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These Procedures govern the handling of the suspension of business because of a disposition, or the voluntary cessation of business, by the head office or a branch of a securities firm ("suspended firm"), or the termination of operations by a head office or branch (including voidance of its business license), and the handling of trading matters by a proxy firm.
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A suspended firm must hand over the performance of all matters relating to deposits, withdrawals, transfers, and transfers of title of securities held in central custody to a proxy securities firm designated by the TPEx. If only a branch of a securities firm has received a disposition suspending its business, then the head office or another branch of the same securities firm may serve as proxy to handle settlement matters. However, the TPEx may still appoint another securities firm to act as proxy under special circumstances, and note that fact in the public announcement of the suspension.
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Prior to the suspension of a securities firm's business, the TPEx may adjust the ratio stipulated in Article 35 of the Rules Governing Securities Trading on the TPEx of the total dollar amount of trade orders that it may process relative to its net worth, and notify the competent authority for recordation.
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Procedures for the handling of trading matters by the suspended firm and the proxy firm:
- Ordinary trading matters:
- Matters required to be handled by the suspended firm:
- The suspended firm must with all due speed post the TPEx's notice of suspension of business on the bulletin board of its trading room, and publicly announce and notify its customers of the following:
- Beginning from the date of suspension, all deposits, withdrawals, transfers, or transfers of title of securities held in centralized custody shall be handled by the proxy firm.
- The suspended firm will continue to perform settlement of funds and securities for transactions that took place before business suspension, and will complete settlement procedures with the TPEx and Taiwan Depository & Clearing Corporation (TDCC) in compliance with the Rules Governing Securities Trading on the TPEx (including the covering of any shortfalls in required securities).
- Customers of the suspended firm who complete account opening procedures at the proxy firm may place securities trading orders with the proxy firm on the day they open their accounts.
- During afternoon settlement operations prior to suspension, the suspended firm shall assist the proxy firm in opening brokerage trading accounts and central securities depository accounts and establishing information files.
- All procedures for corrections to any insufficiency in securities which the suspended firm had requested in accordance with Article 86-1 of the Rules Governing Securities Trading on the TPEx prior to suspension of business must be completed as soon as possible. The proxy firm shall be notified to take all such necessary measures and to return borrowed securities on the suspended firm's behalf if those procedures have not been finished in time.
- Out-trades that occurred on the business day preceding the date of suspension of business must be reported to the TPEx according to the TPEx Directions for Reporting and Handling of Out-Trades and Account Number Corrections by Securities Brokers. When out-trades are not resolved on that day by an offsetting repurchase or resale, another securities firm shall be engaged to handle the out-trades through an ordinary processing account on the date suspension begins.
- The suspended firm shall dispatch associated persons to the proxy firm (where they may not enter the trading counter area) during the period of suspension of business to help customers with brokerage trade orders and settlement matters at the proxy firm. The suspended firm shall also dispatch settlement personnel to the proxy firm to help it handle customers' deposits, withdrawals, transfers, and transfers of title of securities in centralized custody.
- On the business day preceding the date of suspension of business, the suspended firm will hand over to the proxy firm information on its customers' central securities depository accounts, securities balances and changes in the balance, and their specimen seal and signature cards. The proxy firm, from the date of suspension, will handle all customer deposits, withdrawals, transfers, or transfers of title of securities.
- Matters required to be handled by the proxy firm:
- During the period of suspension, matters relating to deposits, withdrawals, transfers, or transfers of title of securities held in centralized custody shall be handled by the proxy firm in accordance with TDCC regulations.
- Assisting the suspended firm's customers in account opening; the proxy firm may accept trading orders from customers on the same date following the completion of account opening procedures by the customers.
- Appropriately managing the information handed over by the suspended firm, and returning the information when the suspended firm resumes business.
- Margin trading matters:
- Matters required to be handled by the suspended firm:
- Handling, in accordance with regulations, the settlement of margin purchases and short sales made by customers prior to the date of suspension of business.
- Producing a list of customer information, including statements of margin account balances as of the final business day, customer margin account agreements, and signature specimen cards, which shall be delivered to the proxy firm for checking and acceptance.
- Following the date of suspension, requesting the proxy firm to process margin trading customers' requests for settlements in cash or in spot securities.
- Procedures shall be as follows when the suspended firm handles margin trading business itself: The suspended firm shall notify all customers with margin trading accounts that they need to open brokerage accounts at the proxy firm before placing margin trading orders with it, and that customers' outstanding margin purchase and short sale positions at the suspended firm can be handled through proxy firm by the "repurchase of securities sold short" or the "sale of securities purchased on margin".
- If the suspended firm and the proxy firm are both agents for the same securities finance enterprise, the suspended firm shall notify all customers with margin trading accounts that they must open a separate securities brokerage account at the proxy firm before they engage it to conduct margin trading.
