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With a view to safeguard the interests of futures traders, a futures commission merchant ("FCM") may, in compliance with these Guidelines, appoint an introducing broker ("IB") to assist in the processing of requests from futures traders to withdraw their deposited margins. For matters on which these Guidelines are silent, applicable futures laws and regulations as well as the internal control system of the FCM and the IB shall govern.
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An FCM appointing an IB to assist in the processing of margin withdrawal requests from futures traders shall enter into an agreement with the IB setting out the respective rights and obligations of the FCM and the IB. The contract shall stipulate at least the following matters:
- Operating methods and procedures for the assistance services delegated to the IB.
- Operating premises and facilities for the assistance services delegated.
- The assistance services for margin withdrawal requests may only be directed at futures traders that have an account with the IB at any of its operating premises for the placing of brokerage trading orders.
- If the IB commits a willful or negligent act in performing assistance services in processing a margin withdrawal request from a futures trader, the appointing FCM shall be liable to the futures trader or a third party for any damage or loss thus incurred, as if it were its own willful or negligent act.
The appointing FCM may not enter into any waiver agreement in advance with the IB excusing itself from the liability specified in subparagraph 4 of the preceding paragraph.
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An IB appointed by an FCM to assist in the processing of margin withdrawal requests from futures traders shall additionally include clauses to the following effect in the customer agreement the IB enters into with futures traders on behalf of the appointing FCM:
- It shall be made known to future traders that the IB performs the operations of processing margin withdrawal requests in an assisting capacity.
- If the IB commits a willful or negligent act in performing assistance services in processing a margin withdrawal request from a futures trader, the appointing FCM shall be liable to the futures trader for any damage or loss thus incurred, as if it were its own willful or negligent act.
- Any other matters specified in the agreement entered into between the IB and the appointing FCM under the preceding Point, that involve the interests of futures traders.
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An IB appointed by an FCM to assist in the processing of margin withdrawal requests from futures traders may only process requests submitted by futures traders in writing or over the telephone, and the FCM and IB shall comply with the following:
- The IB shall designate registered and qualified associated persons to conduct the operations of processing margin withdrawal requests. None of these designated associated persons, however, may be an associated person handling brokerage trading business or an internal auditor.
- If the IB accepts the submission of withdrawal requests in writing, it shall request futures traders to fill out a margin withdrawal request form or other relevant document and affix thereto their seal or signature used for the opening of the account. The withdrawal request form or other document shall then be delivered to an authorized person and a supervising officer of the IB for review of the information on the account name, futures account number, currency and amount of the margin withdrawal, name of the designated paying financial institution, passbook account number, and seal or signature specimen retained on record at the time of account opening, and both of them shall affix their signature or seal to the margin withdrawal form or document to demonstrate their accountability.
- If the IB accepts the submission of withdrawal requests by telephone, it shall designate authorized persons to take such phone calls and ask the futures trader to provide at least two items of the trader's basic information, or set up a telephone-based password, to verify the identity of the futures trader. The IB shall notify futures traders in writing of the telephone number, and in the case of a change, the new telephone number. After having verified the identity of the futures trader, the authorized person shall fill out the margin withdrawal request form or any other relevant document based on the instruction of the futures trader, specifying in particular the call date and time, account name, futures account number, currency and amount of the margin withdrawal, name of the designated paying financial institution, and passbook account number. The form or document shall then be delivered to an authorized officer for review and approval, and both the authorized person and the authorized officer shall affix their signature or seal to the margin withdrawal form or document to demonstrate their accountability. When receiving margin withdrawal requests from futures traders over the telephone, the IB shall record the telephone conversation synchronously for evidential reference and retain the recording for no less than 1 year. In the event of a dispute, however, the recording shall be retained until resolution of the dispute.
