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Amended Article

Title:

Regulations Governing Securities Firms  CH

Amended Date: 2020.10.29 (Articles 14-6, 21, 32-1, 35-2, 68-1 amended,English version coming soon)
Current English version amended on 2020.02.03 
Article 19     A securities firm trading securities for its own account, unless it is concurrently operated by a financial institution and subject to other relevant acts or regulations, shall do so in accordance with the following rules:
  1. The firm shall not hold more than 10 percent of the total issued shares of any domestic company. The total amount of the cost of the securities issued by any domestic company held by such securities firm shall not be more than 20 percent of the securities firm's net worth.
  2. The firm shall not hold more than 5 percent of the total issued shares of any foreign company. The total amount of the cost of the securities issued by any foreign company held by the securities firm shall not be more than 20 percent of the securities firm's net worth; however, the total amount of the cost of such securities with equity characteristics shall not be more than 10 percent of the securities firm's net worth.
  3. The total amount of the investment cost of a securities firm in holdings of equity securities issued by a single related party may not exceed 5 percent of the firm's net worth. The total amount of the investment cost of a securities firm in holdings of equity securities issued by all related parties may not exceed 10 percent of the firm's net worth. However, these restrictions are exempted in the handling of exercise and hedging operations for call (put) warrants, exchange traded notes, and over-the-counter derivative financial product trading business, and in the hedging of beneficial certificates of exchange traded funds and the underlying baskets of stock represented by such beneficial certificates.
  4. The total amount of the investment cost of a securities firm in holdings of straight corporate bonds issued by a single securities firm may not exceed 5 percent of the securities firm's net worth. The total amount of the investment cost of a securities firm in holdings of straight corporate bonds issued by all securities firms may not exceed 10 percent of the securities firm's net worth.
    The term "related party" in these Regulations is defined as determined in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Firms. A securities firm, when holding shares in any single company, may do so either by the method of a proprietary trading position or by the equity investment method in paragraph 1 of the preceding article, but not by both methods.
    If the aggregate of the securities acquired by a securities firm for underwriting purposes, counted in combination with those acquired under the preceding paragraph, exceeds the limit prescribed by the FSC, the portion in excess shall be sold within 1 year after its acquisition in accordance with Article 75 of the Act.
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Article 31-3     A securities firm trading foreign securities for its own account or engaging in foreign derivative financial product transactions may not engage in margin transactions.
    When a securities firm engages in trading or transactions mentioned in the preceding paragraph with any overseas affiliated enterprise, the terms and conditions thereof may not be more favorable than those offered to other similar counterparties, nor may there be any non-arm's length circumstances, and, except in cases where the securities firm is mandating the overseas affiliated enterprise to trade or transact on its behalf, the securities firm shall comply with the following provisions:
  1. Such trading or transactions shall be limited to trading of foreign bonds for the securities firm's own account and engaging in foreign derivative financial product transactions.
  2. Such trading or transactions may be done only with the approval of not less than three-quarters of the directors in attendance at a board meeting attended by not less than two-thirds of the directors. However, for case in which the following conditions are met, the securities firm may draft internal operational rules and, by an aforesaid board resolution, generally authorize the management to engage in such trading or transactions in accordance with those operational rules:
    1. The counterparty to the trade or transaction is an overseas affiliated enterprise that is registered in a jurisdiction that is supervised by a signatory member of the International Organization of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding (MMoU), and holds relevant financial business licenses and is supervised by a competent authority of that jurisdiction.
    2. The instruments traded or transacted have an open market price, or the monetary amount of the trade or transaction is insignificant.
  3. Unless the securities firm is concurrently operated by a financial institution and subject to other relevant acts or regulations, it shall comply with the following provisions:
    1. The total balance of its trades and transactions with any single overseas affiliated enterprise may not exceed 10 percent of the securities firm's net worth.
    2. The total balance of its trades and transactions with all overseas affiliated enterprises may not exceed 20 percent of the securities firm's net worth.
    "Affiliated enterprise" in the preceding paragraph shall be as defined in the Affiliated Enterprises chapter of the Company Act.
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