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If the regulatory capital adequacy ratio of a securities firm fails to reach 100 percent, the restrictions on the multiple by which the total reported amount of its buy or sell quotes entered in brokerage or proprietary trading in a single day may not exceed its net worth, and related measures, are as follows:
- When the capital adequacy ratio of a securities firm reaches 75 percent or greater but fails to reach 100 percent, the abovementioned multiple may be adjusted to 1.4-fold. When after adjustment of the multiple as specified above, the capital adequacy ratio still fails to reach 100 percent for three consecutive months, the multiple may be adjusted to 1.2-fold.
- When the capital adequacy ratio of a securities firm reaches 50 percent or greater but fails to reach 75 percent, the abovementioned multiple may be adjusted to 1.2-fold. When after adjustment of the multiple as specified above, the capital adequacy ratio still fails to reach 75 percent for three consecutive months, the multiple may be adjusted to 1-fold.
- When the capital adequacy ratio of a securities firm fails to reach 50 percent, the abovementioned multiple may be adjusted to 1-fold. When after adjustment of the multiple as specified above, the capital adequacy ratio still fails to reach 50 percent for three consecutive months, the TPEx may halt the securities firm’s proprietary and brokerage trading business and report to the competent authority in writing pursuant to Article 98, paragraph 1, subparagraph 5 of the TPEx Rules Governing Securities Trading on the TPEx.
- After a measure to halt trading has been imposed on a securities firm under the preceding paragraph, if its capital adequacy ratio still fails to reach 50 percent for three consecutive months from the date of the halting of its trading, the TPEx may terminate its contract for TPEx trading of securities pursuant to Article 97, subparagraph 4 of the TPEx Rules Governing Securities Trading on the TPEx.
When the capital adequacy ratio of a securities firm fails to reach 100 percent, the TPEx may, in addition to imposing the controls and measures set out in the preceding paragraph, restrict the securities firm from, through its proprietary trading department or using proprietary funds, making any further purchase of TWSE listed or TPEx listed stock, and limit its trades to sales only.
After a measure to prohibit any further purchase of TWSE listed and TPEx listed stock has been imposed on a securities firm under the preceding paragraph, if there is improvement in its capital adequacy ratio, the securities firm may apply for lifting of the restriction in accordance with the following standards:
- Standards for completely lifting the restriction:
- Its capital adequacy ratio in the current month reaches 200 percent or above. However, when a securities firm applies and is approved for a complete lifting of the restriction on this basis, if its capital adequacy ratio subsequently fails to reach 150 percent at any time after the application date, the TPEx will reimpose the restriction on purchasing TWSE listed and TPEx listed stock.
- Its capital adequacy ratio reaches 150 percent or above for three consecutive months.
- Standards for partially lifting the restriction:
If its capital adequacy ratio in the current month reaches 120 percent or above, it may, through its proprietary trading department or using proprietary funds, purchase TWSE listed or TPEx listed stock within a limit of 30 percent of its net funds available for use. If its capital adequacy ratio in the current month reaches 150 percent or above it may, through its proprietary trading department or using proprietary funds, purchase TWSE listed or TPEx listed stock within a limit of 50 percent of its net funds available for use. However, when a securities firm applies on this basis, if its capital adequacy ratio subsequently fails to reach 120 percent at any time after the application date, the TPEx will reimpose the restriction on purchasing TWSE listed and TPEx listed stock. A securities firm's net funds available for use referred to above are calculated by the following formula, and are based on the data on the net amounts as recorded in the computer files of the Taiwan Stock Exchange Corporation: Net funds available for use ＝ Current assets － Current liabilities ＋ Clearing and settlement fund ＋ Operating bond.
If a securities firm is subject to a measure restricting purchase of stock under paragraph 2 but continues to make buy trades, or obtains a partial lifting of the restriction through application pursuant to subparagraph B of the preceding paragraph but it makes purchases of stock, through its proprietary trading department or using proprietary funds, exceeding the limit set on the use of its net available funds, the TPEx may impose a penalty on the securities firm under Article 95, subparagraph 1 of the Rules Governing Securities Trading on the TPEx. The abovementioned penalty shall be paid to the TPEx within two days after receipt of the notice from the TPEx.
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