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Basis of promulgation
These Rules are promulgated under Article 58 of the Operating Rules of the Taiwan Futures Exchange Corporation ("TAIFEX").
A futures commission merchant ("FCM") reporting default by a principal shall do so in accordance with the provisions of these Rules.
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Procedures for reporting default
Where either of the instances of breach set forth under Article 58, paragraph 1 of the Operating Rules of the Taiwan Futures Exchange Corporation arises with respect to a principal, the FCM shall report to the TAIFEX in accordance with the following provisions, and shall simultaneously notify the principal:
- Computer transmission:
- Time of entry:
- FCMs shall enter the default information into the TAIFEX's computer system beginning from 2 p.m. and no later than 5 p.m. on the day of the default.
- Information entered by an FCM in accordance with the time frame provided shall be posted by the TAIFEX on its public announcement information system by 6 p.m. of the same day.
- Information to be entered:
FCMs shall enter the default information item by item as indicated on the display on the TAIFEX's computer interface page.
- Telephone/facsimile
When computer transmission is not possible due to occasional malfunctions in the computer transmission lines, FCMs shall immediately notify the TAIFEX by telephone and produce a written version of the required information, and after affixing the signature/seals of the company and its responsible person, deliver it to the TAIFEX via telephone facsimile machine. The TAIFEX shall then proceed to enter the information based upon the content of the facsimile.
- Electronic filing of data:
Where the same individual principal amasses a default amount of NT$800,000 or greater within the same reporting day, or a principal fails to perform clearing and settlement obligations, the FCM shall, in addition to reporting to the TAIFEX in accordance with the preceding subparagraph, file a report with the TAIFEX by electronic means in accordance with the following provisions, by the next business day:
- Content of the report:
- Full name of the principal
- Account number
- Identification card number
- Address
- Facts of the default
- Electronic copies of the following documentation shall be attached:
- Identification card (front and back)
- Consignment contract
- Trade confirmation statement
- Margin call notification documents or clearing and settlement notification documents
- Consignment slip for FCM to liquidate futures trading contract, transaction slip or evidentiary documentation of clearing and settlement.
Where an FCM fails to report default by a principal as required under these Rules, the TAIFEX may impose a breach penalty of not less than NT$10,000 and not more than NT$50,000, or additionally take other necessary dispositive measures.
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Procedures for notification of default
Following receipt of a default report from an FCM, the TAIFEX, in addition to posting it on the TAIFEX's public announcement information in accordance with the preceding point, shall also, based on the content of the report, inform the Taiwan Stock Exchange Corporation and the Taipei Exchange. FCMs shall handle the matter in accordance with the provisions of Article 25 of the Rules Governing Futures Commission Merchants. The FCM reporting the default shall be responsible for all instances in which the equity of the principal has been impaired or other disputes have occurred.
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Procedures for voidance of default
Where any of the following circumstances is present in a case of default by a principal, the FCM shall be responsible for investigating and verifying such circumstances, and shall submit a report letter to the TAIFEX to void the default, with specific evidentiary documents attached:
- Where the principal, having been notified by the FCM that its equity amount had fallen to a negative figure, was unable, due to an error in banking operations, to make up the entire negative amount within the prescribed time period or to conduct clearing and settlement at the appointed time.
- Where an FCM, through an oversight in operations, erroneously reported the principal as in default.
- Following confirmation though arbitral award, final and unappealable court judgment or any other public document having the same validity as a final and unappealable judgment that the principal has committed no default.
- When the principal in a discretionary trade submits evidentiary documents after occurrence of default showing that the report of default for the given futures trading account was due to the consignee's failure to perform responsibilities arising out of an unauthorized trade by the consignee.
- There are other facts present sufficient to prove that the default is not attributable to the fault of the principal.
The TAIFEX will not process a report letter filed by an FCM to void a default where the FCM has failed to thoroughly investigate and verify the circumstances of default under the preceding paragraph or has failed to attach specific evidentiary documents, or where formal examination of the documentation and reasons submitted by the FCM fails to clearly absolve the principal of responsibility. The FCM that reported the default shall be wholly liable in the event of any resultant injury to the equity of the principal or where any other disputes occur.
In the event an FCM filing for the voidance of a default contains any falsified, the TAIFEX may handle the matter under Article 130 of the TAIFEX’s Operating Rules.
Where an FCM erroneously reports a principal as in default, the FCM shall act on its own to discipline the employee who committed the error.
Where an FCM has filed a report letter for voidance in a case of principal default and has received the approval of the TAIFEX, the voidance of the case shall promptly be closed and filed for reference. Where [the Taiwan Stock Exchange Corporation and the Taipei Exchange] had already been notified of the facts of a reported default prior to the filing of a report for voidance, the TAIFEX shall post the details of the voidance on its public announcement information system prior to market opening on the following business day, and shall also notify the Taiwan Stock Exchange Corporation and the Taipei Exchange.
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Procedures for case closure:
Following the TAIFEX's notification [of the Taiwan Stock Exchange Corporation and the Taipei Exchange] of a case of default by a principal, if five years have elapsed, or if less than five years have elapsed but all disputes over accounts receivable and accounts payable have been settled, the FCM shall file a report with the TAIFEX by electronic means; the TAIFEX shall post the details of case closure on its public announcement information system prior to market opening on the following business day, and shall also notify the Taiwan Stock Exchange Corporation and the Taipei Exchange.
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These Rules, and any amendments hereto, shall take force after approval and recordation by the competent authority.
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