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These Procedures are to be followed in the event of voluntary and involuntary cessation or termination of business (including revocation of business licenses) of a securities firm's headquarters or any of its branches (collectively referred to as a "Suspended Firm" herein), and outline how the Proxy Securities Firm ("Proxy Firm") should take over outstanding transactions.
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A Suspended Firm must hand over all matters relating to customer deposits, withdrawals, and transfers of share certificates over the centralized securities depository enterprise to a Proxy Firm designated by the GTSM. In situations where only a branch has been involuntarily suspended of business activities, outstanding settlements of the suspended branch can be settled by the headquarter or other branches of the securities firm. However, the GTSM may still appoint other securities firms to act as proxy under special circumstances, and such instructions will be detailed in the GTSM's cessation notice.
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Prior to a suspension of business, the GTSM may adjust the volume of trade orders that a Suspended Firm may process relative to its net worth, from the standard multiples stipulated in Article 35 of Rules Governing Securities Trading on the GTSM, while notifying the competent authority.
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Procedures for handling outstanding transactions by the Suspended Firm and the Proxy Firm:
- Ordinary trading matters:
- Matters to be handled by the disposed firm:
- The Suspended Firm must post the GTSM's notice of suspension of business on the bulletin board of its trading lobby and make the following announcements to its customers:
- Beginning from the date of suspension, all deposits, withdrawals, or transfers of share certificates over the centralized securities depository enterprise shall be handled by the Proxy Firm.
- The Suspended Firm shall continue to perform settlements (includes sourcing securities to cover short balances) on transactions that took place before business suspension in compliance with the policies of the GTSM and Taiwan Depository & Clearing Corporation (TDCC).
- From the date of business suspension onwards, Suspended Firm's customers who open accounts with the Proxy Firm may commence trading on the same day.
- The Suspended Firm shall assist customers with their trading account and securities depository account opening at the Proxy Firm, during the afternoon prior to suspension of business.
- All corrections to defective securities which the Suspended Firm had requested in accordance with Article 86-1 of Rules Governing Securities Trading on the GTSM prior to suspension of business must be completed as soon as possible. The Proxy Firm shall be notified to correct defective securities and return borrowed securities on the Suspended Firm's behalf if they are not finished in time.
- Out-trades that occurred one business day before suspension of business must be reported to the GTSM according to the "Directions for Reporting and Handling of Out-Trades and Account Number Corrections by Securities Brokers." Out-trades that are not resolved in time shall be taken over by the Proxy Firm from the date of suspension of business.
- The Suspended Firm shall dispatch business personnel to the Proxy Firm (without going into the trading counter) over the duration of the suspension of business, and help customers with trade orders and settlement matters at the Proxy Firm. The Suspended Firm shall also dispatch settlement personnel to the Proxy Firm and help handle customers' deposits, withdrawals, and transfers of share certificates over the centralized securities depository enterprise.
- On the business day before the suspension of business, the Suspended Firm will hand over customers' information including their central securities depository accounts, securities balance, balance changes, and specimens of customers' signatures to the Proxy Firm, and allow the Proxy Firm to handle all customers' deposits, withdrawals, or transfers of share certificates over the centralized securities depository enterprise.
- Required actions from the Proxy Firm:
- All deposits, withdrawals, or transfers of share certificates over the centralized securities depository enterprise shall be handled by the Proxy Firm while the Suspended Firm is in suspension.
- Assist the Suspended Firm's customers in account opening and allow trading of securities on the same day.
- Safeguard all information handed over by the Suspended Firm, which needs to be returned when the Suspended Firm resumes business.
- Margin trading matters:
- Matters to be handled by the disposed firm:
- Margin purchases and short sales made by customers prior to a suspension of business shall be settled as usual.
- Hand over customers' margin account balances as at the final business day along with customers' margin account agreements and signature specimens to the Proxy Firm.
- Allow the Proxy Firm to process customers' requests to repay margin purchases or cover short sale positions from the date of suspension of business.
- Procedures shall be as follows when the disposed firm operates its own securities finance business:The Suspended Firm shall notify all margin trading customers that they need to open securities trading accounts at the Proxy Firm to continue margin trading, and that customers' outstanding margin purchases and short sale positions held in the Suspended Firm can be sold or bought back at the Proxy Firm.
- If the Suspended Firm and the Proxy Firm both engage the same securities finance enterprise: The Suspended Firm shall notify all margin trading customers that they need to open securities trading accounts at the Proxy Firm to continue margin trading.
