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Title: Rules Governing Securities Investment Consulting Enterprises
Date: 2004.10.20 ( Announced )
Date: 2009.09.25 ( Amended )

Article Content

 
Chapter I General Principles
Article 1     These Rules are prescribed in accordance with the provisions set forth in Paragraph 2 of Article 18 of the Securities and Exchange Act (hereinafter referred to as "the Act").
Article 2     The term "securities investment consulting enterprises" as used in these Rules refers to enterprises which receive remuneration for their valuation and analysis of securities, investment judgements and suggestions, or execution of securities investment transaction for clients.
    The aforesaid remuneration shall include any benefit received directly or indirectly from a client or from third parties.
Article 3     Operation of a securities investment consulting enterprise shall require the approval of the Financial Supervisory Commission of the Executive Yuan (hereinafter referred to as "the FSC").
    No person may use "securities investment consulting enterprise" or other similar name unless and until the approval prescribed in the preceding Paragraph has been obtained.
Article 4     The organization of a securities investment consulting enterprise shall be limited to the form of a company limited by shares with a paid-in capital of not less than Ten Million New Taiwan Dollars (NT$10,000,000).
Article 5     A securities investment consulting enterprise may engage in the following business activities, in categories and within the scope as approved by the FSC:
  1. being retained to provide research, analysis, or advice, on a commissioned basis, on matters related to securities investment;
  2. accepting consignments for discretionary investment;
  3. issuing publications relating to securities investment;
  4. conducting seminars regarding securities investment; and
  5. other related business approved by the FSC.
    A securities investment consulting enterprise engaging in the business referred to in Item 2 of Paragraph 1 above shall process business matters in accordance with the Rules Governing Discretionary Investment Business to Be Engaged in by Securities Investment Consulting Enterprises and Securities Investment Trust Enterprises (hereinafter referred to as the "Rules Governing Discretionary Investment").
Article 6     The managers, department executives, and associated persons of a securities investment consulting enterprise, when engaging in businesses prescribed in Paragraph 1 of the preceding article, shall be deemed as acting within the authorized scope of the securities investment consulting enterprise.
Chapter II Establishment of Securities Investment Consulting Enterprises
Article 7     None of the following circumstances may apply with respect to the promoter of a securities investment consulting enterprise:
  1. The promoter has received a final and unappealable conviction under the Statute Governing Prevention of Organized Crime and the sentence has not been fully executed, or the sentence has been fully executed but less than five (5) years have elapsed since the execution of the sentence, expiration of the term of probation or pardon of the offense;
  2. the promoter has previously been sentenced to imprisonment for one (1) year or more on an unappealable conviction for the offenses of fraud, breach of trust, or misappropriation and the sentence has not been fully executed, or less than two (2) years have elapsed since the execution of the sentence, expiration of probation or pardon of the offense;
  3. the promoter has been sentenced to a punishment of not less than a term of imprisonment on a final and unappealable conviction for misappropriation related to the promoter's public functions or occupation and the sentence has not yet been fully executed, or less than two (2) years have elapsed since the execution of the sentence, expiration of probation or pardon of the offense;
  4. the promoter has been adjudicated bankrupt and his/her rights have not been reinstated, or where the promoter previously served as the director, supervisor, manager, or otherwise held an equivalent position at a juristic person when such juristic person was adjudicated bankrupt, and a period of three (3) years has not yet elapsed since the bankruptcy was concluded, or there has been no performance of the settlement;
  5. the promoter's check has been refused by a financial institution and the suspension period has not expired;
  6. the promoter has no legal capacity or has limited legal capacity;
  7. the promoter has received a final and unappealable conviction for violation of the Act and the sentence has not yet been fully executed, or less than three (3) years have elapsed after the execution of the sentence, expiration of probation, or pardon;
  8. the promoter was discharged from his/her functional duties pursuant to Article 56 or Paragraph 2 of Article 66 of the Act, and less than three (3) years have elapsed since such punishment;
  9. during the promoter's term as a director or supervisor of a securities firm, securities investment trust enterprise, or securities investment consulting enterprise, the entity concerned was ordered to suspend its business or punished with revocation of its business license per Paragraphs 3 or 4 of Article 66 of the Act, and a less than one (1) year has elapsed since such punishment;
  10. the promoter was removed or discharged from his/her functional duties per Item 2 of Paragraph 1 of Article 100 or Paragraph 1 of Article 101 of the Futures Trading Act, and less than five (5) years have elapsed since such punishment;
  11. the promoter has received a punishment of not less than a term of imprisonment on a final and unappealable conviction under Paragraph 1 of Article 29 of the Banking Act for acceptance of deposit, being retained to manage trust funds or public assets, or conducting inward and outward remittance business, and the sentence has not been fully executed or less than three (3) years have elapsed after the completion of the punishment, expiration of probation, or pardon;
  12. the promoter has received a punishment of not less than a term of imprisonment on a final and unappealable conviction under Article 33 of the Act Governing the Trust Business by engaging in the trust business, and the sentence has not been fully executed or less than three (3) years have elapsed after the completion of the punishment, expiration of probation, or pardon;
  13. investigation reveals that the promoter has allowed his/her name to be used by a third party to act as a promoter, director, supervisor, manager, or associated person of a securities investment consulting enterprise or securities investment trust enterprise;
  14. it is evidenced by facts that the promoter has engaged in or been involved in other dishonest or improper activities, which shows that the promoter is not a suitable responsible person for a securities investment consulting enterprise.
