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Article NO. Content

Title:

Taiwan Stock Exchange Corporation Rules Governing Early Warnings for Overall Operational Risk of Securities Firms  CH

Amended Date: 2016.09.05 
Categories: Market Supervision > Regulation of Securities Firms
Article 6
  1. TWSE
    1. In the event of an early warning given for a weekly scoring index, reviews (audits) may be made within one week.
    2. If a party receives a monthly score below Grade C or an early warning is given for an index below, the party may be selected for review (audit).
      1. Ratio of risk equivalent of money trust and securities trust under wealth management to net self-owned capital.
      2. Ratio of risk equivalent in OTC derivatives market to net self-owned capital.
      3. An early warning is given for both the ratio of balance of funds and securities loans and margin transactions by securities firm to net worth and ratio of balance of subject small-cap stocks in funds and securities loans and margin transactions by securities firm to the total balance.
      4. An early warning is given for both the ratio of balance of funds and securities loans and margin transactions by securities firm to net worth and ratio of balance of subject securities whose price is too volatile or trading volume is excessively abnormal in funds and securities loans and margin transactions by securities firm to total balance.
      5. Ratio of amount of monthly loss on valuation of issue of call (put) warrants to balance of issued call (put) warrants by end of month.
      6. Ratio of risk equivalent in client's funds and securities in securities firm's custody to net self-owned capital.
    3. If a party receives a monthly score of Grade D for two consecutive months and shows no sign of improvement, the party may be subject to review (audit) within one month.
    4. The required multiple may be reduced according to the provisions of Article 28-1, Paragraph 5 of the Operating Rules.
  2. GTSM:
    1. If an early warning is given for a weekly scoring index, a monthly score below Grade C is given, or a monthly score of Grade D is given for two consecutive months and there is no sign of improvement, the required multiple may be reduced according to the provisions of Article 35, Paragraph 9 of the Operating Rules and the party may be subject to audit.
    2. If an early warning is given for a securities firm's ratio of bonds business or ratio of money equivalent of risks in OTC derivatives market to net self-owned capital, the securities firm may be subject to audit and the quota for its trading of bonds may be reduced according to the provisions of Article 79 of the Operating Rules.
  3. Taiwan Securities Association (TWSA): An early warning is given for a securities firm's ratio of total dollar amount of firm underwriting that remains available to net worth.
    1. If an early warning is given for a securities firm, the TWSA shall request the securities firm to provide an explanation within a specified time limit and further request the firm to make improvements if necessary.
    2. If an early warning is given for an index for two consecutive months, the party shall be subject to review; where necessary, the TWSA may limit the quota for firm underwriting by the securities firm in the future according to the applicable TWSA policies and rules.
  4. Taiwan Futures Exchange: An early warning is given upon the evaluation of a securities firm engaging in futures business concurrently:
    1. The securities firm will be subject to review (audit) on a priority basis.
    2. The securities firm shall be subject to written review (audit) or placed on the list of parties subject to special inspection.
    3. Other necessary measures may be taken.