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Title	Taiwan Depository and Clearing Corporation Directions for the Handling of Cross-Border Custody of Foreign Securities CH
Date	2020.09.25 ( AMENDMENT )

Article Content

Chapter 1 General Principles

Article 1	These Directions are adopted pursuant to Articles 3, 8-1, 66, 67, 95-1 to 95-8, and 101 of the Operating Rules of the Taiwan Depository & Clearing Corporation (TDCC).
Article 2	A cross-border custody participant authorizing TDCC to handle cross-border custody of foreign securities is required to have an electronic certificate recognized by TDCC, and to submit the following documents: Custody agreement. Application for account opening/cancellation/amendment for cross-border custody of foreign securities. Photocopy of the document evidencing company or business registration. Seal specimen card. Other documents as required. After TDCC receives the application from a cross-border custody participant and checks the relevant documents for accuracy, the following procedures shall be followed: TDCC will submit the application to the foreign depository and clearing institution (hereinafter, "foreign depository") to open a cross-border custody participant segregated account ("segregated account"), which shall be used for matters in connection with securities held by the participant, including settlement of cash and securities, transferring of cash and securities, foreign exchange, securities lending, cross-border securities transfers, tax identity registration, corporate actions, and account book entries for cash and securities. After TDCC has input the cross-border custody participant's code, authorized user name, and certificate identification number into the cross-border custody system, it will notify the cross-border custody participant.
Article 3	After the cross-border custody participant receives the notice from TDCC, it shall perform a "User Password Change" transaction, and after changing its initial password, it shall also perform a "User Maintenance" transaction to set up the user's ID and its authority, so that the designated personnel can carry out relevant operations.
Article 4	After TDCC has opened a segregated account with the foreign depository, it will notify the cross-border custody participant, and then the participant shall perform a "Sub-Account Setup" transaction to create a sub-account. After the cross-border custody participant has completed the account opening procedures under the preceding paragraph, TDCC shall set up a cross-border custody account book for the participant, recording its name, location, uniform ID as a profit-seeking enterprise or tax withholding entity, transaction details, and the balance of cash and securities in custody.

Chapter 2 Cross-Border Custody Operations

Article 5	When a cross-border custody participant applies to TDCC for handling of settlement of cash and securities, or transferring of securities, it shall perform a "Settlement Instruction" transaction, or submit by fax to TDCC a Settlement Instruction Letter affixed with its signature/seal on file. The participant shall ensure that the cash or securities payable are on deposit in its segregated account before the settlement date. After checking the information under the preceding paragraph for accuracy, TDCC will notify the foreign depository to carry out the settlement operations. Once the foreign depository has notified TDCC of the completion of the settlement process and made the relevant entries of cash and securities for the segregated account, TDCC will record them in the cross-border custody participant's account book, and notify the cross-border custody participant. When a cross-border custody participant carries out the operation under paragraph 1, but finds no transaction-counter-party-information provided in TDCC's cross-border custody system for execution, the participant shall notify TDCC to create the transaction counterparty file in the cross-border custody system, and then perform the transaction under paragraph 1 over again.
Article 6	When a cross-border custody participant applies to TDCC for handling cash movement from its segregated account to a different financial institution, or to another account at the same foreign depository, it shall perform respectively an "Outward Cash Remittance" transaction or a "Cash Transfer" transaction, or submit by fax to TDCC a Cash Instruction Letter affixed with its signature/seal on file. After checking the information under the preceding paragraph for accuracy, TDCC will notify the foreign depository to carry out the remittance or transfer. Once the foreign depository has notified TDCC of the completion of the cash movement process and made the relevant entries, TDCC will record them in the cross-border custody participant's account book, and notify the cross-border custody participant.
Article 7	When a cross-border custody participant applies to TDCC for receipt of cash with its segregated account, it shall perform an "Inward Cash Remittance" transaction, or submit by fax to TDCC a Cash Instruction Letter affixed with its signature/seal on file. After checking the information under the preceding paragraph for accuracy, and once the foreign depository has completed the inward remittance operation and made the relevant entries for the segregated account, TDCC will record them in the cross-border custody participant's account book, and notify the cross-border custody participant.
Article 8	When a cross-border custody participant applies to TDCC for transfer of securities and cash between its own sub-accounts, it shall perform respectively a "Securities Transfer-sub a/c" transaction or "Cash Transfer-sub a/c" transaction, or submit by fax to TDCC a Settlement Instruction Letter or Cash Instruction Letter affixed with its signature/seal on file. After checking the information under the preceding paragraph for accuracy, TDCC will record it in the cross-border custody participant's account book, and notify the cross-border custody participant.
Article 9	When a cross-border custody participant applies to TDCC for foreign exchange, it shall perform a "Foreign Exchange" transaction, or submit by fax to TDCC an FX Instruction Letter affixed with its signature/seal on file. After checking the information under the preceding paragraph for accuracy, TDCC will notify the foreign depository to carry out the foreign exchange conversion. After the foreign depository has notified TDCC of completion of foreign exchange and made the relevant entries for the segregated account, TDCC will record them in the cross-border custody participant's account book and notify the cross-border custody participant.
Article 10	When a cross-border custody participant applies to TDCC for securities lending service, it shall submit an application indicating whether it will use the basic securities lending service on an automatic basis or on a non-automatic (opportunity, case-by-case) basis, or will use the securities lending extended (plus) service, and deliver the application form affixed with its signature/seal on file to TDCC. After checking the information under the preceding paragraph for accuracy, TDCC will notify the foreign depository to proceed. Once the foreign depository has notified TDCC of the completion of the operation for setting up of the service, TDCC will inform the cross-border custody participant. When a cross-border custody participant applies to use the basic securities lending service on an automatic basis or securities lending extended (plus) service, the foreign depository will automatically carry out the securities lending operation based on market needs. When a cross-border custody participant applies to use the basic securities lending service on a non-automatic (opportunity, case-by-case) basis, TDCC will receive a notice from the foreign depository of the need for securities borrowing and forward the notice to the cross-border custody participant. TDCC will then notifying the foreign depository to carry out the securities lending operation after obtaining the confirmation from the participant. Once the foreign depository has notified TDCC of the completion of the securities borrowing operation and made the relevant entries for the segregated account, TDCC will record them in the cross-border custody participant's account book, and notify the cross-border custody participant with relevant statements.
Article 11	When a cross-border custody participant applies to TDCC for transfer of securities, including those regulated by the Taipei Exchange (TPEx) Rules Governing Management of Foreign Currency Denominated International Bonds, and foreign currency denominated bonds issued overseas by Taiwan nationals or foreign nationals and approved by TPEx for registration, from its segregated account at the foreign depository to its depository account in TDCC, or from its depository account in TDCC to its segregated account at the foreign depository, the transfer shall be handled in accordance with Article 19 of the TDCC Directions for the Handling of Book-Entry Transfer Operations for Foreign Currency Denominated Bonds.
Article 12	When a cross-border custody participant carries out any operation under Articles 5 to 11 with any shortfall in cash or securities TDCC will notify the participant to take further measures.