    Where the promoter is a juristic person, the provisions of the preceding Paragraph shall apply mutatis mutandis to the promoter's representative or designated representative in the performance of their duties.
Article 8     One who proposes to operate a securities investment consulting enterprise shall complete an application and file it, along with the following documents, with the FSC for approval:
  1. its Articles of Incorporation;
  2. a business plan stating principles of business operation, internal organization and division of duties and responsibilities, personnel recruitment and training, general conditions of business place and equipment, and a financial forecast for the next fiscal year;
  3. the minutes of the promoters meeting;
  4. a promoters' register, stating the names, addresses, and capital contributions of respective promoters;
  5. a declaration that none of the circumstances stated in Paragraph 1 of the preceding Article apply with respect to any promoter;
  6. a description of its accounting system;
  7. a declaration that it has an independent place of business not jointly used by any other enterprise.
    If the particulars in the documents referred to in the preceding Paragraph are incomplete and if supplementation is possible, the FSC may notify the applicant to supplement the documents within a specified time limit. Failure to submit supplemental documents within the time limit shall subject the application to rejection.
Article 9     Given any of the following circumstances, the application for operation of a securities investment consulting enterprise may be rejected by the FSC:
  1. where any circumstance stated in Paragraph 1 of Article 7 applies to the promoter;
  2. where the application documents are found to be false or deceptive;
  3. where the business plan is not concrete or cannot be effectively implemented;
  4. where the manager, department executive, or associated person does not meet the qualifications given under Article 31, paragraph 1.
  5. where a director, supervisor, or manager has violated Article 33 herein or Article 53 of the Act.
  6. a manager, department head, or associated person has violated the fore part of paragraph 3 or paragraph 4 under Article 28.
Article 10     A securities investment consulting enterprise shall, within six (6) months from the date of FSC approval, complete company registration, fill out an application form, and submit to the FSC the following documents along with its application for issuance of a business license:
  1. documents providing proof of company registration;
  2. its Articles of Incorporation;
  3. its business bylaws;
  4. a shareholders' register;
  5. a directors' register and minutes of the board of directors' meeting;
  6. a supervisors' register;
  7. a list of managers, department executives, and associated persons, and supporting documents of their qualifications;
  8. a declaration that none of the circumstances stated in Article 53 of the Act and Article 33 of these Rules apply to the directors, supervisors, and managers;
  9. a photocopy of the ownership deed or lease agreement of the place of business and its floor plan and photos;
  10. documents proving membership approval of the Securities Investment Trust and Consulting Association of the R.O.C. (hereinafter referred to as the "Trade Association"); and
  11. a receipt showing payment of licensing fees in accordance with Article 12 of The Securities and Exchange Act Enforcement Rules.

    The business bylaws referred to in Item 3 above shall outline the internal control system, including principles of business operation, business procedures, division of duties and responsibilities, procedures for handling business disputes, personnel training, and administration.
    If the securities investment consulting enterprise fails to apply for issuance of a business license within the time limit referred to in Paragraph 1, the FSC may revoke its establishment approval, provided that with legitimate reason, an application for extension may be filed with the FSC. Only one extension, for a period of not more than six (6) months, shall be allowed.
    A securities investment consulting enterprise shall, within one (1) month after commencement of business operations, obtain membership in the Trade Association.
Article 11     A securities investment consulting enterprise satisfying each of the following conditions may apply to establish a branch office:
  1. The enterprise has been in operation for more than two (2) years, provided that branch office(s) resulting from merger or acquisition shall be exempt from such restriction;
  2. the audited financial statement of the enterprise for the most recent year indicates that the net value per share of the enterprise is not less than the par value;
  3. the enterprise has not been served a warning disposition by the FSC per Item 1 of Article 66 of the Act during the preceding three (3) months;
  4. no director, supervisor, or manager of the enterprise has been discharged by the FSC per Item 2 of Article 66 of the Act during the preceding six (6) months;
  5. the enterprise has not been ordered to suspend business by the FSC per Item 3 of Article 66 of the Act during the preceding year; and
  6. approval for establishing a branch office of the enterprise has not been revoked as a punishment by the FSC per Item 4 of Article 66 of the Act during the preceding two (2) years.
    Where a securities investment consulting enterprise has been punished per Items 3 through 6 of Article 66 of the Act and has received an order to effect concrete improvement but failed to demonstrate concrete improvement upon application for establishing a branch office, the FSC may reject the application.
