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Article 6
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Securities firms shall maintain a separate account for each customer and maintain the following details on a daily basis:
- Lending and return of securities.
- The name and value of collaterals and the percentage of coverage.
- Placement, withdrawal, replacement, and disposal of collaterals.
- Compensation payable to the other party.
Securities firms shall provide customers with monthly statements containing the above details; no statement is required provided that no transaction has taken place in the current month and the customer has not request for it in writing.
Securities firms shall obtain written consents from customers, thereby allowing securities lending data to be legally gathered, computer-process, used or transmitted cross-border by TPEx, TSEC, or any institution designated by the competent authority.
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Article 7
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All notifications to advise customers for which securities firms are bound to provide as stipulated under this policy shall be delivered by mail, courier, or other method agreed upon between the two parties.
Notifications served by mail are deemed effective from the day the postal service makes its first delivery, if it does not reach the customer on time for reasons attributable to the customer.
Where notifications are served by courier, the customer's signature must be dated and be consistent with the one printed on the lending agreement.
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Article 14
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The types of collaterals that securities firms may request from customers for lending book-entry central government bonds, and the applicable discounts on collateral values, are listed below:
- Cash.
- Book-entry central government bonds. Collateral value is determined at 90% of the face value.
The abovementioned collaterals can not be used for any purposes other than the ones described below:
- To be placed as collateral for borrowing from TPEx's lending system.
- Bank deposits.
- Purchase of short-term notes.
Only bonds that are registered in the customer's name can be placed as collaterals. For collaterals that are placed in cash, the securities firm shall pay interest to the customer at a rate agreed between two parties.
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Article 16
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Upon receiving the customer's request to replace collaterals, the securities firm must complete the replacement accordingly before the second business day in the manner agreed between the two parties.
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Article 17
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Securities firm shall notify the customer in accordance with Article 7, Paragraph 1 at least 10 business days before the securities are due for return. Customer's collateral must be returned on the due date when the customer returns the lent securities.
Collaterals that are placed in cash shall be deposited into the customer's bank account, whereas book-entry central government bonds need to be returned in the manner described in Article 10.
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Article 18
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Securities firm may request for an early return by the customer according to the agreed terms, and shall undertake to return customer's collaterals on the day the securities are recovered.
Customer may request for a partial or full return of borrowed securities before the due date, and arrange the means and timeframe in which the lent securities and collaterals are to be delivered. The securities firm must return customer's collateral no later than the second business day after the customer has returned the lent securities.
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Article 25
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If customer exhibits any one of the following, the securities firm shall dispose the customer's collaterals the next business day and take the necessary measures agreed in the agreement:
- The customer fails to return the borrowed book-entry central government bonds upon the due date or at any earlier date agreed between the two parties.
- The customer fails to pay compensation upon the due date.
- The customer fails to remargin to the satisfactory level or provide eligible collaterals within a given period.
- The customer does not pay the agreed expenses.
If the disposal of customer's collateral does not sufficiently cover customer's outstanding debts, the securities firm may proceed to close customer's other lending deals to the extent necessary to cover outstanding debts. Any amounts remaining after the forced closure are returned to the customer, whereas shortfalls are claimed from the customer within a given notice period.
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Article 26
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Customers are considered to be in default if they do not reimburse shortfalls according to Paragraph 2 of the preceding Article. In such a case, the securities firm has a duty to report the default to TPEx, thereby allowing TPEx to notify TSEC and other securities firms.
The securities firm may impose a penalty totaling 10% of the agreed lending rate over the amount of shortfall payable by the customer, starting from the date of default until the shortfall is settled.
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