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Article 76
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Upon discovering that a principal falls in any of the following categories, a securities broker shall refuse to open an account or, if an account has already been opened, refuse to accept orders for brokerage trading or subscription of securities:
- Persons without legal capacity or with limited legal capacity, who do not have the agency or authorization of their legal guardian.
- Personnel or employees of the Securities and Futures Bureau (SFB) of the Competent Authority who fail to submit a letter of consent from the SFB.
- Personnel of the TWSE who fail to submit a letter of consent from the TWSE.
- Persons declared bankrupt and whose rights have not been reinstated.
- Persons declared by a court to be placed under guardianship where such declaration has not been voided; provided, this restriction shall not apply when a guardian disposes of securities for purposes of the interest of the ward.
- Persons declared by a court to be placed under assistance where such declaration has not been voided; provided, this restriction shall not apply if the person under assistance has obtained the consent of the assistant or permission from a court.
- Juristic persons opening accounts that cannot supply proof that there is authorization to open the account.
- Securities dealers which have not been approved by the Competent Authority.
- A principal who has engaged a director, supervisor, or employee of a securities firm to open an account with such securities firm as an agent or representative of the principal.
- The principal is applying or applied to convert an account it originally opened as a discretionary investment account to a brokerage account for the principal's own trading use.
Insiders of securities firms opening accounts for brokered securities trading shall comply with the Rules Governing Insiders of Securities Firms Opening Accounts at Their Securities Firms for Brokered Securities Trading prescribed by the TWSE.
Upon discovering that a principal falls in any of the following categories, a securities broker shall refuse to open an account or, if an account has already been opened, refuse to accept orders for brokerage trading or subscription of securities:
- Any person that has breached a contract relating to securities trading, where the TWSE or the GreTai Securities Market have notified all securities brokers of this fact, where the case has not been closed and less than 5 years have elapsed. However, this provision does not apply to brokerage trades that are made for purposes of offsetting margin purchases or short sales that were already executed for the same principal on the same day, and are of the same type and same quantity of securities, nor does it apply to opposite offsetting trades made on the same day in brokerage day trading in accordance with the Operational Rules Governing Day Trades of Securities.
- Any person that, in connection with a violation of the Securities and Exchange Act or forging (or altering) TWSE listed or Taipei Exchange listed securities, has been indicted in a public prosecution and the case is still pending, or has been adjudicated criminally guilty by a final and unappealable court judgment within the last 5 years.
- Any person that has breached a futures contract where the case has not been closed and less than 5 years have elapsed, or that has violated future trading laws or regulations and has been adjudicated criminally guilty by a final and unappealable judgment of a judicial authority within the past 5 years.
Upon conclusion of a case of breach of a brokerage contract by a principal, the securities broker shall promptly report such conclusion to the TWSE; the TWSE will in turn inform all other securities brokers.
Where a principal repeats its breach of a brokerage contract within a year (inclusive), the securities broker shall collect from principals in advance the full funds or securities for orders placed for 10 consecutive business days from the initial trade date as entertained by the securities broker within three months of the date of announcement of the conclusion of the case.
The operating procedures for the advance collectioon of funds or securities under the preceding paragraph are governed by the Operation Directions for the Advance Collection of Funds and Securities by Securities Brokers in Brokerage Trading mutatis mutandis.
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Article 91
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Where the principal fails to fulfill its settlement obligations on time, the principal is in default. In such an event, the securities broker shall report the default in accordance with the TWSE Guidelines for Securities Brokers in Reporting Delayed Settlement and Default by Principals , and shall simultaneously notify the principal.
When the principal is an offshore overseas Chinese or foreign national, or a mainland area investor, and a report of delayed settlement has been filed in accordance with Article 82, paragraph 2, if settlement is not completed in accordance with provisions and it is not an out-trade, the principal is in default. The securities broker shall handle the matter pursuant to the provisions in the preceding paragraph.
A securities broker which receives securities or consideration in accordance with paragraph 1 or paragraph 2 of this Article shall engage another securities broker to dispose of it on the Exchange no later than the first business day after the principal's default. Thereafter, the securities broker shall forthwith report to the TWSE and notify its principal in accordance with the Guidelines for Securities Brokers in Reporting Delayed Settlement and Default by Principals. However, those securities which belong to the same account and are of the same type and same volume may be offset against each other.
Where the aggregate number of [shares represented by] the share certificates of securities received by a securities broker under paragraph 1 and paragraph 2 during the period of a single default reaches 5 percent or more of the number of shares of the underlying securities already issued, and furthermore reaches or exceeds the average daily volume of the underlying securities during the 20 trading days prior to reporting of the default, the securities broker may adopt either of the following measures to handle the default:
- If handling of the default cannot be completed through reverse transactions during the 3 consecutive business days from the day next following the date of confirmation of the default by the principal, the securities broker, by reaching a mutual agreement with the principal or by notice to the principal, may, depending on market conditions, in accordance with the content of the agreement or the notice, complete handling of the default through reverse transactions within 180 days, and report the agreement or notice to the TWSE via letter for recordation.
- The securities broker may reach an agreement with the principal setting a price(s) to serve as the basis for calculating profit/loss, and submit the written agreement reached between the parties to the TWSE via letter for recordation.
Based on the report of a securities broker referred to in paragraph 1 or paragraph 2 of this Article, the TWSE will forthwith notify each securities broker, which shall act in accordance with paragraph 3 of Article 76 hereof.
In the event that the principal suffers losses or there is any other dispute arising out of the notification sent by the TWSE to each securities broker based on the report by a securities broker, the securities broker reporting the default shall be fully responsible therefor.
If a securities broker, for a reason not attributable to the broker, is unable in a timely manner to take measures pursuant to paragraphs 3 and 4, it shall prepare a handling record and keep it on file for inspection along with related documentary evidence.
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