Article 12     One who proposes to establish a branch office of a securities investment consulting enterprise shall fill out an application for establishment of a branch office, submitted together with the following documents, and apply to the FSC for approval:
  1. its Articles of Incorporation;
  2. a business plan stating principles of business operation, internal organization and division of duties and responsibilities, personnel recruitment and training, general conditions of the place of business and equipment, and a financial forecast for the next fiscal year;
  3. minutes of the board of directors meeting recording the resolution for establishment of a branch office;
  4. the internal control system of the branch office; and
  5. a financial report for the previous year, audited and certified by a CPA.
    If the particulars in the documents referred to in the preceding Paragraph are incomplete and if supplementation is possible, the FSC may notify the applicant to submit supplementary documents within a specified time limit. Failure to submit supplementary documents within the time limit shall subject the application to rejection.
Article 13     A securities investment consulting enterprise intending to establish a branch office shall, within six (6) months from the date of FSC approval, complete company registration of the branch office, fill out an application form and submit it along with the following documents to apply to the FSC for issuance of a business license for the branch office:
  1. a photocopy of the incorporation registration for the branch office;
  2. a photocopy of the ownership deed or lease agreement of the place of business for the branch office, and its floor plan and photos; and
  3. a receipt showing payment of licensing fees in accordance with Article 12 of The Securities and Exchange Act Enforcement Rules.
    If the securities investment consulting enterprise fails to apply for a business license for its branch office within the time limit referred to in the preceding Paragraph, the FSC may revoke its establishment approval, provided that with legitimate reason, an application for extension may be filed with the FSC. An extension shall be granted once only for a period of not more than six (6) months.
Chapter III Concurrent Operation of a Securities Investment Consulting Enterprise
Article 14     Where a business item of a trust company approved by the FSC involves approved items for discretionary transaction by the trust company, and where the entrusted assets are to be used for the securities prescribed in Article 6 of the Act or the futures prescribed in Article 3 of the Futures Trading Act, the trust company shall apply in its institutional name to the FSC for approval to concurrently operate securities investment consulting business.
    A trust company concurrently operating securities investment consulting business shall allocate dedicated working capital for the said business in an amount not less than prescribed in Item 1 of Paragraph 1 of Article 4 of the Rules Governing Discretionary Investment.
Article 15     A trust company proposing to concurrently operate a securities investment consulting enterprise shall fill out an application form and submit it together with the following documents to apply to the FSC for approval:
  1. a photocopy of its business license;
  2. its Articles of Incorporation or the equivalent;
  3. a business plan stating principles of business operation, internal organization and division of duties and responsibilities, and personnel recruitment and training;
  4. the minutes of the meeting of the board of directors or trustees;
  5. a directors' register and supervisors' register;
  6. a declaration that none of the circumstances stated in Article 53 of the Act or Article 33 of these Rules applies to the directors and supervisors;
  7. a photocopy of FSC approval for operation of discretionary investment business; and
  8. a financial report for the previous year, audited and certified by a CPA.
    If the particulars in the documents referred to in the preceding Paragraph are incomplete and if supplementation is possible, the FSC may notify the applicant to supplement the documents within a specified time limit. Failure to submit supplemental documents within the time limit shall subject the application to rejection.
Article 16     A trust company proposing to concurrently operate securities investment consulting business shall, within six (6) months from the date of FSC approval, fill out an application form and submit it, along with the following documents, to apply to the FSC for issuance of business license:
  1. the business bylaws for operation of the discretionary investment business;
  2. an organizational chart and a list of associated persons and supporting documents showing their qualifications per Article 6 of the Rules Governing Discretionary Investment;
  3. a declaration that none of the circumstances stated in Articles 53 and 54 of the Act and Article 33 of these Rules applies to the associated persons referred to in the preceding item;
  4. a guidebook produced per Article 17 of the Rules Governing Discretionary Investment;
  5. documents evidencing the Trade Association's approval of membership;
  6. a photocopy of the amended business license for the trust company;
  7. a CPA-issued auditing report on the special review of the internal control system for discretionary investment business;
  8. documents evidencing allocated operating capital; and
  9. a receipt showing payment of licensing fees in accordance with Article 12 of The Securities and Exchange Act Enforcement Rules.

    The business bylaws referred to in Item 1 of the preceding paragraph shall prescribe the internal control system, including principles of business operation, business procedures, division of duties and responsibilities, procedures for handling business disputes, and personnel training and administration.
    If the trust company fails to apply for issuance of a business license within the time limit referred to in the preceding Paragraph, the FSC may revoke approval for concurrent operation, provided that with legitimate reason, an application for extension may be filed with the FSC. An extension shall be granted once only for a period of not more than six (6) months.
    A trust company shall, within one (1) month after commencement of business operation, obtain membership in the Trade Association.
Article 17     A securities broker or futures broker may apply to concurrently operate a securities investment consulting enterprise, provided that a securities broker or a futures broker concurrently operated by a financial institution may not do so.
    A securities broker or futures broker that concurrently operates a securities investment consulting enterprise may not engage in the business set forth under Article 5, paragraph 1, subparagraph 2.
    A securities broker or futures broker that concurrently operates a securities investment consulting enterprise shall establish an independent department exclusively responsible for consulting, and appoint a director and associated persons for operation of the department.
