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Amended Article

Title：

Operating Rules for Securities Business Money Lending by Securities Firms  CH

Amended Date： 2024.09.05 
Categories： Securities Exchange Market > Borrowing of Money
Article Content Chapter Content Search Article No. Search Legal Basis Amended Article Legislative History Chinese
2     A securities firm conducting securities business money lending shall do so in accordance with securities trading laws and regulations, these Operating Rules, and the relevant bylaws, regulations, public announcements, and circular letters of the Taiwan Stock Exchange Corporation (TWSE), the Taipei Exchange (TPEx), and the Taiwan Depository & Clearing Corporation (TDCC).
    Lending of money in connection with securities business ("securities business money lending") in these Operating Rules refers to any monetary financing business undertaken, pursuant to an agreement between a securities firm and a customer, to facilitate the settlement of customer purchases of securities and other commodities.
    The scope of such financing includes the following:
  1. TWSE or TPEx listed stocks (including stock warrant certificates, certificates of entitlement to new shares, and certificates of payment for shares), call (put) warrants, beneficial certificates, depositary receipts, central book-entry bonds, municipal bonds, ordinary corporate bonds, financial bonds, convertible bonds, bond conversion entitlement certificates, beneficial interest securities, and asset-backed securities, excluding stocks and EFT beneficial certificates traded in foreign currency.
  2. TPEx traded beneficial certificates of open-end funds and physical gold.
  3. Subscription for beneficial certificates of open-end securities investment trust funds and of future trust funds.
  4. Public subscription or competitive auction of new shares before their TWSE or TPEx listing (including cash capital increase).
  5. Shares of the issuer for which its employees and existing shareholders may subscribe in the event the issuer issues new shares in a cash capital increase after its initial listing on the TWSE or TPEx.
  6. Others as approved by the competent authority.
    For purposes of the preceding paragraph, TPEx traded beneficial certificates refer to the beneficial certificates of securities investment trust funds registered for trading on the Taipei Exchange under the Taipei Exchange Rules Governing the Review of Beneficial Certificates of Open-end Funds for Trading on the Taipei Exchange; securities investment trust funds refer to the trust funds in Article 23 of the Regulations Governing Securities Investment Trust Funds; and futures trust funds refer to the trust funds in Articles 8, 9, 10 and 10-1 of the Regulations Governing Futures Trust Funds.
    The beneficial certificates of securities investment trust funds and those of futures trust funds as mentioned in the third paragraph are limited to domestic investments if denominated in New Taiwan dollars.
    The scope of financing referred to in the third paragraph does not include shares subject to a margin purchase and short sale, block trading, odd-lot trading, auction, tender offer or altered trading method, or TPEx managed stocks.
    The amount of securities business money lending conducted by a securities firm is limited to the amount, as well as the relevant processing fees and taxes, payable by each customer after netting the prices of securities bought and sold by that customer on that trading day.
    A securities firm conducting securities business money lending for a financing period not exceeding 30 days may post collateral in the form of new shares subscribed for by a customer being an employee or an existing shareholder of an issuer as issued by the issuer in a cash capital increase after its initial listing or after its listing on the TWSE or TPEx (Subscription Lending). The dollar amount is the stock payment less the margin payable by the customer. The preceding paragraph does not apply.
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7     A securities firm conducting securities business money lending may not accept the securities or other commodities listed below as collateral:
  1. Pledged securities or other commodities
  2. new shares not assignable by employees within a given period or new restricted employee shares
  3. stocks to which company employees elect to apply deferral of income tax payment
  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.
    A customer shall warrant that the collateral it provides is free and clear of all liens, claims, and encumbrances of any nature whatsoever; in the event of any defect or legal dispute in this respect, the securities firm may not provide financing.
12     Notice of matters by a securities firm to its customer as required under these Operating Rules shall be effected by mail, by email in a manner conforming to electronic signature requirements, or signed for in person by the customer.
    Where the securities firm's notice sent by mail is not delivered on time due to the customer's failure to give notice under the preceding article, or some other reason attributable to the customer, the notice shall be deemed effective from the day of the first delivery attempt by the post office.
