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1     These Guidelines are specially promulgated to provide futures commission merchants (“FMCs”) with a groundwork for handling various procedures of mergers and assignment of operations.
2     Mergers and assignment of operations by FCMs shall be undertaken in accordance with the Company Law and other applicable laws and regulations, and shall be reported to the Taiwan Futures Exchange Corporation (“TAIFEX”), which will forward the report to the competent authority for approval.
3     FCMs shall carry out mergers in accordance with the following provisions:
  1. After reporting to the competent authority and receiving approval, an FCM undergoing a merger shall mail notification to the TAIFEX with the relevant documents enclosed (see Appendix 1) 7 business days prior to the scheduled record date of the merger for the purpose of public announcement by the TAIFEX.
  2. Within 5 days of the day of conclusion of the post-merger shareholders’ meeting or the inaugural meeting convened in accordance with Article 318, paragraph 1 of the Company Law, the FCM surviving after a merger (“surviving FCM”) or the FCM newly established after a merger (“newly established FCM”) shall mail a report to the TAIFEX for recordation, with a photocopy of the amended or newly adopted articles of incorporation enclosed.
  3. An FCM extinguished through a merger (“extinguished FCM”) shall terminate operations in accordance with the provisions for application under the Taiwan Futures Exchange Procedures for Suspension or Termination of Futures Commission Merchant and Clearing Member Operations. The surviving or newly established FCM shall succeed to all rights and obligations of the extinguished FCM, provided that any record of violations by the extinguished FCM shall not be subject to this provision.
  4. Contracts entered into between an FCM and the TAIFEX shall be handled in accordance with the following provisions:
    1. After close of the regular trading session on the record date of the merger, the surviving FCM or the newly established FCM shall return to the TAIFEX the contract for use of the centralized futures exchange market, the contract for use of trading information, and the contract for computer link to the centralized futures market previously signed between the extinguished FCM and the TAIFEX.
    2. The newly established FCM, in addition to proceeding in accordance with the preceding paragraph, shall apply to enter into new contracts with the TAIFEX.
  5. When an FCM without clearing member status is a party to a merger, its clearing and settlement obligations shall be handled in accordance with the following provisions:
    1. Prior to the record date of the merger, the extinguished FCM shall carry out termination of its contract for clearing and settlement with the clearing member that handles its clearing and settlement procedures.
    2. Prior to the record date of the merger, the surviving FCM shall enter into a contract for clearing and settlement with the clearing member it commissions to handle clearing and settlement procedures.
    3. When any open futures contracts are still held by the extinguished FCM, its commissioned clearing member shall carry out transfers of positions and margins after close of accounts after close of the regular trading session on the record date of the merger by faxing a Position and Margin Transfer Application Form and the position transfer files to the TAIFEX.
  6. When an FCM with clearing member status (“clearing member”) undergoes a merger, its clearing and settlement obligations shall be handled as follows:
    1. Clearing member status:
      1. A surviving clearing member may extend its clearing member status, and shall sustain compliance with clearing member qualification standards.
      2. A surviving or newly established FCM without clearing member status that wishes to become a clearing member must do so in accordance with the Taiwan Futures Exchange Corporation Clearing Member Application Procedures.
      3. An extinguished clearing member shall apply for cancellation of its clearing member status in accordance with the Taiwan Futures Exchange Corporation Clearing Member Application Procedures 1 month prior to the record date of the merger.
    2. Consignor FCMs:
    3. Consignor FCMs of an extinguished clearing member may change to another clearing member and carry out transfers of positions and margins in accordance with the Taiwan Futures Exchange Corporation Guidelines for Mergers and Assignment of Operations by Futures Commission Merchants.
    4. The clearing margin and positions:
    5. After closing of accounts after close of the regular trading session on the record date of the merger, an extinguished clearing member with open futures contracts shall transfer its positions and its clearing margin by faxing a Position and Margin Transfer Application Form and the position transfer file data to the TAIFEX.