    The independent consulting department referred to in the preceding paragraph shall be staffed by a sufficient number of competent managers and associated persons, as determined by the scope of the business, operating conditions, and management requirements associated with the internal control system. Those staff shall possess the qualifications set forth under Article 31, paragraph 1, and may not engage in business outside the scope of registration under Article 28; such business may not be concurrently carried out by personnel other than those referred to as "associated persons" by these Rules.
Article 18     A securities broker or futures broker applying to concurrently operate a securities investment consulting enterprise shall conform with the provisions of each following subparagraph:
  1. A net value per share not lower than the par value, as evidenced by the CPA-audited and certified financial report for the preceding period.
  2. A period of two full years since establishment of the securities or futures brokerage enterprise.
  3. No receipt of any FSC warning disposition pursuant to Article 66, subparagraph 1 of the Act or Article 100, paragraph 1, subparagraph 1 of the Futures Trading Act during the preceding three months.
  4. No receipt of any FSC disposition ordering removal of a director, supervisor, or manager pursuant to Article 66, subparagraph 2 of the Act, or requiring a change in the responsible person or other related persons pursuant to Article 100, paragraph 1, subparagraph 2 of the Futures Trading Act during the preceding half year.
  5. No receipt of any FSC disposition requiring either full or partial suspension of business pursuant to Article 66, subparagraph 3 of the Act or Article 100, paragraph 1, subparagraph 3 of the Futures Trading Act during the preceding year.
  6. No receipt of any FSC disposition requiring voidance or revocation of any part of its business license pursuant to Article 66, subparagraph 4 of the Act or Article 100, paragraph 1, subparagraph 4 of the Futures Trading Act during the preceding two years.
  7. No receipt of any disposition pursuant to the bylaws of the Taiwan Stock Exchange, the Taifex, the GreTai Securities Market, or a futures clearing house requiring that trading be halted or restricted during the preceding year.
    When a securities broker or futures broker has received a disposition under subparagraphs 3 to 7 above and has been ordered to effect improvement, but has failed to effect concrete improvement at the time of application for concurrent operation of a securities investment consulting enterprise, the FSC may reject its application.
Article 19     When a securities broker or futures broker applies to concurrently operate securities investment consulting enterprise business, it shall fill out an application form and submit it to the FSC for approval with the following documents:
  1. a business plan stating the principles under which the business will be operated, the internal organization and division of labor, recruitment and training of personnel, a general description the site and facilities, and a one-year financial forecast for the department responsible for consulting operations;
  2. a statement of operating rules to prevent conflicts of interest;
  3. a CPA-audited and certified financial report for the preceding period;
  4. the minutes of the directors' meeting;
  5. a declaration that none of the circumstances set forth in Article 33 apply to any director or supervisor;
  6. documents evidencing compliance with the provisions of Article 18, paragraph 1, subparagraph 7.
    Where the required particulars are not fully set out in the application documents referred to in the preceding paragraph and where supplementation is possible, the FSC may issue a notice for supplementation within a specified period; if the required information has not been supplemented by the end of that period, the application will be rejected.
Article 20     When a securities broker or futures broker applies to concurrently operate securities investment consulting business, it shall, within six months from the date of approval by the FSC, fill out an application form and submit it to the FSC, together with the following documents, for approval and issuance of a business license:
  1. an internal control system plan for concurrent operation of a securities investment consulting enterprise;
  2. a register of personnel conforming to the provisions under Article 31, paragraph 1, and documents evidencing their qualifications;
  3. a declaration that none of the circumstances under Article 33 herein or Articles 53 and 54 of the Act apply with respect to the personnel referred to in the preceding subparagraph;
  4. a CPA-audited and certified financial report for the preceding period, provided that a securities or futures broker may be exempt from this requirement when the financial report submitted during application for approval was for the same period;
  5. documents showing admission into membership in the Trade Association;
  6. a receipt showing payment of licensing fees in accordance with Article 12 of The Securities and Exchange Act Enforcement Rules.

    The internal control system plan referred to in the preceding paragraph shall set out methods for preventing conflicts of interest and for segregating risk in connection with operation of the business in areas such as information exchange and utilization, advertising, the holding of public investment analysis activities, or provision of research and analysis reports.
    When a securities broker or futures broker fails to apply for a business license within the period specified in paragraph 1, its approval for concurrent operation of a securities investment consulting enterprise will be revoked, provided that with legitimate reason, it may apply to the FSC for an extension prior to the end of that period. An extension shall be granted once only, for a period of no more than six months.
    A securities broker or futures broker shall obtain membership in the Trade Association within one month from the day on which its business license is issued.
Article 21     When a securities broker or futures broker applies for permission to concurrently operate securities investment consulting business, it may at the same time apply for approval for concurrent operation of securities investment consulting business by its branch offices.
    When a foreign securities broker or futures broker has received approval from its home government, it may apply for concurrent operation of securities investment consulting business by a branch office established within ROC territory.