    Where the customer signs in person to acknowledge receipt of a securities firm's notice, the customer's signature or seal shall match the signature on the original loan contract or the original seal/signature-of-record, and shall be accompanied by the date.
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13     In securities business money lending conducted by a securities firm, if the customer applies for a financing period between the second to the fifth business day after the trade date and intends to post collateral in the form of securities that it is purchasing, the customer shall file an application by 11 a.m. on the second business day after the transaction date, and have the securities firm or custodian institution transfer the customer's purchased securities or other commodities into the loan collateral account opened by the securities firm at the TDCC or central government securities settlement bank; the financing period shall be from the second business day after the transaction date to the fifth business day after the transaction date.
    When the customer of the preceding paragraph submits the loan application by a method other than in person, it shall submit a written statement of consent for exemption from the use of a signature or seal on the loan application. If the securities firm has verified and kept that consent statement on file, it is not necessary for the customer to sign/seal the application.
    When the customer applies to borrow money from a securities firm by personal telephone call, the securities firm shall make a synchronous recording of the call, which shall be kept at its place of business and retained for at least one year. In the event of any dispute, the recording shall be retained until the dispute has been eliminated.
    The value of the collateral in paragraph 1 shall be confined to 100 percent to 130 percent of the monetary amount of the financing provided to the customer by the securities firm and calculated as below:
  1. The value of TWSE and TPEx traded securities, except central book-entry bonds, municipal bonds, common corporate bonds, secured convertible (exchangeable) corporate bonds, and financial bonds, is the closing price of the business day immediately prior to financing.
  2. The value of beneficial certificates of open-end funds traded on the TPEx is the net asset value ("NAV") of each unit of beneficial rights of the business day immediately prior to financing.
  3. The value of physical gold traded on the TPEx is the average of the highest bid price and lowest offer price of market makers at the closing of the business day immediately prior to financing ("Closing Average").
  4. The value of central book-entry bonds is 80 per cent of the face value.
  5. The value of municipal bonds, common corporate bonds, secured convertible (exchangeable) corporate bonds, and financial bonds is 60 per cent of the face value.
    The closing price referred to in the preceding paragraph and in Articles 18, 24, and 25 shall be determined pursuant to Article 58-3, paragraph 5 of the TWSE Operating Rules and Article 35, paragraph 3 of the GreTai Securities Market Rules Governing Securities Trading on the GTSM.
    When the customer files an application pursuant to paragraph 1 herein and is notified by the securities firm to post the collateral that it holds pursuant to Article 16, paragraph 9, the application-related provisions of paragraph 1 shall apply mutatis mutandis.
    When the customer makes partial repayment prior to the expiration of the financing period, the securities firm shall return to the customer on a proportional basis the securities it originally posted as collateral, provided that increments of less than one trading unit may not be returned.
    When the customer has purchased securities for which halting of margin purchases and short sale transactions has been announced, due to a resolution of the Surveillance Operations Oversight Committee of the TWSE or GTSM or due to other circumstances under which those transactions are inappropriate, then during the effective period of the disposition, that security may not be accepted as the additional financing collateral referred to in paragraph 1 above and in Article 16, paragraph 1. However, this rule shall not apply to a customer that posts collateral in the form of the securities that it purchases, if the halting of margin purchases and short sale transactions for those securities has not been announced on the trade date.
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14-1     Where the financing period of Subscription Lending for which a customer applies in securities business money lending conducted by a securities firm does not exceed 30 days, the customer shall file its application between the fourth and the second business day prior to the last day for share payment.
    After filing an application, a customer shall, before the business day immediately before the last day for payment for its new subscription, transfer the margin for its Subscription Lending to the customer ledger of the settlement account opened by a securities firm, for the securities firm to pay for the shares to the share payment account of the issuer.
    A securities firm shall prepare and deliver to the TDCC particulars of the Subscription Lending on the last day for share payment, to be delivered by the TDCC to the issuer on the following business day.
    The securities acquired by a customer upon subscription shall all serve as collateral to be delivered by the TDCC by book-entry transfer from the customer’s account with a centralized securities depository enterprise to the loan collateral account of the securities firm. The relevant book-entry transfer procedures are governed by TDCC regulations.
