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Chapter VII Default and Extraordinary Event Procedure |
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Failure by a customer to make timely deposit of margin purchase margin or short sale margin under Article 19 constitutes an event of default, in which case the securities firm shall immediately proceed by the mutatis mutandis application of Article 19 of the Taiwan Stock Exchange Corporation Rules Governing Brokerage Contracts of Securities Brokers and Article 7 of the GreTai Securities Market Account Opening Contract for Trading of Securities on the TPEx; also, on the basis of the securities firm's report, the TWSE or TPEx will forward notice to all securities finance enterprises and securities firms.
In the event of any default by the customer as specified under the preceding paragraph, and a balance remains in the customer's margin account, the securities firm shall, at the latest on the following business day, proceed by the mutatis mutandis application of the handling method under Article 81, paragraph 3 hereof to settle the account, and shall cancel the margin account; if there is no balance, the margin account shall be cancelled.
If any of the following circumstances applies to a customer, and a balance remains in the customer's margin account, the securities firm shall immediately notify the customer to close out all margin purchase and short sale trades on the next business day, after which it shall cancel the customer's margin account; if the customer fails to close out all margin trades within this time limit, the securities firm shall, by the mutatis mutandis application of Article 81, paragraph 3, close out the trades for the customer starting from the next business day:
- Failure to perform a settlement obligation on time under Article 91 of the TWSE Operating Rules or Article 87 of the TPEx Trading Rules; provided that this does not apply to an event of default under paragraph 1.
- Default under Article 58 of the Operating Rules of the Taiwan Futures Exchange Corporation.
- Default under Article 33 of the Operating Rules for Securities Lending by Securities Firms.
- Violation under Article 28 of the Operating Rules for Securities Business Money Lending by Securities Firms.
If an event of default under paragraph 1 or 3 occurs to a discretionary investment account, the preceding three paragraphs shall apply, unless the cause is unauthorized trading, in which case the provisions of Article 91-1 of the TWSE Operating Rules or Article 87-5 of the TPEx Trading Rules shall be followed.
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Matters involving securities transactions and futures transactions with which a offshore foreign institutional investor designating two or more custodian institutions shall comply are governed by, in addition to these Guidelines, securities and exchange laws and regulations, futures transactions laws and regulations, the Overseas Chinese and Foreign Nationals Investment Regulations, Directions for Futures Trading by Overseas Chinese and Foreign Nationals (Overseas Chinese and Foreign Nationals Futures Trading Directions), and the relevant rules, regulations, public announcements and letter directives etc. of the TWSE, Taiwan Futures Exchange Co., Ltd., Taipei Exchange, and Taiwan Depository & Clearing Corporation (TDCC).
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A offshore foreign institutional investor designating two or more custodian institutions shall designate one primary custodian institution and not more than three secondary custodian institutions and shall apply to the TWSE for registration in accordance with the Operation Directions for Applications by Overseas Chinese, Foreign Nationals, and Mainland Area Investors for Registration to Invest in Domestic Securities or Trade Domestic Futures.
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A offshore foreign institutional investor designating two or more custodian institutions shall comply with the following regulations upon the approval of its application for registration of its designation of two or more custodian institutions (Investor Designating Multiple Custodian Institutions):
- The caps on the funds to be utilized by an Investor Designating Multiple Custodian Institutions, on the outward remittances by such investor of proceeds from the sale of borrowed securities, and caps on the sales of securities borrowed by privately placed mutual funds and unit trusts, as under Article 4, paragraph 2, Article 14, paragraph 1, and Article 21 of the Overseas Chinese and Foreign Nationals Investment Regulations, shall be calculated based on the assets held in custody by the primary custodian institution and secondary custodian institutions as entrusted.
- When an Investor Designating Multiple Custodian Institutions applies for exchange settlement of proceeds from its securities investments in accordance with Article 6, paragraph 2 of the Overseas Chinese and Foreign Nationals Investment Regulations, whether there are earnings may be determined on the basis of the positions of the securities held in custody by the primary custodian institution and secondary custodian institutions as entrusted.
- With regard to its utilization of funds and securities inventories under Article 22 of the Overseas Chinese and Foreign Nationals Investment Regulations, an Investor Designating Multiple Custodian Institutions shall have its primary custodian institution and secondary custodian institutions establish separate accounts, and the previous day's inward and outward remittances shall be reported to the competent foreign exchange authority. Within 10 days of the end of each month, the primary custodian institution and secondary custodian institutions shall separately produce a statement of trades, inward and outward remittances of funds, and securities inventories for the previous month, to be reported to the competent foreign exchange authority and at the same time provided to the TWSE for registration.
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The TDCC shall, within three days of the commencement of the period of suspension of account transfer, notify the securities issuers of the data that it has compiled in accordance with Article 32 of the Regulations Governing Book-Entry Operations for Centrally Deposited Securities in connection with the owners of the securities held in its custody. The relevant data may include particulars of the centrally deposited accounts of the primary custodian institution that holds no position.
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A public company may, based on the content of the TDCC notice, enter in the shareholders' register the name of the dedicated account of the primary custodian institution of the Investor Designating Multiple Custodian Institutions, including information on account opening or changes in the mailing address etc.
A securities issuer as in Article 4, paragraph 1 of the Overseas Chinese and Foreign Nationals Investment Regulations is governed mutatis mutandis by the preceding paragraph concerning the use of the name of the dedicated account of the primary custodian institution.
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An Investor Designating Multiple Custodian Institutions engaging in futures trades shall comply with the following provisions:
- designate two or more agents as in Point 12 of the Overseas Chinese and Foreign Nationals Futures Trading Directions, and shall designate the primary custodian institution as the primary agent and a secondary custodian institution as a secondary agent
- With regard to the balance in New Taiwan dollars resulting from the cumulative realized New Taiwan Dollar profits gained combined with the amounts under Point 11, paragraphs 2 and 3 of the Overseas Chinese and Foreign Nationals Futures Trading Directions, the amounts in the various futures accounts as reported by the primary agent and secondary agent shall be calculated in the aggregate. Such amount as in an individual trader account or an individual omnibus account may not exceed NTD 300 million. The primary agent shall notify the Investor Designating Multiple Custodian Institutions of the aforementioned balance.
- Where the balance in New Taiwan dollars as mentioned in the preceding subparagraph exceeds the cap, the primary agent shall notify the Investor Designating Multiple Custodian Institutions to act in accordance with the time limit for exchange settlement and the balance requirement as stipulated in Point 11, paragraph 6 of the Overseas Chinese and Foreign Nationals Futures Trading Directions.
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| Article 82 |
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