    The provisions of Article 17, Article 18, paragraph 1, subparagraph 5 of Article 20, Articles 22-25, and Article 44 shall apply mutatis mutandis to the application by a foreign securities broker or futures broker for concurrent operation of securities investment consulting business by its branch office within ROC territory.
    When a foreign securities broker or futures broker applies for concurrent operation of securities investment consulting business by its branch office within ROC territory, it shall attach a certified copy of the related board of directors' resolution and a power of attorney authorizing its designated agent to carry out the application.
    The documents referred to in the preceding paragraph shall be notarized or legalized; when any such document is in a foreign language, it shall be accompanied by a Chinese translation.
Article 22     A securities broker or futures broker applying for concurrent operation of securities investment consulting business by a branch office shall conform with each of the following provisions:
  1. The requirements set forth in Article 18.
  2. The securities broker or futures broker shall have already received its approval or business license for concurrent operation of securities investment consulting business, or shall apply for concurrent operation of securities investment consulting business at the same time as its branch office.
  3. The branch office shall appoint personnel with the qualifications under Article 31, paragraph 1 whose exclusive responsibility shall be implementing operations, provided that in the case of the branch office of a futures broker, operations may be carried out by personnel with the qualifications set out under Article 31, paragraph 1 on a concurrent basis.
    When a securities broker or futures broker has received a disposition under Article 18, paragraph 1, subparagraphs 3-7 above and has been ordered to effect improvement, but has failed to effect concrete improvement at the time of application for concurrent operation of securities investment consulting business by a branch office, the FSC may reject the application for concurrent operation of securities investment consulting business by the branch office.
Article 23     When a securities broker or futures broker applies for concurrent operation of securities investment consulting business by a branch office, it shall fill out an application form and submit it to the FSC for approval, together with the following documents:
  1. a business plan stating the principles under which the branch office will operate the securities investment consulting enterprise, the enterprise's internal organization and division of labor, its recruitment and training of personnel, a general description of the site and facilities, and a one-year financial forecast;
  2. a statement of operating rules for the branch organization for preventing conflicts of interest, provided that exemption from this requirement is allowed when these operating rules are the same as the operating rules submitted with the previous application for concurrent operation of securities investment consulting business by the branch office.
  3. the minutes of the directors' meeting;
  4. a CPA-audited and certified financial report for the preceding period;
  5. documents evidencing compliance with the provisions of Article 18, paragraph 1, subparagraph 7.
    Where the required particulars are not fully set out in the application documents referred to in the preceding paragraph and where supplementation is possible, the FSC may issue a notice for supplementation within a specified period; if the required information has not been supplemented by the end of that period, the application will be rejected.
Article 24     When a securities broker or futures broker applies for concurrent operation of securities investment consulting business by a branch office, it shall, within six months from the date of approval by the FSC, fill out an application form and submit it to the FSC together with the following documents for approval and issuance of a business license for the branch office:
  1. a description of the internal control system for concurrent operation of securities investment consulting business by the branch office;
  2. a register of personnel conforming to the provisions under Article 31, paragraph 1, and documents evidencing their qualifications;
  3. a declaration that none of the circumstances under Article 33 herein or Articles 53 and 54 of the Act apply with respect to the personnel referred to in the preceding subparagraph;
  4. a CPA-audited and certified financial report for the preceding period, provided that exemption from this requirement is allowed when the financial report submitted during application for approval was for the same period;
  5. a receipt showing payment of licensing fees in accordance with Article 12 of The Securities and Exchange Act Enforcement Rules.
    When a securities broker or futures broker has failed to apply for a business license for operation of a securities investment consulting business by the branch office within the period specified in paragraph 1, the approval for concurrent operation of a securities investment consulting enterprise will be revoked, provided that with legitimate reason, application may be made to the FSC for an extension prior to the end of that period. An extension shall be granted once only, for a period of no more than six months.
Article 25     When a securities broker or futures broker applies to concurrently operate securities investment consulting business, the FSC may, given any of the following circumstances, withhold approval:
  1. The application documents contain false or misleading items;
  2. the business plan or description of the internal control system is not sufficiently specific or capable of effective implementation;
  3. operation of the business is not effectively carried out in accordance with the internal control system; or
  4. the managers, department directors, or associated persons do not possess the qualifications set out in the fore part of paragraph 3 or of paragraph 4 of Article 28.
Chapter IV Administration of Operations, Finance, and Personnel
Article 26     The following acts of a securities investment consulting enterprise shall require prior approval of the FSC:
  1. change of company name;
  2. change of capital amount;
  3. amendment of business items;
  4. change of business address of the enterprise or its branch office;
  5. assignment or acceptance of the whole or a substantial portion of a business or assets;
  6. dissolution or merger; and
  7. other matters subject to FSC approval.
Article 27     Any of the following matters concerning a securities investment consulting enterprise shall be handled in accordance with the law and reported to the FSC:
  1. commencement, suspension, resumption, or termination of business operations;
  2. change of directors, supervisors, or managers;
  3. change of shareholding of its directors, supervisors, or shareholders holding 5% or more of the total numbers of issued and outstanding shares;
  4. litigation, non-contentious matters, or arbitration by the Trade Association resulting from business operations or from performance of business duties by associated persons; or
  5. other particulars to be reported as required by the FSC.