    Collateral financing with regard to securities subscribed for in Subscription Lending is 60 percent of the subscription price, and is 40 percent of the subscription price if said securities are not eligible for margin purchases and short sales.
    Article 13, paragraphs 2 and 3 apply mutatis mutandis if a customer as in paragraph 1 applies for money lending not in person.
14-2     In securities business money lending conducted by a securities firm, a customer’s application for Subscription Lending shall be rejected if:
  1. the customer fails to pay the margin within the prescribed period;
  2. extension of the offering period of the issuer is approved by the competent authority;
  3. the issuer changes the subscription amount per share; or
  4. the period between the last day for payment for new subscription and the last day for payment by specified persons subscribing for new shares exceeds three business days.
14-3     In securities business money lending conducted by a securities firm, the issuer shall return the subscription payment to the customer ledger of the settlement account of the securities firm if the issuance of new shares for cash in Subscription Lending is not executed or is revoked or voided by the competent authority.
    The securities firm shall, before the following business day, deduct the funds it loans and interest thereon from the aforementioned customer ledger and return the balance to the customer.
    Should the issuer fail to pay the returned funds back to the customer ledger of the settlement account of the securities firm, the securities firm shall give notice to the customer to request repayment of the loan extended by the securities firm and payment of the interest on the loan within the following business day.
14-4     In securities business money lending conducted by a securities firm, if the customer applies for Subscription Lending, funds derived from any sale of those collateral securities prior to the expiration of the financing period shall first be used to repay the money lent, provided that this condition shall not apply if the customer has already replaced the collateral securities before repayment is made.
    The securities firm may stipulate with the customer that prior to the expiration of the financing period as referred to in the preceding paragraph, the customer's securities trading balance will be used to repay the money lent. The scope of the securities trading balance shall be stipulated between the parties.
15     In securities business money lending conducted by a securities firm, if a customer that has applied for a financing period from the second to fifth day after the trade date and posted collateral in the form of securities that it is purchasing, or has applied for a financing period for Subscription Lending not exceeding 30 days and posted collateral in the form of the securities subscribed for by it, may, prior to the expiration of the financing period, to convert to the financing method specified in Article 16, paragraph 1, the originally purchased or subscribed securities or otherwise-held securities or other commodities that it posts as collateral shall comply with Article 16, paragraph 9, and the collateral financing shall be calculated according to the standards provided in Article 18.
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16     In securities business money lending conducted by a securities firm, a customer applying for a financing period not exceeding 6 months shall file an application prior to 12 noon on the first business day after the transaction date of its securities purchase. If the customer posts collateral in the form of securities or other commodities that it purchases or holds, the securities firm or custodian institution shall transfer the customer's collateral to the loan collateral account opened by the securities firm at the TDCC or central government securities settlement bank. A customer posting a collateral in foreign currency for an offshore overseas Chinese or foreign national shall deposit the collateral in the foreign currency loan collateral account opened by the securities firm at the bank permitted by the Central Bank of the Republic of China (Taiwan) to engage in foreign exchange business. Collateral financing shall be calculated according to the standards provided in Article 18.
    No collateral is required from the above new applicant posting, for money lending purposes, collateral in the form of securities or other commodities or foreign currencies that it purchases, if the maintenance ratio of the financing collateral combined with the collateral for the purposes of calculation of said ratio pursuant to Article 23 is 166 per cent or above.
    Subject to the customer posting securities or other commodities or foreign currencies that it holds as collateral, a securities firm conducting securities business money lending may accept the customer’s application for financing in the form of public subscription or competitive auction of new shares (including cash capital increase). The financing scope includes the bond for competitive auction and the award price after award less the bond, and the subscription price deducted by the bank on the day immediately preceding the lot drawing for subscription, provided the customer shall maintain sufficient collateral in the securities firm’s collateral account at the time of the customer’s application and on the date of disbursement by the securities firm, with a collateral maintenance ratio not lower than the minimum prescribed by Article 23, paragraph 4; transfer to the collateral account in paragraph 1 of new shares allotted is not required, provided the securities firm must strengthen its credit check and KYC in respect of applying customers and its internal control and regulation, to control risks.