    6. Clearing and Settlement Fund:
      1. A surviving clearing member shall submit clearing and settlement funds to the TAIFEX prior to the record date of the merger in accordance with the Taiwan Futures Exchange Corporation Criteria for Clearing Membership. The TAIFEX may at its discretion deduct the clearing and settlement funds directly from the clearing and settlement fund account originally submitted by the extinguished clearing member.
      2. When a clearing member applies for cancellation [of clearing member status], the TAIFEX will return the member’s clearing and settlement funds and interest thereupon after the member has completed the cancellation procedures.
  7. Where an extinguished FCM or branch office thereof had not yet commenced operations or was in continuous operation less than 2 years [prior to merger], the bond originally paid by the FCM or its branch office for computer link may serve as the computer link bond for the surviving or newly established FCM, and will be refunded without interest at the end of the 2-year period of continuous operation, calculation of which resumes from the time the [surviving or newly established FCM] succeeds to its operations. Where all or any part [of the extinguished FCM] is dissolved and not retained in use, the surviving or newly established FCM may apply for refund [of the computer link bond] after settlement of related debts.
  8. Every item of provisions or reserves recognized or set aside by an extinguished FCM shall be calculated as part of the reserve already allocated or deposited by the surviving FCM or serve as the reserve to be allocated or deposited by the newly established FCM.
  9. The surviving or newly established FCM shall be responsible for payment of the various fees payable to the TAIFEX by the extinguished FCM and its branch offices prior to the merger.
  10. Any change in the directors, supervisors, managers, or sales agents of an extinguished, surviving, or newly established FCM shall be handled in accordance with the Rules Governing Responsible Persons and Sales Agents of Futures Commission Merchants, with secondary notification to be given to the TAIFEX.
  11. When there is a merger of FCMs, transfer of operations shall take place in accordance with the following provisions:
    1. An extinguished FCM shall no longer be allowed to operate as of the business day next following the record date of the merger; when the surviving or newly established FCM retains use of operating venues of the extinguished FCM, it may commence operations only after an operating license and other documents required under applicable regulations have been obtained.
    2. Any futures contracts that have not yet been liquidated by the extinguished FCM shall be succeeded to by the surviving or newly established FCM on the business day next following the record date of the merger.
    3. Any account errors or correction of account numbers arising out of trades consigned with the extinguished FCM or breaches of contract by consignors that have not yet been handled by the extinguished FCM shall be handled under the name of the surviving or newly established FCM from the business day next following the record date of the merger.
    4. The extinguished FCM shall, after close of the regular trading session on the record date of the merger, cancel all accounts opened with the TAIFEX in its name, and after settlement of all related account matters shall cancel accounts opened with other FCMs.
    5. A surviving or newly existing FCM shall notify consignors on the record date of the merger or prior to commencing operations, and shall arrange with the TAIFEX for updating of the computer files for consignment trading accounts of consignors at the extinguished FCM before it may begin to accept consignments for trading.
    6. On the afternoon of the record date of the merger, the extinguished FCM and its branch offices shall, in accordance with law and the regulations of the TAIFEX, deliver the finance- and operations-related documents that they are required to keep in custody to the surviving or newly-established FCM and its branch offices, which shall be responsible for the custody thereof.
    7. Except where retention of property and equipment originally belonging to the extinguished FCM is necessary for operational purposes, the surviving or newly established FCM shall dispose of those assets in accordance with the regulations of the competent authority.

