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[Law Basis]
[Print]
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Section 2 Management of Foreign Exchange Business
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〈Know your customer and retention of documents〉
Article 11 Securities enterprises engaging in foreign exchange business shall first verify
the identity and primary registration information of the customer and ensure
that supporting documents comply with these Regulations before processing the
transaction. In addition, securities enterprises shall comply with the “Money
Laundering Control Act”, “Terrorist Financing Prevention Act”, “Directions
Governing Anti-money Laundering and Countering Terrorism Financing of the
Securities and Futures Sector” and the relevant rules.
Securities enterprises shall properly retain customer information and
transaction records for at least five (5) years after the completion of the
transaction or the closing of customer’s account.
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〈Risk disclosure and avoiding speculation and inappropriate publicity〉
Article 12 When engaging in foreign exchange business, securities enterprises shall carry
out internal control and risk management in accordance with relevant rules and
regulations of the competent authority. Securities enterprises shall also
disclose fully to the customers foreign exchange related risks, and shall not
offer predictions on the future movements of the NTD exchange rates.
The Bank’s letter of approval or acknowledgement to reporting for record is
merely a certificate 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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〈Counterparty to foreign exchange position coverage and risk management〉
Article 13 A securities enterprise’s coverage of foreign exchange positions 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 (council
members) or the head office (or regional headquarter) in the case of a foreign
securities firm, all its offices shall abide by these rules and conduct audits
regularly.
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〈Funding Methods for foreign currencies〉
Article 14 When a securities enterprise has a demand for a certain foreign currency arising
out of its securities-related foreign exchange business, the securities
enterprise may raise the foreign currency funds through the following means:
1.The securities enterprise may engage in foreign exchange swaps or cross
currency swaps between NTD and the foreign currency with authorized banks;
2.A securities enterprise that engages in the following foreign exchange
businesses may borrow money directly from an overseas financial institution
or obtain a foreign currency loan from an authorized bank according to the
following rules, but the borrowed funds may not be used as working capital:
(1)Acting as a participating dealer of an offshore ETF: For hedging transactions
to cover equity risk associated with offshore ETF positions held, the
securities enterprise may obtain a foreign currency loan with the foreign
transaction document or the Bank’s business approval letter.
(2)Acting as a liquidity provider for domestically issued foreign currency
denominated ETF: The securities enterprise may obtain a foreign currency
loan with the Bank’s business approval letter.
(3)Proprietary trading of foreign currency securities: The securities enterprise
may obtain a foreign currency loan 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 the
original purchased foreign currency security will be used directly to repay
the lender and will not be used for other purposes.”
(4)Underwriting of an international bond: When underwriting on a firm commitment
basis or a standby commitment basis, the securities enterprise may use the
underwritten bond as collateral to obtain a foreign currency loan with the
Bank’s business approval letter or related underwriting contractual
documents and relevant documents evidencing the payment of the settlement
amount by the enterprise. The loan should be repaid no later than the
maturity date of the underwritten bond or when the bond is sold.
3.A securities enterprise may obtain a foreign currency call loan from an
authorized bank, an offshore banking unit 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 net worth as
shown in its CPA audited or certified financial statements plus the balance
of unsold committed underwritten 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), but
excluding transactions between the OSU and its 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 sold for NTD,
and unless with the Bank’s approval, the sources of fund for loan repayment
may not come from foreign exchange against NTD.
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〈Restriction on foreign exchange settlement in repo trade〉
Article 15 Securities enterprises may not exchange the foreign currency fund they receive
from repo trade of foreign currency securities into NTD, and the sources of
fund for settlement payment upon expiration may not come from foreign exchange
against NTD.
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〈Matters for compliance when conducting business on behalf of OSU〉
Article 16 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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〈Receipt/payment and foreign exchange settlement〉
Article 17 Unless otherwise provided in these Regulations, a securities enterprise that
engages in foreign exchange business involving outward and inward remittance
of fund or foreign exchange settlement against NTD 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 the “Regulations for Declaration”), “Directions Governing Banking
Enterprises for Operating Foreign Exchange Business” (hereinafter referred to
as “Operating Directions”), and “Directions for Banking Enterprises on
Assisting Customers to Declare Foreign Exchange Receipts and Disbursements or
Transactions”.
Unless special provisions apply to the foreign exchange settlement, securities
enterprises shall observe the following rules when handling receipt/payment
associated with their foreign exchange business:
1.Where the receipt/payment of the foreign exchange business is in foreign
currency, the customer shall carry out foreign exchange settlement at an
authorized bank in accordance with the “Regulations for Declaration”, or
the payment may be transferred from the customer’s foreign exchange deposit
account;
2.When accepting orders to trade foreign securities, conducting wealth
management business involving foreign exchange by means of trust, or acting
as a master agent or its mandated sub-distributors of an offshore fund
institution to purchase or redeem offshore funds in NTD, the securities
enterprise shall carry out foreign exchange settlement at an authorized bank
in accordance with the “Regulations for Declaration”; and
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 receipt/payment is not allowed.
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〈Reports〉
Article 18 Securities enterprises that engage in foreign exchange business shall, for each
category of business, submit relevant reports to the Bank’s Department of
Foreign Exchange and ensure the completeness and accuracy of the contents of the
reports. The instructions for filling the application form, required attachments
and methods of submission of the reports shall be prescribed separately by the
Bank.
The timetable for securities enterprises to submit relevant reports to the
Department of Foreign Exchange of the Bank is as follows:
1.Daily report:Before 12:00 noon on the next business day.
2.Monthly report:Within ten (10) days after the end of each month.
If deemed necessary, the Bank may ask a securities enterprise to submit other
relevant reports.
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 and relevant documents or
information within a prescribed period of time if deemed necessary.
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