    Subject to the customer posting securities or foreign currencies that it holds as collateral, a securities firm conducting securities business money lending may accept the customer’s financing application for subscription for beneficial certificates of open-end securities investment trust funds and those of futures trust funds and directly deliver such beneficial certificates to the customer.
    In securities business money lending conducted by a securities firm, if a customer posts as collateral the beneficial certificates of open-end securities investment trust funds and those of futures trust funds that are purchased on the customer’s order in the securities firm’s name, the authorized securities firm shall keep a registration log for management purposes and inform relevant information to the TDCC, and the requirement in paragraph 1 that the securities firm transfer the collateral provided by the customer to the securities firm’s loan collateral account at the TDCC does not apply.
    When a securities firm lends money to a customer to pay for the settlement price, and the customer has yet to obtain the securities that it has purchased, other securities, foreign currencies, or commodities that the customer holds shall be used as collateral.
    When the customer of the preceding paragraph submits the application to borrow money by a method other than in person, the provisions of Article 13, paragraphs 2 and 3 shall apply mutatis mutandis.
    Before the expiration of the financing period in paragraph 1, the customer may file an application to extend the period, and the securities firm may grant a 6-month extension depending on the customer's creditworthiness. After the expiration of one-year period, the securities firm may review the customer's creditworthiness and then grant the customer's application for a 6-month extension.
    Collateral referred to in paragraph 1 shall be limited to the following:
  1. TWSE and TPEx listed securities, excluding EFT beneficial certificates traded in foreign currency, and shares subject to an altered trading method or TPEx managed stocks.
  2. TPEx traded beneficial certificates of open-end funds or physical gold.
  3. Beneficial certificates of open-end securities investment trust funds and those of futures trust funds that are offered and invest domestically.
  4. Offshore overseas Chinese and foreign nationals may post foreign currencies as collateral. Currencies received are limited to U.S. Dollar, Euro Dollar, Japanese Yen. British Pound, Australian Dollar, and Hong Kong Dollar. The foreign currency collateral account shall be opened with a bank permitted by the Central Bank of the Republic of China (Taiwan) to engage in foreign exchange business.
  5. Other collateral approved by the competent authority.
    Collateral posted by a customer under the preceding paragraph may be replaced during the financing period. The method for applying for replacement shall be stipulated between the parties.
    When a customer makes partial repayment prior to the expiration of the financing period, the securities firm shall return to the customer the securities it originally posted as collateral on a proportional basis, provided that increments of less than one trading unit may not be returned. Notwithstanding, the customer may agree with the securities firm that subject to repayment by the customer of the loaned funds, the securities firm is exempt from returning the collateral in whole or in part, and the customer may apply to the securities firm for a loan pursuant to paragraph 1 in respect of the collateral that is not returned.
    For each loan of money using the financing method set out in paragraph 1 herein, the securities firm shall notify the customer in writing 10 business days before the expiration of the financing period.
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19-1     In securities business money lending conducted by a securities firm, if the securities for which the customer subscribes fail to be transferred to the loan collateral account of the securities firm in accordance with Article 14-1, notice shall be given to the customer to request that collateral be provided, or the loaned funds be repaid and interest thereon paid, before the following business day.
    The collateral mentioned in the preceding paragraph shall be limited to any of the ones specified in Article 16, paragraph 9. The financing calculation standards applicable to such collateral are governed mutatis mutandis by Article 18, paragraph 1.
21-1     A securities firm conducting securities business money lending in the form of Subscription Lending shall report to the TWSE the financing data relevant to the particulars of the Subscription Lending by the business day following the last day for share payment.
    If the issuer’s issuance of new shares for cash in Subscription Lending is not executed or is revoked or voided by the competent authority after the last day for payment for new subscription, the securities firm conducting Subscription Lending shall notify the TWSE and TDCC two business days prior to the date of the issuer’s public notice.
