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[Law Basis]
[Print]
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Section 2 Management of Foreign Exchange Business
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Article 9
Securities enterprises engaging in foreign exchange business shall first verify the
identity or primary registration data of the client, and ensure that supporting
documents comply with regulations. Securities enterprises shall also properly retain
client data and transaction records for at least five (5) years after the completion
of the transaction or the closing of client's account.
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Article 10
When engaging in foreign exchange business, securities enterprises shall disclose
fully to the clients foreign exchange related risks, and shall not offer prediction
on the future movements of the NTD exchange rates.
The letter of approval issued by the Bank is merely an approval for the securities
enterprise to engage in relevant foreign exchange businesses, which shall not be
publicized as the Bank's endorsement for the safety or performance of related
business or used in other inappropriate ways.
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Article 11
A securities enterprise’s coverage of currency risk exposure arising from its foreign
exchange business shall be carried out by its head office through an authorized bank,
an offshore banking unit or an overseas financial institution.
A securities enterprise shall heed its foreign exchange risk and draft its own foreign
exchange risk management rules based on the foreign exchange business conducted. After
the rules have been passed by its board of directors, all its offices shall abide by
these rules and conduct audits regularly.
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Article 12
When a securities enterprise has needs for a certain foreign currency arising out of
its securities-related foreign exchange business, the securities enterprise may raise
the foreign currency through the following means:
1.The securities enterprise may engage in foreign exchange swap or cross currency swap
between NTD and the foreign currency with authorized banks;
2.For hedge trading to cover equity risk associated with offshore exchange-traded fund
positions held, the securities enterprise may obtain a foreign currency loan from an
authorized bank with the transaction document or the Bank’s approval document, or
borrow money from an overseas financial institution;
3.When carrying out a proprietary trade in foreign securities, the securities
enterprise may obtain a foreign currency loan from an authorized bank or an
overseas financial institution with the transaction confirmation or document from
the counterparty. For such a loan, the securities enterprise shall sign an
affidavit undertaking that“proceeds from the sale of originally purchased foreign
security will be remitted into the securities enterprise’s designated repayment
account opened at the lending bank”to ensure that the loan will not be used as
working capital.
4.When a securities enterprise underwrites an international bond on a firm commitment
basis or a standby commitment basis, the enterprise may use the underwritten bond as
collateral to obtain a foreign currency loan from an authorized bank in compliance
with the following rules:
(1)Required documentation: The Bank’s letter of approval or underwriting related
contractual document and relevant documents evidencing the amount of settlement
payable by the enterprise;
(2)Loan amount: Up to 60% of payment (to the bond issuer); and
(3)Tenor of loan: Loan shall be repaid no later than the maturity date of the
underwritten bond or when the bond is sold.
5.A securities enterprise may obtain a foreign currency call loan from an authorized
bank or an overseas financial institution.
When acquiring a foreign currency loan or a call loan, securities enterprises shall
also comply with the following rules:
1.The total balance of foreign currency loans plus foreign currency call loans from
other financial institutions shall not exceed 100% of its networth as shown in its
CPA audited or certified financial statements plus the balance of unsold committed
foreign currency bonds;
2.The total balance of foreign currency loans plus foreign currency call loans
mentioned in the preceding subparagraph shall include those foreign currency loans
and call loans obtained by its offshore securities unit (OSU) from authorized banks,
offshore banking units and overseas financial institutions, but excluding
transactions between the OSU and the head office;
3.The tenor of foreign currency call loans handled by securities enterprises shall not
be longer than one year; and
4.Proceeds from foreign currency loans and call loans may not be converted into NTD,
and unless with the Bank’s approval, the sources of funds for loan repayment may not
come from foreign exchange purchase with NTD.
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Article 13
Securities enterprises that have been approved by the Bank to engage in securities-
related foreign exchange business may, within the scope of its permitted businesses,
handle the offshore securities business and related tax matters on behalf of an OSU of
the same securities firm. Such business handled by the securities firm shall be booked
on the account books of the OSU.
When handling the services on behalf of an OSU mentioned in the preceding paragraph,
the securities enterprise shall observe the Offshore Banking Act, Enforcement Rules of
the Offshore Banking Act, Regulations Governing Offshore Securities Units, as well as
other applicable regulations.
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Article 14
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When the foreign exchange business carried out by a securities enterprise involves
outward and inward remittance of fund or foreign exchange settlement against NTD, the
securities enterprise shall deal with an authorized bank in accordance with the
Regulations Governing the Declaration of Foreign Exchange Receipts and Disbursements
or Transactions (hereinafter referred to as “Declaration Regulations”), Directions
Governing Banking Enterprises for Operating Foreign Exchange Business (hereinafter
referred to as “Operating Directions”), and Directions for Banking Enterprises on
Assisting Clients to Declare Foreign Exchange Receipts and Disbursements or
Transactions.
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[Related Regulations]
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Unless special provisions apply to the foreign exchange settlement, securities
enterprises shall observe the following rules when handling receipts and payments
associated with their foreign exchange business:
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1.Where the receipt/payment of the foreign exchange business is in foreign currency,
the client shall carry out foreign exchange settlement at an authorized bank in
accordance with the Declaration Regulations, or the payment may be transferred from
the client’s foreign exchange deposit account;
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2.When accepting orders to trade foreign securities, conducting wealth management
business by means of non-discretionary individually managed money trust, or
purchasing and redeeming of offshore funds by a master agent or its mandated
sub-distributors of an offshore fund institution in NTD, the securities enterprise
shall carry out foreign exchange settlement at an authorized bank in accordance
with the Declaration Regulations; and
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3.Foreign exchange settlement shall be carried out at an authorized bank based on
the exact amount of the transaction. Unless with the Bank’s approval, settlement
on a net basis after offset of receipts and payments is not allowed.
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Article 15
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Securities enterprises shall submit requested reports in five (5) business days
after the end of each month, and ensure the completeness and accuracy of the
reports. The format of the reports and related matters shall be prescribed
separately by the Bank.
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With regard to the review of reports submitted by securities enterprises, the Bank
may dispatch personnel to inspect the relevant account books and documents, or
request securities enterprises to provide truthful relevant documents or information
within a prescribed period of time if deemed necessary.
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Article 16
The Bank may suspend, revoke or cancel its approval in part or in whole the foreign
exchange business engaged by a securities enterprise, or put a moratorium on its
application either for new foreign exchange business or for adding branches to carry
out foreign exchange business in the event of any of the following:
1.The securities enterprise fails to commence operation within six months after being
issued a letter of approval. A securities enterprise may request for an extension
with reasons. If approved, the securities enterprise may have an extension of no
more than three months. An institution may apply for extension only once ;
2.The securities enterprise has seriously violated the provisions of these Regulations,
or was asked by the Bank to act, but has failed to rectify the situation within the
period specified by the Bank;
3.After being issued a letter of approval to engage in foreign exchange business, the
securities enterprise was found to have provided false information in its application
which is deemed a serious violation;
4.The securities enterprise suspends operations, is dissolved, or declares bankruptcy; or
5.There is other evidence indicating that the applicant has a situation that hinders the
sound operation of the business, or that the applicant is unable to meet financial
policy requirements.
A securities enterprise, which has its business approval revoked or cancelled
according to the preceding paragraph, shall surrender the letter of approval to the Bank
within seven (7) days after the receipt of the sanction. If the letter of approval is
not surrendered within seven days, the Bank shall cancel the business approval by public
announcement.
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