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Relevant Laws

Title:Taiwan Stock Exchange Corporation Securities Borrowing and Lending Rules (2021.03.31)
Article 42     Upon occurrence of any of the circumstances described in the subparagraphs of Article 39, paragraph 1 to an SBL participant in a fixed-price or competitive bid transaction, the TWSE may halt that party's participation in securities borrowing and lending transactions.
    If an event of default under Article 40 occurs to an SBL participant in a fixed-price or competitive bid transaction, the TWSE shall terminate that party's participation in securities borrowing and lending transactions.
Article 45     Upon occurrence of any of the circumstances under subparagraph 1 of Article 39, paragraph 1 to the borrower in a negotiated transaction, the lender shall, either by itself or through its lending agent authorized to keep custody of collateral on its behalf, place an order with a securities firm to buy in subject securities in the exchange market for return of the securities loan, and submit a regulatory filing, together with relevant transaction details, to the TWSE reporting the close-out of the negotiated transaction.
    If a circumstance arises under the preceding paragraph, and if due to the trading status of the market generally or the subject securities specifically it is not possible to buy the necessary amount of subject securities, even at a limit-up priceor with market order, within 2 consecutive business days after the date of the circumstance requiring the buy-in action, or if due to a restraint from the ratio of foreign capital allowable for investment in the subject securities it is not possible to buy in the subject securities, the shortfall may be repaid in cash or otherwise offset and settled by collateral, as per the pre-determined criteria set out in the loan agreement or as otherwise agreed between the lender and the borrower.
    In the case where the lending agent places an order with a securities firm to, using the brokerage trading account established in the name of the lending agent itself, buy in the subject securities in the exchange market for return of the securities loan, upon confirmation of accuracy regarding the loan transaction record and the transaction execution information, the TWSE will, based on the buy-in amount stated in the submitted regulatory filing, notify the central securities depository to effect a book-entry transfer of subject securities in that amount from the CSD account of the lending agent to that of the lender, and thereby make a note indicating the close-out of the negotiated transaction.
    In the event that the borrower in a negotiated transaction is in the circumstances in Article 39, paragraph 1, subparagraphs 1 or 4, or the lender is in the circumstances in subparagraph 4 of the same paragraph, or an SBL participant is in breach ofa negotiated transaction agreementfor securities borrowing and lending,the other participant shall forthwith instruct their authorized securities firm to submit a regulatory filing to the TWSE reporting the handling of the event, the TWSE may halt or terminate the participation in securities borrowing and lending transactionsby the party in one of the above circumstances.
Article 49     Except as otherwise stated in Article 42 or 45, if an SBL participant violates or breaches these Rules, the Master Securities Borrowing and Lending Agreement, the Securities Borrowing and Lending Authorization Letter, or any applicable regulations, rules, announcements, or circular letters, the TWSE may halt that party's participation in securities borrowing and lending transactions or notify it to make corrections, depending upon the seriousness of the matter.
    If the SBL participant fails to make the correction specified by the TWSE in the notice, the TWSE may terminate that party's participation in securities borrowing and lending transactions.
    When an SBL participant's participation in securities borrowing and lending transactions is halted or terminated by the TWSE pursuant to Article 42, 45, or this article, the TWSE shall promptly forward notice to all securities finance enterprises and securities firms. In cases in which participation in securities borrowing and lending transactions has been terminated by the TWSE, the SBL participant may resume its participation in securities borrowing and lending transactions only after one full year following the full satisfaction or performance of its obligations or completion of correction.