23     In securities business money lending conducted by a securities firm, if a customer applies for a financing period not exceeding 30 days and posts collateral in the form of the securities for which the customer subscribes or not exceeding six months and posts collateral in the form of securities or other commodities or foreign currencies that it purchase or holds, the customer's overall-account and individual-transaction collateral maintenance ratio for money lent to the customer shall be calculated as follows:
Collateral maintenance ratio = (market value of the collateral + market value of additional collateral securities or other commodities or foreign currencies) divided by the financing amount, and multiplied by 100 percent.
     In regard to the collateral referred to in the preceding paragraph, the market value of TWSE and TPEx listed securities is the closing price of the current day; that of central book-entry bonds, municipal bonds, common corporate bonds, secured convertible (exchangeable) corporate bonds, and financial bonds is their face value; that of physical gold is the Closing Average of the current day; that of TPEx traded beneficial certificates of open-end funds, open-end securities investment trust funds and futures trust funds is the NAV of the preceding business day; and that of foreign currency collaterals is calculated at the current spot rate – buying of the bank with which the foreign currency collateral account is opened. If there is no current day's closing price for a given TWSE or TPEx security, the market value shall be determined by the following principles:
  1. If the current day's highest buy order price at the close of market is higher than the current day's auction reference price at market opening for a TWSE listed security, or than the current day's benchmark price at trade opening for a TPEx listed security, use the highest buy order price.
  2. If the current day's lowest sell order price at the close of market is lower than the current day's auction reference price at market opening for a TWSE listed security, or than the current day's benchmark price at trade opening of trading for a TPEx listed security, use the lowest sell order price.
  3. When neither of the above circumstances applies, use the current day's auction reference price at market opening for a TWSE listed security, or the current day's benchmark price at trade opening for a TPEx listed security.
  4. In the event of Subscription Lending, the subscription price applies if the securities have none of the prices mentioned in the preceding subparagraphs.
    The collateral posted by the customer, if in the form of securities in Subscription Lending, shall still be included in the calculation of the collateral maintenance ratio before the securities firm obtains the collateral.
    In regard to its mark-to-market accounting of the collateral maintenance ratio, the securities firm shall mark-to-market such ratio each business day except for Subscription Lending, where the ratio shall be marked-to-market on a daily basis from the business day following the last day for share payment. If the collateral maintenance ratio is lower than 130 percent due to a change in the value of the collateral or additional collateral securities or other commodities, or the customer is an offshore overseas Chinese or foreign national as in paragraph 8 with a collateral maintenance ratio lower than as agreed, the securities firm shall notify the customer to cover the collateral shortfall and bring the collateral maintenance ratio above 166 percent within 2 business days from receipt of the notice, and shall further comply with the following provisions:
  1. If the customer fails to cover the collateral shortfall within 2 business days from the date upon which the notice is served and the collateral maintenance ratio is still lower than 130 percent, beginning from the third business day, the securities firm shall dispose of the customer's collateral beginning from the third business day under the mutatis mutandis application of Article 27, paragraph 1.
  2. If the customer fails to cover the collateral shortfall within 2 business days from the date on which the notice is served and the collateral maintenance ratio has risen to 130 percent or higher, the securities firm may temporarily refrain from disposing of the collateral on the third business day. However, on any subsequent business day in which its collateral maintenance ratio is again lower than 130 percent and where the customer does not deposit additional collateral on its own initiative on the afternoon of that day, its collateral shall be disposed of beginning on the next business day under the mutatis mutandis application of Article 27, paragraph 1.
  3. If the collateral maintenance ratio returns to 166 percent or higher even though the customer has not covered, or has covered only a portion of, the collateral shortfall, or if the customer makes successive collateral deposits sufficient in total to cover the shortfall as stated in the notice prior before its collateral has been disposed of under the preceding subparagraphs, the record of the collateral call shall be expunged.
    Any and all individual loans of funds in the financing account for which the collateral maintenance ratio is below 130 percent are shortfalls that are required to be covered pursuant to the preceding paragraph, and shall be subject to a collateral call.
    If, as a result of any change in share price, there is an increase in the net value of the collateral in a customer's financing account less the customer's obligations, the securities firm is prohibited from delivering to the customer any cash or securities equivalent to the amount of the increase.