Chapter 3　Principal and Interest Payment Operations

Article 13

After receiving a principal and interest payment notice from the foreign depository, TDCC will carry out the process for distribution of the principal and interest payments to participants' sub-accounts.
When TDCC distributes principal and interest amounts to sub-accounts, the amounts of principal and interest due shall be calculated to the smallest unit of the foreign currency to be paid. If there is any remainder, the sub-accounts will be ranked in sequential order from largest to smallest based on the amount of their unpaid portion, and the sub-accounts will receive one smallest unit each in order of their ranking until all of the remainder has been distributed. If two or more sub-accounts are owed an equal amount, distribution to them shall be made in random order.

Article 14

When any interest is accrued or expense incurred in a cross-border custody participant's segregated account, the foreign depository will make a credit or debit on its own discretion to the participant's segregated account and make the relevant book entries. Once the foreign depository has completed the cash credit or debit operation, TDCC will record it in the participant's account book, and notify the cross-border custody participant.

Chapter 4 Other Operations

Article 15	When a cross-border custody participant applies for tax identity registration operations to any market in any country, it shall submit an application affixed with its signature/seal on file and complete the application document provided by the foreign depository, and deliver them together to TDCC. After checking the information under the preceding paragraph for accuracy, TDCC will forward the application documents to the foreign depository. Once the foreign depository has notified TDCC of completion of the tax registration operation, TDCC will inform the cross-border custody participant.
Article 16	When TDCC receives notices from the foreign depository about corporate actions by issuers of securities, it will immediately generate the corporate action information accordingly into the cross-border custody system, and notify the participant to take further measures. If the content of the corporate action information under the preceding paragraph requires a response from the cross-border custody participant, the participant shall, within the deadline indicated by TDCC, perform a "Corporate Action Response" transaction, or notify TDCC by submitting a fax with required documents affixed with its signature/seal on file. TDCC will then forward the response to the foreign depository to take further measures. If a corporate action involves any change of balance of cash or securities, once the foreign depository has notified TDCC of completion of book entries about the movement in the segregated account, TDCC will record it in the cross-border custody participant's account book, and notify the cross-border custody participant.
Article 17	A cross-border custody participant may query for an Asset Valuation Statement presenting the valuation of the securities balance at the end of each month. When a cross-border custody participant needs to query the Asset Valuation Statement of a specific day for the securities it holds, it shall, on the business day before that specific day, perform an "Asset Valuation Statement Application" transaction, or submit an application affixed with its signature/seal on file to TDCC by fax. After checking the application under the preceding paragraph for accuracy, TDCC will notify the foreign depository to proceed. Once the foreign depository has notified TDCC of the completion of the Asset Valuation Statement of the specific day, TDCC will notify the cross-border custody participant.
Article 18	A cross-border custody participant may perform an "Inventory Balance Statement Query", "Cash Balance Statement Query", "Settlement Statement Query", or "Cash Movement Statement Query" transaction, to check the balance of cash and securities with its details in its cross-border custody account book. When the participant finds any discrepancy, it shall promptly notify TDCC to undertake a joint investigation to determine the cause and make a correction.

Chapter 5 Supplementary Provisions

Article 19

All matters on which these Directions are silent shall be governed by the Operating Rules of the Taiwan Depository & Clearing Corporation and other applicable regulations.