- The IB shall, within the time frame required by the appointing FCM, prepare and produce margin withdrawal statements in printed form, specifying the date, time, withdrawer account name, futures account number, currency and amount of margin withdrawal, and, additionally for withdrawal requests received by telephone, the date and time indicated in the computer record for the telephone call. The IB shall have its authorized persons and officers check each item on the withdrawal request documentation, together with the date and time in the computer record, and affix their signature or seal thereto to acknowledge their confirmation. The IB shall then send the margin withdrawal request documentation to the appointing FCM by facsimile or otherwise, and afterward deliver the original withdrawal request form to the appointing FCM within seven business days, or, in the case of one single margin withdrawal request in an amount of NT$1 million or higher, or separate margin withdrawal requests in a cumulative total of NT$10 million or higher, within three business days.
- Upon receipt of the duplicate copy of withdrawal request documentation sent by the IB, the FCM shall cause a person charged with the receipt and payment of margins to prepare and produce a margin withdrawal statement in printed form and then check on an item-by-item basis the account name, futures account number, currency and amount of the margin withdrawal, name of the designated paying financial institution, passbook account number, and seal or signature specimen retained on record at the time of account opening. When no error is found, the FCM shall cause an authorized person and an authorized officer to affix their signature or seal thereto to acknowledge confirmation. The FCM shall then proceed with subsequent operations in accordance with its internal control system.
- Upon receipt of the original margin withdrawal documentation delivered by the IB, the FCM shall cause a different person, also charged with the receipt and payment of margins, to check whether the original documentation complies with the copy sent previously, and if any non-compliance is found, request the IB to correct it immediately. If the interest of the FCM, IB, or futures trader is thus prejudiced, a report shall be submitted to the general manager or president of the FCM for taking corresponding action, and such matters shall be documented in writing, to be preserved together with the original margin withdrawal documentation.
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An IB maintaining a telephone system, in which personal identity can be verified by telephone-based password, for purposes of assisting in the processing of margin withdrawal requests from futures traders shall comply with the following:
- To ensure the confidentiality of telephone-based passwords, the IB shall cause the passwords to be generated and delivered via password letters, and in the case of personal delivery, retain the statements signed by futures traders for acknowledgement of receipt. Initial passwords shall be generated on a random basis, and not using a default initial value (e.g. 0000) or based on the basic information of futures traders. The telephone system shall have a function that when accessing the system for the first time, a futures trader cannot proceed unless he or she has changed the initial password, and that if the futures trader enters wrong passwords for three times, the system connection shall be cut off.
- The IB shall assign a person to monitor the facilities of or in connection with the telephone system, and shall have a reporting mechanism, contingency plan, as well as response procedures in place to deal with any unusual records identified on the telephone system. If the development or maintenance of the telephone system having the identity verification function is outsourced to an outside contractor, the IB shall enter into an agreement with the contractor setting out, among other matters, the confidentiality obligations with respect to the confidential information of futures traders. The IB shall assign a person to accompany and supervise the outsource contractor when performing software or hardware maintenance and document the operations in writing for future reference.
- Matters regarding the division of functions and responsibilities of the data processing departments, application system maintenance and management, computer system management, computerized operations management, and backup and recovery operating systems related to the hardware and software facilities of the telephone system shall all be duly implemented in accordance with the Examination System for the Establishment of Information and Communications Security for Future Commission Merchants as promulgated by the TAIFEX.
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The original and duplicate copies of margin withdrawal documentation, margin withdrawal statements, and other written documents specified in these Guidelines shall be retained for no less than five years. In the event of a dispute, however, they shall be retained until resolution of the dispute.
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An FCM and its appointed IB shall have in place mechanisms that ensure the confidentiality, integrity, and non-repudiation of any transmitted message and authenticate the identify of the sender and the receiver of the message. The FCM shall assign associated persons, other than those who are charged with the handling of brokerage trading orders for customers, or internal auditors to take charge of the sending and receiving of relevant documents, and shall implement procedures to safeguard against unauthorized disclosure of information.
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An FCM and an IB shall each set up its respective operating procedures conforming to these Guidelines, and shall include these procedures as part of its internal control and internal audit activities to monitor their implementation.
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