    The disposal of collateral under paragraph 4, subparagraphs 1 and 2 shall be carried out in accordance with Article 27 of the Operating Rules. If such disposal is insufficient to make repayment, the customer shall be notified to make repayment within a certain time period, with interest accruing at the financing interest rate from the date on which the claim occurred until the date of repayment.
    A securities firm may agree on the collateral maintenance ratio with offshore overseas Chinese and foreign nationals meeting the following qualification requirements, provided such ratio may not be lower than 110 percent and is subject to necessary adjustment by the TWSE in relation to financial market volatility:
  1. A qualified institutional investor designated by the competent authority in accordance with Article 4, paragraph 2 of the Financial Consumer Protection Act.
  2. A member of a foreign securities exchange designated by the competent authority in accordance with Article 5, paragraph 1 of the Regulations Governing Securities Firms Accepting Orders to Trade Foreign Securities, or a liquidity provider.
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25     In securities business money lending conducted by a securities firm, if a customer applies for a financing period not exceeding 30 months and posts collateral in the form of securities for which is subscribes or not exceeding six months and posts collateral in the form of securities or other commodities or foreign currencies that it purchases or holds, the additional collateral securities or other commodities or foreign currencies that the customer shall provide to cover a collateral shortfall under Article 23 shall be limited to the collateral in Article 16, paragraph 9.
    The valuation percentage for calculating the collateral value of additional collateral securities or other commodities or foreign currencies under the preceding paragraph shall be subject, mutatis mutandis, to Article 18, paragraph 1.
    The collateral in paragraph 1 to which either of the circumstances listed below applies may not be used as additional collateral:
  1. Securities comprising less than one trading unit.
  2. Where the securities are registered shares of the issuing company acquired by its shareholders or capital contributors as a result of that company's conduct of a capital increase from earnings, capital increase through contributions by that company's employees out of their bonuses to the industry in which they serve, or capital increase by a venture capital company out of undistributed earnings pursuant to Article 13 of the Statute for Encouragement of Investment or Articles 16 and 17 of the Act for Upgrading Industries, and such shares have not been transferred or reported for taxes.
    When calculating a customer's overall account collateral maintenance ratio, a securities firm is not required to apply a haircut to the value of the additional collateral securities or other commodities or foreign currencies.
    If the rate of bonus shares or stock dividend shares distributed on collateral or additional collateral securities or other commodities provided by a customer is 20 percent or higher, except where the Competent Authority has imposed restrictions on trading of the securities, all such new shares shall serve as collateral, and the right to defer income tax shall be waived. The TDCC shall transfer the shares by book-entry transfer into the segregated loan collateral account opened by each securities firm.
    Bonus shares or stock dividends referred to in the preceding paragraph may not be used as collateral for borrowing securities from the TWSE securities lending system or for obtaining refinancing from a securities finance enterprise.
    The provisions of Article 24 shall not apply to bonus shares or stock dividend shares used as collateral. After ex-rights trading has commenced, the market value of such shares shall be calculated at 60 percent of the closing price of the TWSE or TPEx listed securities. After the shares have been transferred to the securities firm's segregated loan collateral account, the haircut need not be applied to the calculation of their value.
    The provisions of Article 18, paragraph 2 shall apply mutatis mutandis to paragraph 1 and the preceding paragraph.
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27     When any of the circumstances listed below applies to a customer, at market opening on the business day on which disposal is required, the securities firm shall, through the Money Lending Default Handling Account opened with another securities broker, dispose of the respective collateral and additional collateral securities or other commodities on the TWSE centralized exchange market or through the TPEx Securities market trading system, with the exception of central book-entry bonds, municipal bonds, common corporate bonds and financial bonds, which may be subject to price negotiation and trading with the bond dealers at the place of business. If an order to dispose of the collateral is not executed, it shall continue to be quoted on the next business day, and the related processing fees and tax shall be borne by the customer, unless the parties agree otherwise.
  1. Repayment has not been made at the expiration of the financing period.
  2. The money lent has not been repaid pursuant to Article 19.
  3. A collateral shortfall has not been covered pursuant to Article 23, provided the collateral may not be disposed of until after the issuance of new shares in the event of Subscription Lending.
