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If the capital adequacy ratio of a securities firm is less than 100 percent, the relevant measures and restrictions on the number of folds by which the total reported amount of brokerage or dealer trading entered in a single day may not exceed the net funds available for use are as follows:
- Where the capital adequacy ratio of a securities firm is less than 100 percent but more than 75 percent, the abovementioned number of folds may be adjusted to seven. Where the capital adequacy ratio fails to reach 100 percent for three consecutive months, the number of folds may be adjusted to six.
- Where the capital adequacy ratio of a securities firm is less than 75 percent but more than 50 percent, the abovementioned umber of folds may be adjusted to six. Where the capital adequacy ratio fails to reach 75 percent for three consecutive months, the number of folds may be adjusted to five.
- Where the capital adequacy ratio of a securities firm is less than 50 percent, the abovementioned number of folds may be adjusted to five. Where the capital adequacy ratio fails to reach 50 percent for three consecutive months, the Taiwan Stock Exchange Corporation ("TWSE") may suspend trading of its dealing or brokerage business and report to the competent authority in writing pursuant to Article 142, Paragraph 1, Subparagraph 4 of the Operating Rules of the TWSE ("Operating Rules"). Where the capital adequacy ratio fails to reach 50 percent for three consecutive months after the date of such suspension, the TWSE may terminate the market usage contract pursuant to Article 141, Subparagraph 6 of the Operating Rules.
If the capital adequacy ratio of a securities firm is less than 100 percent, the TWSE may, in addition to controlling the total amount of its brokerage or dealer trading, restrict its trading department from purchasing TWSE listed or GTSM listed stock and limit its trading to sale only.
If the capital adequacy ratio of a securities firm is less than 100 percent and the TWSE has restricted its purchase of TWSE listed or GTSM listed stock, the securities firm may apply for lifting the restriction according to the following standards after said situation has been improved:
- Standards for lifting the restriction entirely:
- The improved capital adequacy ratio in that month reaches 200 percent or above. However, if the capital adequacy ratio of the securities firm applying for a total lift based on this standard falls below 150 percent after the application date, the TWSE will recommence the restriction on purchasing TWSE listed or GTSM listed stock.
- The capital adequacy ratio reaches 150 percent or above for three consecutive months.
- Standards for partially lifting the restriction:
If the securities firm has improved its capital adequacy ratio in that month to 120 percent or above, its trading department may purchase TWSE listed or GTSM listed stock up to 30 percent of its net funds available for use. If the securities firm has improved its capital adequacy ratio in that month to 150 percent or above, its trading department may purchase TWSE listed or GTSM listed stock up to 50 percent of its net funds available for use. However, if the capital adequacy ratio of the securities firm applying for a partial lift based on this condition falls below 120 percent after the application date, the TWSE will recommence the restriction on purchasing TWSE listed or GTSM listed stock.
If a securities firm is restricted from purchasing TWSE listed or GTSM listed stock under the second paragraph but continues to purchase such stock, or obtains a partial lift of the restriction upon application pursuant to Subparagraph B of the preceding paragraph but its trading department makes purchases exceeding the permitted amount, the TWSE may impose a default penalty according to Article 138, Paragraph 1, Subparagraph 1 of the Operating Rules. The abovementioned penalty shall be paid to the Finance Department of the TWSE within two days after receipt of notice from the TWSE.
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