    Matters prescribed in Item 1 above shall be reported in advance; matters prescribed in Items 2 through 4 shall be reported to the Trade Association in writing within five (5) business days from the date of their occurrence for report to the FSC.
Article 28     A securities investment consulting enterprise shall have an investment research department and a finance and accounting department.
    The term "associated persons," as used in these Rules, shall refer to the personnel performing the following business duties for a securities investment consulting enterprise:
  1. research and analysis, recommendation and suggestion, and publication in connection with matters concerning securities investment;
  2. analysis or lectures regarding securities investment;
  3. research and analysis, investment decision-making, or execution of transactions in connection with matters concerning consignment of discretionary investment;
  4. internal auditing;
  5. chief accountant's duties; and
  6. promotion, business solicitation, or internal assistance for matters concerning securities investment consulting business for the enterprise.

    The department executives, branch office managers, and associated persons shall be hired on a full-time basis, and shall not perform business duties unless and until prior registration by the enterprise with the Trade Association has been completed.
    The number of associated persons referred to in Items 1 through 3 of Paragraph 2 above may not be fewer than 5; where the total number of associated persons is fewer than 10, it may not be less than one-half of the total number.
Article 29     A securities investment consulting enterprise shall register any change in its department executives, branch office managers, and associated persons with the Trade Association within five (5) business days from the day following such change. Before completing registration of the said change, the securities investment consulting enterprise shall be responsible and liable for the conduct of the outgoing person.
Article 30     The registration particulars for the responsible person, department executives, branch office managers, and associated persons of a securities investment consulting enterprise shall be prescribed by the Trade Association and submitted to the FSC for approval before implementation; the same shall also apply to any amendments thereto.
Article 31     The department executives, branch office managers, and associated persons performing business duties, referred to in subparagraphs 1 through 3 of Paragraph 2 of Article 28 above, of a securities investment consulting enterprise shall have one of the following qualifications:
  1. having obtained qualification as a securities investment analyst per Paragraph 1 of Article 32 of these Rules;
  2. having passed the qualification exam for associated persons of securities investment trust and consulting enterprises, held by an institution commissioned by the Trade Association and having more than one (1) year of practical securities-related or futures-related experience in professional investment institutions;
  3. having passed the exam for senior agents of securities firms held by an institution commissioned by the Trade Association or having obtained certification issued by the by the original Securities and Futures Commission after passing the said exam, while having more than two (2) years of practical securities-related or futures-related experience in professional investment institutions;
  4. having more than one (1) year of practical experience as fund manager for local or overseas funds; or
  5. being a graduate of a domestic or foreign university recognized by the Ministry of Education or having an equivalent level of education, while having three or more years of experience as an associated person at a securities or futures institution or a trust enterprise.

    The scope of the "professional investment institutions" specified in paragraphs 2 and 3 above, and the scope of related work experience, will be as announced by the FSC.
    The position of internal auditor at a securities investment consulting enterprise concurrently operated by a securities broker or a futures broker may be held concurrently by the registered internal auditor of the given securities broker or futures broker.
    To present securities investment analysis in the media, a person from a securities investment consulting enterprise shall possess at least one of the qualifications in Items 1 through 3 above.
Article 32     An analyst of a securities investment consulting enterprise shall have one of the following qualifications:
  1. a passing score on a qualification exam for securities investment analysts held by an institution commissioned by the Trade Association;
  2. certification abroad as securities analyst, with more than two (2) years of practical experience recognized by the Trade Association; or
  3. certification as securities analyst prior to 10 October 2000.
    Matters concerning the qualification exam and certification as referred to in subparagraphs 1 and 2 above shall be prescribed by the Trade Association and submitted to the FSC for approval before implementation; the same shall also apply to any amendments thereto.
Article 33     A person to whom the circumstances of any subparagraph of Article 7, paragraph 1 or Article 7, paragraph 2 apply shall not serve as the responsible person, department executive, branch office manager, or associated person in a securities investment consulting enterprise. Any such person already acting in such capacity shall be discharged from the post.
    The directors, supervisors, and managers of a securities investment consulting enterprise shall not invest in any other securities investment consulting enterprise, nor shall they concurrently act as directors, supervisors, and managers of another securities investment consulting enterprise, securities investment trust enterprise, or securities firm.
Article 34     The associated persons of a securities investment consulting enterprise shall attend the orientation course and on-the-job training held by institutions designated by the FSC.
    A person who fails to attend the aforesaid training or fails the training, and within one year fails the subsequent re-training, shall not act as an associated person, and the Trade Association shall notify the securities investment consulting enterprise that registration as associated person for the said person is revoked.
Article 35     Except as required by business operations, the securities investment consulting enterprise shall not loan its capital to other persons or use the capital for other purposes, and use of the self-owned capital shall be limited to the items listed hereunder; a trust enterprise, securities broker, or futures broker concurrently operating a securities investment trust enterprise, however, shall use self-owned capital in accordance with the provisions of the Trust Enterprise Act, the Law, or the Futures Trading Act:
  1. bank deposits;
  2. purchase of government bonds or financial bonds;
  3. purchase of treasury bills, negotiable certificates of bank deposit, or commercial papers; and
  4. other purposes approved by the FSC.