- If the Suspended Firm and the Proxy Firm engage 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 with the following:
- Once customers have opened new securities trading accounts at the Proxy Firm, the only margin trading activities allowed under these accounts are either selling existing margin purchases or buying back short sale positions.
- Customers who wish to make new margin purchases or make new short sales are required to transfer their margin trading accounts to a securities firm that engages the same securities finance enterprise as does the Suspended Firm; in which case, sales of existing margin purchases and buybacks of short sale positions shall also be handled by the new securities firm.
- Refer customers to the Proxy Firm if they wish to make repayments to their margin purchases or cover their short sale positions after the date of suspension of business.
- Paragraph 4-2-(1)-5 shall apply to situations where the Suspended Firm's securities finance enterprise later signs an agency agreement with the Proxy Firm.
- Required actions from the Proxy Firm:
- For every margin transaction that the Proxy Firm has processed on behalf of the Suspended Firm, the printed trade confirmations and statements must be stamped with the words: "Processed on behalf of XXXX Co., Ltd." and prepared separately from the usual batch of statements.
- Margin trading clients proceeding to the authorized firm to open accounts shall be assisted in doing so with all due haste. For margin trading, the original account numbers of those clients may continue to be used, and orders for securities trades may be accepted on the day that account-opening procedures are completed.
- In situations where the Suspended Firm engages the same securities finance enterprise as does the Proxy Firm, the Proxy Firm shall first complete proxy Procedures at the securities finance enterprise and undertake to submit a copy of every relevant statement to the securities finance enterprise.
- Procedures for redemptions in cash and securities:
- If the Suspended Firm offers proprietary securities financing services, the Proxy Firm shall establish a special bank account for handling customers' cash or securities redemptions, and shall assist customers with their withdrawals or transfers of redeemed securities.
- In a scenario where the Suspended Firm engages an external securities finance enterprise, and customers repay their margin purchases or cover their short sale positions with securities held on hand, the redeemed securities are credited into customers' central securities depository accounts whereas redeemed proceeds are credited into the Proxy Firm's bank account first before crediting to customers' bank accounts.
- All securities borrowing in relation to settlement shall proceed according to Paragraph 4-3 of "Taiwan Stock Exchange Corporation Procedures for Suspension or Termination of Securities Firm Operations."
- Warrant matters:
- Matters to be handled by the disposed firm:
- From the date of suspension, to suspend handling of matters in connection with investors' exercise of warrants.
- Provide information on unexpired call (put) warrants to the Proxy Firm.
- Assist the Proxy Firm in handling investors' exercise requests.
- Required actions from the Proxy Firm:
- The Proxy Firm will process all exercise requests on call (put) warrants previously issued or traded by the Suspended Firm, over the entire duration of the suspension of business.
- If the Suspended Firm is incapable of making delivery to holders' exercise requests, the Proxy Firm shall notify the GTSM and TDCC immediately and assist in handling exercise requests that have already been raised. Furthermore, the Proxy Firm shall accept no more exercise requests from investors from this point onwards.
- Keeping proper custody of information transferred to it by the disposed firm, and returning that information to the disposed firm at such time as its operations are either resumed or terminated.
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Procedures for the termination of business activities (including revocation of business licenses) to a securities firm's headquarter or any of its branches:
- Required actions from a securities firm when terminating business activities (including revocation of business licenses) at the headquarter:
- The firm shall make a public announcement for its business termination, and undertake to assist customers in transferring securities balances to another securities firm of their desire.
- The firm shall return all approved licenses (including branch licenses, if any) back to the competent authority.
- The firm shall return all original and duplicate copies of "Contract for Trading of Securities on the Over-the-Counter Market by a Securities Firm," "Computer Networking Agreement," and "Information User Agreement" back to the GTSM, where they will be revoked.
- The firm may claim back its settlement fund placed at the GTSM after all outstanding transactions have been settled and all accounts have been closed.
- The securities firm has the obligation to retain account books and vouchers in good custody, and shall undertake to do so in accordance with Article 11 of Criteria Governing the Preparation of Financial Reports by Securities Firms and the Required Periods for Preservation of Accounting Statements and Vouchers by Securities Firms. A custodian may be designated by the liquidator, or stakeholders may apply to court for appointment of a special custodian.
- When a branch office terminates business operations (including revocation of business licenses), the securities firm shall immediately make a public announcement relating to the termination and undertake to assist customers in transferring securities balances to the headquarter or other branches, or to another securities firm of their desire. In which case, Subparagraphs (2) and (4) of the preceding Paragraph shall apply.
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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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