a transaction involving partial termination of agreement, interest shall be paid, based on the original agreed interest rate, on the funds used to enter into a subsequent repo transaction with the same counterparty to replace the original transaction. If a new repo-style transaction agreement is entered into for that purpose, it shall have the same expiry date and interest rate as the original agreement as if it were not terminated early. The same shall not apply, however, if without detriment to customer interests the securities firm otherwise reaches or has reached an agreement with the non-terminating customer(s).
    The preceding paragraph shall also apply when a securities firm uses funds from the cash management account to engage in repo transactions with the securities firm itself.
Article 32     The agreement signed between a securities firm and a customer for the provision of business services relating to custody and investment of funds on behalf of the customer, shall contain a special clause to the effect that when a subject instrument involves repo transactions, if any single repo transaction involves pooling of funds from two or more customers, and if the transaction is subject to early termination due to early termination of agreement by any of the customers involved, it is agreed that in this circumstance the securities firm may on its own initiative terminate the agreement early and that the securities firm shall take further action as specified in the preceding article.
Article 33     A securities firm conducting business relating to custody and investment of funds on behalf of customers shall assign qualified associated persons to engage in outright transactions and repo transactions with counterparties.
    When a securities firms uses funds from the cash management account to engage in outright transactions and repo transactions with itself, the function of associated persons for the business described in the preceding paragraph may not be performed by associated persons engaging in proprietary trading operations for that business, and vice versa.
Article 34     A securities firm using funds from the cash management account to engage in outright transactions or repo transactions may not use the underlying assets thus obtained for further outright sale to others, for further repo-style transactions, or for any other purposes.
    A securities firm using funds from the cash management account to engage in outright transactions or repo transactions shall, in lieu of actually receiving and holding the underlying assets, only use a short-term bill passbook, central depository passbook, bond passbook, or repo-style transaction certificate, as the case may be, issued by a custodian institution; it may not withdraw any underlying asset in physical form.
    When a securities firms uses funds from the cash management account to engage in transactions in eligible instruments with itself, the functions of associated persons performing clearing and settlement for those transactions may not be performed by associated persons performing clearing and settlement for proprietary trading operations for that business, and vice versa.
Article 35     A securities firm shall in its internal control system specify the preservation method for the trade confirmation statements, delivery statements, and payment and settlement statements with respect to subject instruments, and for the relevant passbooks and certificates, and shall regularly check the relevant passbooks or certificates thus held against the information on any outstanding balance of subject instruments, and also prepare and maintain written verification records accordingly.
Article 36     A securities firm using funds from the cash management account to invest in funds shall do so in compliance with the following:
  1. Its investment in beneficial certificate units of any single securities investment trust fund may not exceed 10% of the net asset value of that fund.
  2. Its investment in beneficial units of securities investment trust fund(s) offered and issued by any single securities investment trust enterprise may not in total exceed 20% of the total amount of invested funds.
  3. Its investment in quasi-money market funds within the category of bond funds may not in total exceed 10% of the total amount of invested funds.
Article 37     A securities firm using funds from the cash management account to invest in funds issued in certificated form may not take or receive the physical beneficial certificates; if it uses such funds to invest in funds issued in dematerialized form, it shall deposit the fund units in the accounts opened by the relevant securities investment trust enterprises with the TDCC.
Article 38     A securities firm using funds from the cash management account to invest in beneficial certificate units shall obtain written consent from customers for matters that are required by law or regulation to be approved by the beneficial owners or unitholders of the fund but that exceed the scope of customer authorization stated in the agreement for the business contemplated hereunder.
Article 39     A securities firm shall in its internal control system specify matters relating to the method for preserving trade confirmation statements, reconciliation statements, notices issued by fund companies, and any other relevant vouchers, records, and documents in relation to its investment in beneficial certificate units, and shall regularly check the balance of beneficial units in funds whose trading involves the use of funds from the cash management account against the number of beneficial units on hand, and prepare and maintain written verification records accordingly
Article 40     A securities firm using funds from the cash management account to engage, with the securities firm itself or with a company that is an interested party of the securities firm, in transactions involving eligible instruments specified in Article 10 may not engage in such transactions in a total amount exceeding 50% of the total amount invested.
    A securities firm using funds from the cash management account to invest in subject instruments under outright transactions may not invest in such instruments in a total combined amount exceeding 20% of the total amount invested.
Article 41     When a securities firm conducts business relating to custody and investment of funds on behalf of customers, the total amount of the funds handled for custody and investment by the securities firm may not exceed 200% of the securities firm's net worth. Any interest accrued on custodied funds and any income or loss incurred on investment, however, shall not be included in the calculation of the aggregate custody and investment amount.
    The securities firm shall calculate the following information on each business day and transmit the same to the TWSE by the next business day:
  1. The aggregate custody and investment amount described in the preceding paragraph.
  2. Information on the credit rating of the counterparty to a repo transaction as described in Article 27 and on the combined outstanding balance of repo transactions with a single counterparty and the counterparty's net worth as described in Article 28.
  3. The percentage of investment in beneficial certificate units of any single securities investment trust fund to the net asset value of the fund, as described in Article 36.
  4. The percentage of investment in beneficial certificate units of securities investment trust fund(s) offered and issued by any single securities investment trust enterprise to the total amount of invested funds, as described in Article 36.
  5. The percentage of the total investments in quasi-money market funds within the category of bond funds to the total amount of invested funds, as described in Article 36.
  6. The percentage of the securities firm's total combined investments in subject instruments under outright transactions to the total amount of invested funds, as described in Article 40.
Article 42     A securities firm conducting business relating to custody and investment of funds on behalf of customers shall set aside an operation bond in the amount of 1% of the total amount of funds entrusted by customers for custody and investment, current as of the end of each month. Any interest accrued on custodied funds, and any income or loss incurred on investment, shall not be included in the calculation of the total amount of funds entrusted by customers for custody and investment.
    The securities firm shall at the end of each month calculate the total amount of funds entrusted for custody and investment as referred to in the preceding paragraph and shall by the 10th business day of the next month either set aside an additional amount of operation bond or, as the case may be, withdraw any surplus amount upon approval by the competent authority.
Article 43     Upon violation of these Rules by a securities firm or any of its responsible persons or employees, either the TWSE or the GTSM may take corresponding action pursuant to its rules.
Article 44     These Rules, and any amendments hereto, shall be jointly prepared by the TWSE and GTSM, and announced and implemented after submission to and final approval by the competent authority.