    A securities investment consulting enterprise shall not endorse negotiable instruments or provide other guarantees.
Article 36     A securities investment consulting enterprise and its responsible person, department executives, branch office managers, and other associated persons shall faithfully carry out their business duties in an honest and trustworthy manner.
    Unless otherwise provided by law or regulation, the aforesaid enterprise and persons shall not:
  1. Enter into a consignment contract by fraud, threat, or other improper means;
  2. engage in investment in marketable securities on behalf of a client;
  3. make covenant with a client to share profits or losses from investment in marketable securities;
  4. purchase or sell the same marketable securities as recommended to investors;
  5. engage in behavior that is false, deceptive, abusive, or otherwise at variance with the facts or sufficient to cause misplaced trust by others;
  6. enter into agreement with a client regarding loans or lending of marketable securities, or act as middleman for loans or lending of marketable securities;
  7. take under custody or use without authorization the marketable securities, payments, seal/chop, or passbook of a client;
  8. seek to benefit oneself, other clients, or third parties by using the investment research, analysis, suggestions, publications, or lectures offered for one certain client;
  9. disclose matters entrusted by a client or other secrets obtained through business duties, except in accordance with an investigation undertaken pursuant to the law;
  10. agree or by tacit permission allow third parties to perform business duties in the name of the enterprise or its associated persons;
  11. relay, by any means, unfounded trading tips to a client during the trading hours of the centralized securities exchange market or the OTC automated trade matching system;
  12. recommend certain securities or forecasted valuations for certain securities to any unspecified person at a public venue or through media other than radio or television media, or recommend or induce trading of a particular security without disclosing a reasonable analytical basis;
  13. conduct investment analysis for investors by divination or citing spiritual beings;
  14. instigate or entice others by word, picture, speech, or other means to refuse performance of settlement obligations, stage protests, or engage in other acts which disturb the market order;
  15. use part-time workers to solicit clients or pay commissions at an unreasonable rate;
  16. use unregistered name(s) or pseudonym(s) to engage in securities investment analysis activities; and
  17. other offenses under securities and futures regulations, or acts prohibited by the FSC.

    The provisions of the preceding paragraph shall apply mutatis mutandis to other employees of a securities investment consulting enterprise.
    A securities investment consulting enterprise shall prescribe and implement a set of management regulations for internal personnel in accordance with Trade Association regulations.
Article 37     When conducting advertising or securities investment analysis activities for the public, neither a securities investment consulting enterprise nor its responsible person, department directors, branch office managers, or associated persons shall engage in any of the following acts:
  1. violating provisions of the preceding article in securities investment analysis programs offered in the mass media;
  2. employing, for the purpose of soliciting clients, deceptive or other improper means to entice investors to attend securities investment analysis activities;
  3. making, without evidence, an advertising claim of superiority over competitors in terms of performance, content, or method of securities investment consulting services;
  4. disclosing in advertisements only matters favoring the enterprise or making other exaggerated promotional statements;
  5. advertising to mislead others to believe that the enterprise handles discretionary investments, contrary to the fact that the enterprise has not obtained approval from the authorities concerned;
  6. indicating that it will guarantee profits or bear losses;
  7. using advertising to solicit clients while presenting investment analysis in mass media;
  8. being involved in conflicts of interest, fraud, deception, or other acts intended to disturb the order of the securities market;
  9. forecasting the valuation of certain individual securities;
  10. recommending or offering inducements to trade in an individual security to unspecified persons through radio or television media during the period of trading on the centralized securities trading market or the OTC automated trade matching system, or within one hour before or after that period;
  11. during any time outside of the period specified in the preceding paragraph, recommending or inducing trading in a particular security, or providing information on industry or corporate finances relating to an individual security to unspecified persons through radio or television media without disclosure of a reasonable analytical basis;
  12. failing to disclose a reasonable analytical basis from which conclusions regarding prospective market performance, market analysis, or industry trends are made;
  13. citing high-profile investors, speculation of corporate groups, insider information, or other improper or illegal content as basis to solicit clients and recommend certain securities;
  14. quoting recommendation letters, thank-you notes, past performance, or other similar texts or expressions convenient for convincing others of guaranteed profits;
  15. failing to print, in printed materials for business promotion, the registered company name, address, telephone number, and reference number of its business license;
  16. hosting securities investment analysis activities, or producing and distributing printed materials under the names of associated persons, the internal research unit, or names other than that of the enterprise itself; and
  17. violating the code of self-discipline for advertising and promotional activities prescribed by the Trade Association.
    The code of self-discipline referred to in subparagraph 17 of the preceding paragraph shall be prescribed by the Trade Association to be approved by the FSC before implementation; the same shall apply to any amendment thereto.
Article 38     When a securities investment consulting enterprise accepts a consignment from a securities investor, a retainer contract shall be made in writing setting forth the rights and obligations of both parties thereto.
