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Article NO. Content


Regulations Governing Custody and Investment of Funds by Securities Firms on Behalf of Customers  CH

Amended Date: 2015.01.21 
Article 16     A securities firm that keeps custody of and invests funds on behalf of customers shall enter into a contract with customers regarding the custody and investment of funds.
    The contract of the preceding paragraph shall specify at least the following matters:
  1. The type and the amount of funds to be kept under custody and used for investment.
  2. The required minimum amount for investment.
  3. The types of investment instruments.
  4. The method and time of notification regarding the individual underlyings in each type of investment instrument under the preceding subparagraph that the securities firm decides to invest in.
  5. A securities firm that keeps custody of and invests funds on behalf of a customer shall do so pursuant to the customer's directions, and may not be involved in making investment judgments unless it has obtained the customer's authorization on the terms and conditions of transaction for individual investment instruments.
  6. The securities firm shall invest the funds in the cash management account under the name of "XXX Securities Firm's Customer Cash Management Account."
  7. The priority of disposition of investment instruments when the customer has funding needs.
  8. The application procedure by which customers withdraw their funds.
  9. Where a securities firm keeps custody of and invests funds on behalf of customers, the risks and profits and losses arising from the investment shall be born and enjoyed solely by the customers; the securities firm shall not enter into any stipulation with customers regarding the sharing of investment profits and losses. The securities firm shall also disclose in the contract the potential risks with respect to investments of funds and to dispositions of various underlyings for purposes of meeting the funds needs of customers.
  10. When the investment instrument is a repo-style transaction, if a single repo-style transaction is undertaken that consolidates the funds of two or more customers and some of the customers terminate their contracts early, triggering the circumstances for early termination of the transaction, the securities firm shall obtain approval from the other customers to allow it to terminate the contract early, on its own, in such circumstances. The securities firm shall handle the subsequent matters pursuant to Article 18.
  11. A securities firm that uses the cash management account to conduct a transaction in any investment instrument specified in Article 11 with its own proprietary account or the account of any company that is an interested party of the securities firm shall obtain its customers' approval, and the conditions for trading may not be less favorable than for other trading counterparties of the same type, and the securities firm shall disclose the aforementioned trading information.
  12. The securities firm shall keep a record of fund payments and receipts and related investments in the course of operating this business.
  13. Matters related to the interest generated on customer funds kept in custody by the securities firm in the cash management account, the profits and losses from the investments, and the management fee rates.
  14. When a securities firm discontinues the operation of this business due to noncompliance with Article 6, or when customers terminate the contract early or do not extend the contract upon expiration, then on the following business day and within the following five business days, respectively, the securities firm shall transfer customer funds under custody in the cash management account and the proceeds from closing out investments already made to the securities transfer accounts opened by customers for the transactions under Article 10, paragraph 1, subparagraph 1. The securities firm shall disclose to customers potential losses from the aforementioned method of handling the funds.
  15. The effective date and duration of the contract, and the procedures for amendment and termination of the contract.
  16. Dispute resolution.
    A model for the contract referred to in paragraph 1 shall be drafted by the Taiwan Securities Association and submitted for the competent authority's approval.