  4. Replacement of additional collateral securities or other commodities has not been made pursuant to Article 26.
    Where a securities firm disposes of securities pursuant to the preceding paragraph and such disposal is insufficient to offset the debt, it shall notify the customer to cover the shortfall on the next business day. If the customer fails to do so, the securities firm may dispose of the collateral and additional collateral securities or other commodities or foreign currencies provided by that customer up to the amount required to repay the debt. If any surplus remains, it shall be returned to the customer; if any shortfall remains, the customer shall be notified to repay it within a prescribed time period.
    Where a securities firm conducts Subscription Lending, if the customer fails to repay the loan in accordance with Article 14-3, paragraph 3, or to provide collateral or repay the loan in accordance with Article 19-3, the preceding paragraph applies mutatis mutandis, in which case the securities firm may dispose of the collateral and additional collateral securities or other commodities or foreign currencies provided by the customer up to the amount required to repay the debt. Where no additional collateral securities or other commodities or foreign currencies are provided for disposal, the securities firm shall file a report of a case of default in accordance with Article 28.
    Where any of the following circumstances applies to a customer during the financing period, the securities firm shall notify the customer to settle the obligation the next business day, and shall terminate the loan contract that it has entered into with the customer. In case the customer fails to settle the obligation, the securities firm shall close out the lending transactions the next business day through mutatis mutandis application of the provisions of paragraph 1:
  1. Failure to perform settlement obligations on time as specified in Article 91 of the Operating Rules of the TWSE, Articles 87 and 89 of the GTSM Rules Governing Securities Trading on the GTSM, or Article 58 of the Operating Rules of the Taiwan Futures Exchange Corporation.
  2. Any default or violation specified in Article 81 of the Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities, Article 33 of the Operating Rules for Securities Lending by Securities Firms, Article 26 of the Rules Governing the Lending of Book-Entry Central Government Bonds by Securities Firms, or 26 of the Operating Rules for Securities Firms Handling Non-Restricted Purpose Loans.
    During the financing period, if a customer’s participation in securities lending transactions is halted or terminated by the TWSE pursuant to Article 42, 45, or 49 of the TWSE Securities Borrowing and Lending Rules, or if any of the following circumstances applies to the customer at another securities firm, futures commission merchant, or securities finance enterprise, the securities firm shall halt the provision of any new securities business money lending to the customer:
  1. Any default specified in Article 76, paragraph 3, subparagraph 1 or 3 of the Operating Rules of the TWSE or Article 47, paragraph 2, subparagraph 1 or 3 of the GTSM Rules Governing Securities Trading on the GTSM.
  2. Any default or in violation specified in Article 81 of the Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities, Article 33 of the Operating Rules for Securities Lending by Securities Firms, Article 26 of the Rules Governing the Lending of Book-Entry Central Government Bonds by Securities Firms, or Article 26 of the Operating Rules for Securities Firms Handling Non-Restricted Purpose Loans.
  3. Any default specified in a securities finance enterprise's operating rules for handling margin purchases and short sales, securities settlement financing rules, or rules of operation for securities lending, or violation of a type comparable to that referred to in the preceding subparagraph.
    Before a case of a default or violation under the preceding paragraph is closed, the customer may have the collateral and additional collateral securities or other commodities it provided sold by the securities firm through the Money Lending Default Handling Account opened with another securities broker to repay the money lent.
    Where the registration of an overseas Chinese or a foreign national has been cancelled by the TWSE or the TAIFEX, the securities firm, after receiving notice of such cancellation, may not accept such customer's request for new loan transactions, and shall notify such customer to close out any loan transactions, and terminate the loan contract after the closeout.
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34     In securities business money lending conducted by a securities firm, with respect to customers posting collateral in the form of securities being purchased by the customers, if the amount of financing made available to customers on any single business day exceeds 50 percent of the securities firm's NAV or reaches NT$1 billion, or if the outstanding balance of financing to customers exceeds 100 percent of the securities firm's NAVh, the securities firm must control risks in accordance with the internal control system.
36     These Operating Rules shall be jointly drafted by the TWSE and TPEx and TDCC and take effect after having been submitted to and approved by the competent authority. Subsequent amendments thereto shall be effected in the same manner.