    Major particulars to be covered by the retainer contract referred to in the preceding Paragraph shall be prescribed by the Trade Association to be approved by the FSC before implementation; the same shall apply to amendments thereto.
Article 39     A securities investment consulting enterprise shall regularly publish reports of its business condition in accordance with the provisions prescribed by the FSC.
Article 40     A Securities investment consulting enterprise shall, within four (4) months after completion of its final account at the end of each fiscal year, prepare an annual report audited by a certified public accountant and submit the same to the FSC after such report has been approved by the board of directors and acknowledged by the supervisors.
    The aforesaid annual report shall be submitted to the Trade Association for forwarding to the FSC.
Article 41     A securities investment consulting enterprise, when providing securities investment analyses and suggestions, shall produce an investment analysis report detailing its analytical bases and research sources.
    Duplicate copies and records of the said investment analysis report as referred to in the preceding Paragraph shall be kept by the securities investment consulting enterprise for a period of five (5) years from the date on which such information is furnished, and may be stored in electronic media.
    The retainer contract executed by a securities investment consulting enterprise in accordance with the provisions of Article 38 hereof shall be kept for a period of five (5) years from the date on which the contractual relation of rights and obligations thereunder have extinguished.
    The investment analysis provided by a securities investment consulting enterprise to the mass media shall be videotaped (or audio-recorded) for recordation and shall be kept for a period not less than two (2) months.
Article 42     The FSC may order a securities investment consulting enterprise or its associated persons to submit financial and/or business reports or other reference information and may initiate direct inspection of the financial and/or business condition of such securities investment consulting enterprise.
Article 43     When the FSC finds, in the course of its examination of the financial and/or business reports or other reference materials submitted by a securities investment consulting enterprise, or in the course of inspection of the financial and/or business condition of the same, that there are matters not in conformity with laws and regulations, the FSC may order the securities investment consulting enterprise to correct such discrepancies.
Article 44     When a securities broker or a futures broker concurrently operates securities investment consulting business in accordance with these Rules, the management of operations, finances, and personnel in that department shall apply the provisions of this Chapter mutatis mutandis, except where otherwise provided by the Act, the Futures Trading Act, or other laws and regulations.
    Unless otherwise provided for by the Act Governing the Trust Business or other laws, where a trust company concurrently accepts consignment of discretionary investment as referred to Article 5, Paragraph 1, subparagraph 2, the following provisions of this Chapter shall apply mutatis mutandis with regard to business, finance, and the administration of the directors and associated persons responsible for securities research and analysis, investing decisions, and execution of trades within the department in charge of the said business: paragraph 1, subparagraph 4 and the latter part of paragraph 2 of Article 27; the latter part of paragraph 3 of Article 28; Article 29 through Article 31, paragraphs 1 and 2; Articles 32-34; Article 36; and Articles 42-43.
Chapter V Investment, Recommendation, and Consulting Business for Foreign Securities
Article 45     Operation of investment, recommendation, and consulting business for foreign securities shall be restricted to the following types of enterprises:
  1. Securities investment consulting enterprises;
  2. Securities brokers engaged in consigned trading of foreign securities and concurrently engaged in securities investment consulting business.
  3. Futures brokers engaged in consigned trading of foreign futures and concurrently engaged in securities investment consulting business.
    The type and range of overseas marketable securities contained in portfolios offered by the securities investment consulting enterprises shall be announced by the FSC.
Article 46     A securities investment consulting enterprise shall not engage in investment, recommendation, or consulting services involving overseas marketable securities unless and until its application submitted to the FSC together with relevant documents has been approved.
Article 47     Where any of the following circumstances apply to a securities investment consulting enterprise applying to offer investment, recommendation, or consulting services regarding foreign marketable securities, the FSC may reject the application:
  1. failure to comply with Article 45 hereof; or
  2. the application documents are incomplete or contain errors, or particulars in the documents are incomplete, and such situation is not corrected within a specified time limit after being so notified.
Article 48     A securities investment consulting enterprise, while handling investment, recommendation, and consulting businesses in relation to overseas securities, shall not engage in domestic offering, issuance, or trading.
Article 49     A securities investment consulting enterprise operating investment recommendation and consulting businesses in relation to foreign securities shall deliver to the client the materials related to the said securities; the same shall apply to any amendments to those materials.
Article 50     After a securities investment consulting enterprise has been approved to engage in investment recommendation and consulting business in relation to foreign marketable securities, the FSC, upon discovering one of the following conditions, may, in addition to cancellation of the said approval, suspend for two (2) years the enterprise's acceptance of new investment recommendation and consulting business for foreign marketable securities:
  1. a false statement contained in the application documents;
  2. a violation either of the preceding two Articles; or
  3. other conditions in violation of compulsory or prohibitive prescriptions of the FSC for investment recommendation and consulting business regarding foreign marketable securities.
Chapter VI Supplemental Provisions
Article 51     Matters herein relating to forms of documents shall be announced by the FSC.
Article 52     These Rules shall become effective from the date of promulgation.