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Article 7-1
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If a securities firm conducts securities business money lending and the financing period does not exceed 30 days, new shares issued by an issuer upon its initial listing on the TWSE or TPEx or for cash capital increase after its initial listing on the TWSE or TPEx that are subscribed by customers who are employees or existing shareholders of the issuer may be used as collateral (hereinafter, "share subscription loans").
The ratio between the value of the collateral under the preceding paragraph and the amount of money lent by the securities firm to that customer may not be below a certain ratio. A securities firm shall mark to market on a daily basis the ratio of collateral value to customer debt in each lending account. When that ratio is below the prescribed ratio, it shall immediately notify the customer to make up the difference by a deadline with collateral of the types prescribed in paragraph 3 of the preceding article.
The ratio referred to in the preceding paragraph shall drafted by the TWSE in joint consultation with the TPEx, and submitted to the competent authority for final approval.
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Article 8
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If a securities firm conducts securities business money lending and the financing period does not exceed 6 months, the securities or other instruments that the customer purchases or holds shall be used as collateral; the ratio between the value of such collateral and the amount of money lent by the securities firm to that customer may not be below a certain ratio.
Prior to the expiration of the period in the preceding paragraph, a securities firm may, depending on the customer's credit standing, grant an extension of 6 months. Prior to the expiration of the one-year period, the securities firm may, depending on the customer's credit standing, again allow the customer to apply for an extension of 6 months.
When a securities firm lends money to its customer to pay for the settlement price, and the customer has yet to obtain the securities that it has purchased, the other securities or instruments that the customer holds shall be used as collateral.
Collateral referred to in paragraph 1 shall be limited to the following:
1. TWSE or TPEx listed securities.
2. Beneficial certificates of securities investment trust funds or futures trust funds that are domestically offered and that invest domestically.
3. Central government bonds.
4. Physical gold that is registered for trading over the counter.
5. Other collateral approved by the competent authority.
A securities firm shall mark to market on a daily basis the ratio of collateral value to customer debt in each lending account. When that ratio is below the prescribed ratio, it shall immediately notify the customer to make up the difference by a deadline with collateral of the types prescribed in the preceding paragraph.
The ratio referred to in paragraph 1 and the preceding paragraph shall be drafted by TWSE in joint consultation with the TPEx, and submitted to the competent authority for final approval.
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Article 9
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A securities firm conducting securities business money lending may not accept as collateral the securities listed below:
1. Pledged shares.
2. New shares that employees are prohibited from transferring for a certain period, or new restricted employee shares.
3. Stock for which a company employee has elected to apply the deferral of income tax.
4. A company's own shares or other equity securities acquired through a buyback of its own shares, donation, merger, transfer of operations, or other reason.
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Article 14
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A securities firm conducting securities business money lending shall sign and execute a loan contract with the customer.
The loan contract referred to in the preceding paragraph shall clearly state at least the matters listed below:
1. Reason for the financing.
2. Scope of the financing.
3. Financing period.
4. Financing limit.
5. Financing interest rate, processing fee rate, and the total cost expressed as an annual percentage rate.
6. Rules for protecting creditor rights, including eligible collateral, types of maintenance collateral, collateral maintenance ratio, remargining deadline, and the repayment method under Article 7, paragraph 4.
7. Method by which the securities firm will return collateral to a customer that has repaid loaned money.
8. In cases of share subscription loans, in the event that the issuance of new shares for cash is not accomplished or is voided or revoked by the competent authority, stipulations regarding the account in which the customer will receive the money to be refunded by the issuer and the payment method for the loan amount and the interest thereupon.
9. Disposal of collateral.
10. Effective date and duration of the contract, and procedures for amendment and termination of the contract.
11. Dispute resolution.
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Article 18
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A securities firm that conducts securities business money lending shall do so in accordance with the regulations governing business operations.
The regulations governing business operations of the preceding paragraph shall clearly specify financing application, repayment, and collateralization methods, standards for calculating collateral financing, calculation of the collateral maintenance ratio, types of maintenance collateral, financing calculation standards and deadlines, procedures for share subscription loans, disposal of collateral, and other matters as required by the competent authority. The regulations shall be drafted by the TWSE in joint consultation with the TPEx and the Taiwan Depository and Clearing Corporation and submitted to the competent authority for final approval.
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