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Title: Taiwan Futures Exchange Corporation Rules for Auditing Futures Commission Merchants and Clearing Members
Date: 2004.08.06 ( Announced )
Date: 2007.02.07 ( Amended )

Article Content

 
Article 1     These Regulations are adopted in accordance with Article 13, Paragraph 1 of the Rules Governing Management of the Futures Exchange and Article 31, Paragraph 1 of the Rules Governing Futures Clearing Houses.
Article 2     Auditing of the finances, operations, and internal auditing procedures of futures commission merchants and clearing members by this Corporation shall be undertaken in accordance with these Regulations. Matters not provided for herein shall be undertaken in accordance with the Operating Rules of the Taiwan Futures Exchange Corporation and other applicable regulations.
Article 3     "Competent Authority" as used herein shall mean the Financial Supervisory Commission, Executive Yuan.
Article 4     General audits of futures commission merchants and clearing members performed by this Corporation shall be categorized as either routine or selective audits:
  1. Routine audits: Audits of finances, operations, and internal auditing procedures.
  2. Selective audits: Audits of particular areas where indicators show irregularities, of cases reported by futures traders, or of matters referred by the Competent Authority not in relation to cases under special investigation.
    The "particular areas where indicators show irregularities" referred to in subparagraph 2 of the preceding paragraph are classified as follows:
  1. Dynamic indicators: based on the information reported in this Corporation's execution of standard operating procedures for early risk warning and cross-department information reporting of futures commission merchants and clearing members.
  2. Static indicators: based on the information generated by operations in accordance with this Corporation's Early Warning Rules for Operational Risk of Futures Commission Merchants and Clearing Members.
Article 5     This Corporation will conduct audits of futures commission merchants and clearing members by means of on-site audits and document audits, which will in principle be random. Full audits may be conducted as necessary.
Article 6     On business days, this Corporation may dispatch personnel to futures commission merchants or clearing members to investigate or make inquiries with regard to auditing reports or any vouchers, receipts, account books, statistical tables, records, contracts, and other evidentiary documents related to trading, clearing, and settlement.
Article 7     Futures commission merchants and clearing members may neither evade nor refuse auditing procedures undertaken by this Corporation; in case of evasion or refusal, trading or clearing operations may be suspended in accordance with Articles 128 and 129 of the Operating Rules of the Taiwan Futures Exchange Corporation, and a letter of report sent to the Competent Authority.
    Employees of futures commission merchants and clearing members shall cooperate in providing explanations of matters related to their professional duties during audits of those areas. Where they are involved in evading or refusing an audit, this Corporation may assess the severity of the situation and at its discretion may notify the futures commission merchant or clearing member to issue a warning or temporarily suspend the employee from their duties, in accordance with Article 134 of the Operating Rules of the Taiwan Futures Exchange Corporation.
    "Evasion or refusal" as used in the preceding two paragraphs refers to any of the following:
  1. When, during an on-site audit, a futures commission merchant or clearing member deliberately creates an incident, or though not deliberately, nonetheless allows to occur an incident that could have been foreseen under the circumstances, or delays in immediately eliminating such an event when elimination would have been possible, thereby interfering with the smooth progress of the audit.
  2. When, during a document audit, the futures commission merchant or clearing member is late in producing relevant account books, vouchers, or information that this Corporation has notified it by letter to produce on a regular basis.
Article 8     When auditors proceed to the entity being audited to perform an audit, they shall produce the audit certification documents issued by this Corporation.
    When executing their duties, auditors shall maintain a fair and impartial stance and a serious and rigorous attitude toward their work, and uphold their duty to maintain confidentiality.
Article 9     In executing audit work, auditors shall produce an audit report for each audit performed, which shall include recommendations and areas requiring improvement in relation to the items audited and the results of the audit.
Article 10     This Corporation may appropriately penalize a futures commission merchant, clearing member or their affiliated personnel for shortcomings discovered through audits, in accordance with the Operating Rules of the Taiwan Futures Exchange Corporation and other applicable regulations. Where there is any violation of the Futures Trading Law or related laws and regulations, this Corporation shall report the matter to the Competent Authority for handling.
Article 11     Where this Corporation performs general audits of futures commission merchants and clearing members and discovers poor management, losses leading to difficulty in maintaining credit standing, unforeseen incidents, or significant flaws in internal auditing procedures, it shall conduct a special investigation and provide guidance. Regulations governing such procedures shall be adopted separately.
Article 12     This Corporation shall compile and submit to the Competent Authority monthly reports on the results of its audits of the finances and operations of futures commission merchants and clearing members.
Article 13     These Regulations shall be implemented from the date of their public announcement.