- If the suspended firm and the proxy firm are agents for different securities finance enterprises:
- If the suspended firm's securities finance enterprise has not signed an agency agreement with the proxy firm, the suspended firm shall notify all margin trading customers to proceed as follows:
- Once customers have opened new securities brokerage accounts at the proxy firm, the only margin trading activities allowed under these accounts are the "sale of securities purchased on margin" or the "repurchase of securities sold short."
- Customers who wish to make new margin purchases or short sales must transfer their margin trading accounts to a securities firm that has signed an agency contract with the same securities finance enterprise as the suspended firm. The related "sale of securities purchased on margin" or "repurchase of securities sold short" also be handled by the new securities firm.
- The suspended firm shall refer customers to the proxy firm to handle applications for "cash redemption of margin purchases" or "redemption of short sales with spot securities" after the date of suspension of business.
- The procedures in Point 4.2Ae shall apply when the suspended firm's securities finance enterprise later signs an agency agreement with the proxy firm.
- Matters required to be handled by the proxy firm:
- For every margin transaction that the proxy firm has processed on behalf of the suspended firm's margin trading customers, the printed trade certificates and statements must be stamped with the words "Processed on behalf of XXXX Co., Ltd.," and printed and prepared separately from the usual batch of statements.
- The proxy firm shall employ all due haste in assisting margin trading clients who come to open accounts with it. For margin trading, the original account numbers of those clients shall continue to be used, and orders for securities trades may be accepted on the day that account-opening procedures are completed.
- If the suspended firm acts as agent for the same securities finance enterprise as does the proxy firm, the proxy firm shall first consult the securities finance enterprise regarding documentation for proxy procedures, and shall compile and submit a copy of every relevant statement to the securities finance enterprise.
- Procedures for redemptions in cash and spot securities:
- If the suspended firm handles margin trading business itself, the proxy firm shall establish a dedicated bank account to handle receipts and payments of funds for customers' applications for redemptions in cash or spot securities, and shall assist customers with their withdrawals or transfers of those securities.
- When the suspended firm is the agent for a securities finance enterprise in margin trading, then after the proxy firm has handled the redemptions, on behalf of the suspended firm, for customer applications for redemptions in cash or spot securities, the securities finance enterprise will transfer the securities to the customer's central depository account or will transfer the price of the securities into the proxy firm's bank account, after which the proxy firm will further transfer the price of the securities into the customer's bank account.
- Procedures for securities borrowing and lending for trading needs and performance of obligations shall follow Point 4.3 of the Taiwan Stock Exchange Corporation Procedures for Suspension or Termination of Operations by Securities Firms.
- Warrant issuance (or trading) business matters:
- Matters required to be handled by the suspended firm:
- From the date of suspension, to suspend handling of matters in connection with investors' exercise of warrants.
- To provide information on unexpired call (put) warrants to the proxy firm.
- To assist the proxy firm in handling investors' exercise requests.
- Matters required to be handled by the proxy firm:
- The proxy firm will handle procedures relating to the exercise of call (put) warrants issued by the suspended firm during the duration of its suspension of business.
- If the suspended firm is incapable of meeting exercise requests, the proxy firm shall notify the TPEx and TDCC immediately. Aside from assisting in handling exercise requests that have already been raised, the proxy firm shall accept no further exercise requests.
- The proxy firm shall keep proper custody of information transferred to it by the suspended firm, and return that information to the suspended firm at such time as its operations are either resumed or terminated.
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Procedures for the termination of business activities (including voidance of the business license) of a securities firm's head office or branches:
- Matters required to be handled by a securities firm when terminating its business (including voidance of its business license):
- The firm shall publicly announce its business termination, and assist customers in transferring their securities in central custody to another securities firm of their choosing.
- The firm shall return all licenses approved by the competent authority (including branch licenses, if any) to the competent authority.
- The firm shall return all original and duplicate copies of the Contract for Trading of Securities on the TPEx by a Securities Firm, Contract for Computer Connection, and Contract for Supply and Use of Trading Information to the TPEx for cancellation.
- The firm may apply to the TPEX for return of its contribution to the clearing and settlement fund after all outstanding transactions have been settled and all accounts have been closed.
- The securities firm has the obligation to retain account books, statements, and source documents in good custody, and shall do so in accordance with Article 11 of the Criteria Governing the Preparation of Financial Reports by Securities Firms and the provisions of the Required Periods for Preservation of Accounting Statements and Vouchers by Securities Firms. A custodian may be designated by the liquidator, or interested parties may apply to a court for appointment of a special custodian.
- When a branch office of a securities firm terminates business operations (including due to voidance of its business license), it shall immediately make a public announcement of matters relating to the termination and assist customers in transferring their securities in central custody to the head office or other branch of the securities firm, or to another securities firm, as they choose, and shall follow the procedures of subparagraphs B and D of the preceding paragraph.
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These Procedures, and any amendments hereto, shall be publicly announced and implemented after approval by the competent authority.
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