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[Law Basis]
[Print]
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Chapter 2 General Provisions – Operation and Management of Foreign Exchange Business
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Section 1 Application and Commencement of Foreign Exchange Business
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〈Approval of foreign exchange business〉
Article 6
Unless otherwise provided in these Regulations or by the Bank, a securities
enterprise may engage in foreign exchange business only after its head office,
or a branch within the territory of the Republic of China in the case of a
foreign securities firm, has submitted an application to the Bank and been
issued a letter of approval.
A securities enterprise may apply to engage in all or some of the business
categories mentioned in the subparagraphs of Paragraph 1 of Article 4 herein,
and the Bank will grant approval to each business category individually. The
Bank may also prescribe other rules or state those rules in the letter of
approval for business categories approved under Subparagraph 4 of the same
paragraph and article.
Unless otherwise provided in these Regulations or by the Bank, a securities
enterprise shall report the date of commencement to the Bank for record
within seven (7) days after commencing its foreign exchange business.
Unless otherwise provided in these Regulations or by the Bank, securities
enterprises shall not conduct any foreign exchange business without the approval
of the Bank.
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〈Application documents for foreign exchange business〉
Article 7
A securities enterprise that applies for approval to engage in foreign exchange
business shall submit a written application with the following documents:
1.A photocopy of the certificate of security business license;
2.A photocopy of the business license or qualification document for relevant
business evidencing the approval of the FSC or the consent of the Taipei
Exchange (hereinafter referred to as “TPEx”) for the securities enterprise
to engage in the business;
3.A resolution of the board of directors resolving to apply for the business or
a letter of authorization from the head office or regional command center in
the case of a foreign securities firm; and
4.A statement of regulatory compliance.
When a securities enterprise applies to engage in foreign exchange businesses
provided in Item 2 of Subparagraph 1, Subparagraph 2 or 3, Paragraph 1 of
Article 4 herein, it shall simultaneously apply for a foreign currency risk
upper limit and the exclusion of overseas long-term equity investment, real
estate and equipment from such limit. This does not apply to authorized foreign
exchange banks (hereinafter referred to as "authorized banks") concurrently
engaging in securities business.
When a change in the approved foreign currency risk upper limit and exempt items
mentioned in the preceding paragraph occurs, a securities enterprise shall
submit a FSC approval document or other relevant documents to the Bank for
consent.
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〈Supplementary information or correction of application documents〉
Article 8
A securities enterprise that applies for foreign exchange business will be
granted a designated period for providing supplementary information or making
corrections if the documentation or information submitted were found to be
incomplete or insufficient. The Bank may reject the application if supplementary
information or corrections are not submitted within the designated period.
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〈Rejection of application〉
Article 9
The Bank may reject a securities enterprise’s application for foreign exchange
business in the event of any of the following:
1.Qualifications of the applicant do not comply with the requirements;
2.The applicant has failed to assist declarants to fill out the Declaration
Statement of Foreign Exchange Receipts and Disbursements or Transactions
(hereinafter referred to as “Declaration Statement”) as required.
3.A high error rate in the certificates, reports and forms prepared by the
applicant;
4.The applicant has violated the provisions of these Regulations or relevant
rules in the past year and the violation is of a serious nature; the
applicant was ordered to rectify the situation by the Bank, but has failed to
do so within the period specified by the Bank; or
5.Other facts that are sufficient to indicate that the applicant may hinder
sound operations of the business, or that the applicant is unable to meet
financial policy requirements.
When a securities enterprise reporting a foreign exchange business to the Bank
for record with false documents or reporting a foreign exchange business which
is not required to report to the Bank for record according to these Regulations,
the Bank may, depending on the severity of the situation, impose the following
sanctions:
1.Demand the securities enterprise to take remedial action;
2.Suspend the application of the securities enterprise for new foreign exchange
business or for adding branches to conduct foreign exchange business for a
specified period of time;
3.Suspend specific foreign exchange businesses of the securities enterprise for
a specified period of time; or
4.Withdraw the securities enterprise’s privilege of commencing a foreign
exchange business that requires reporting for record according to these
Regulations by reporting the business to the Bank for record.
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〈Suspension, revocation or cancellation of approval〉
Article 10
The Bank may suspend, revoke or cancel its approval in part or in whole the
foreign exchange business engaged by a securities enterprise, or suspend the
application of the securities enterprise for new foreign exchange business or
for adding branches to conduct 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. The applicant may request for an extension
with valid reasons. If agreed by the Bank, the securities enterprise may have
an one-time extension of no more than three months;
2.The securities enterprise did not engage in a foreign exchange business again
within one year after reporting to the Bank the date of commencing the
business;
3.The securities enterprise has violated the provisions of these Regulations or
other relevant laws and regulations and the violation is of a serious nature,
or was asked by the Bank to rectify the situation within the period specified
by the Bank, but has failed to do so;
4.After the securities enterprise has been approved to engage in various foreign
exchange businesses, its original application documents were found to contain
false information or misrepresentation of a serious nature;
5.The securities enterprise suspends operations, is dissolved, or declares
bankruptcy; or
6.Other facts that are sufficient to indicate that the securities enterprise
may hinder sound operations of the business, or that the securities enterprise
is unable to meet financial policy requirements.
For the securities enterprise whose approval is revoked or cancelled according
to the preceding paragraph, the Bank will announce to nullify the approval.
A securities enterprise that is ordered by the Bank or the relevant competent
authority to suspend or stop applying for business for a specified period of
time shall not commence any foreign exchange business that requires reporting
for record according to these Regulations by reporting the business to the Bank
for record if the suspension period has not expired, if it fails to propose
proper and concrete improvement measures during the suspension period, or if its
proposed improvement measures have not been accepted by the competent authority.
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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 the foreign exchange business shall first
verify the identity and primary registration information of the customer and
ensure that the supporting documents comply with these Regulations before
processing the transaction.
When a securities enterprise engages in the foreign exchange business, the
operation of customer due diligence, record keeping, and reporting of
suspicious transactions on money laundering or terrorist financing shall
comply with“Money Laundering Control Act”,“Regulations Governing
Anti-Money Laundering of Financial Institutions ”and other applicable
regulations；the reporting on the property, or property interests and
location of the property or property interests of designated individuals,
legal persons or entities shall comply with“Terrorism Financing Prevention
Act”and other applicable regulations.
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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 trades of foreign currency securities into NTD, and
unless with the Bank’s approval, the sources of fund for the 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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