Appendix 1
  1. Documents required for notification [prior to] the record date of the merger:
    1. Letter of application (the applicant’s standard form for official letters)
    2. Photocopy of the competent authority’s approval letter
    3. Minutes of meetings regarding setting the record date of the merger
    4. Basic registration information for the FCM and the clearing member
    5. Adjusted net capitalization spreadsheet, balance sheet, and adjustments and related statements
    6. Statements for the segregated margin accounts of the FCM and the clearing member
  2. Documents required for commencement of business by branches established after notification of merger:
    1. Forms for notification of commencement of business by the FCM and the clearing member
    2. Basic registration information for the FCM and the clearing member
    3. Photocopies of the approval license certificate and evidentiary documentation of company registration and commercial registration of the branch office
    4. Certificate of auction equipment connection
    5. Proof of completion of circuits testing
    6. Statements for the segregated margin accounts of the FCM and the clearing member
    7. Copy of the financial institution agreement for opening segregated client margin accounts
    8. A succession agreement or evidentiary documentation showing consent of another FCM to succeed [to the FCM’s operations]
4     Assignment of operations by an FCM shall be carried out in accordance with the following provisions:
  1. After an assignment of operations by an FCM has been reported to and approved by the competent authority, the FCM shall submit all related documents by mail to the TAIFEX (see Appendix 2) 7 days prior to the scheduled final business day to allow the TAIFEX to make public announcement.
  2. An assignee FCM that retains for use the business premises of the assignor FCM or a branch thereof shall do so in accordance with the provisions regarding branch offices contained in the Rules Governing the Establishment Criteria of Futures Commission Merchants or the provisions regarding changes in business premises contained in the Rules Governing Futures Commission Merchants.
  3. When an FCM without clearing member status assigns operations, it shall carry out clearing and settlement matters in accordance with the following provisions:
  4. When the assignor FCM still holds open futures contracts after close of the regular trading session on the final day of operations, its commissioned clearing member shall fax a Position and Margin Transfer Application Form and its position transfer file to the TAIFEX after settlement of accounts after close of the regular trading session on the final day of operations in order to carry out the transfer of positions and margins.
  5. When an FCM with clearing member status (hereinafter, “clearing member”) assigns operations, it shall carry out clearing and settlement matters in accordance with the following provisions:
    1. Clearing member status:
      1. An assignee clearing member may extend its clearing member status, and shall sustain compliance with the Criteria for Clearing Membership.
      2. An assignee FCM without clearing member status that wishes to become a clearing member shall apply in accordance with the Clearing Member Application Procedures.
      3. The assignor clearing member shall apply to cancel its clearing member status in accordance with the Clearing Member Application Procedures 1 month before its final day of operations.
    2. Consignor FCMs:
    3. The consignor FCMs of an assignor clearing member may carry out change of clearing members and transfer of positions and margins in accordance with the TAIFEX’s Procedural Guidelines for Futures Commission Merchants Changing Consigned Clearing Members.
    4. Positions and clearing margins:
    5. When the assignor clearing member still holds open futures contracts, it shall fax a Position and Margin Transfer Application Form and its position transfer file to the TAIFEX after settlement of accounts after close of the regular trading session on the final day of operations to carry out the transfer of positions and the clearing member margin.
    6. Clearing and settlement funds:
      1. The assignee clearing member shall pay to the TAIFEX clearing and settlement funds in accordance with the TAIFEX’s Criteria for Clearing Membership before the final day of operation of the assignor clearing member.
      2. For assignor clearing members applying for cancellation [of their clearing member status], the TAIFEX will return their clearing and settlement funds and any interest thereupon after the clearing member completes the cancellation procedures.
  6. The provisions governing merger shall apply mutatis mutandis to the handling of the computer link bond paid by the assignor FCM.
  7. The TAIFEX may deduct any fees payable by an assignor FCM or its branches from amounts refundable.
  8. An assignor FCM that reports to the competent authority and receives approval for its dissolution shall cancel the registrations of its directors, supervisors, managers and sales persons with the Futures Industry Association prior to dissolution and provide secondary notice of same to the TAIFEX.
  9. Handling of any still unresolved matters relating to assignor FCM breach of contract or account errors or correction of account numbers shall be carried out on its behalf by the assignee FCM starting from the business day next following the final business day of the assignor FCM in accordance with the regulations of the TAIFEX.
  10. An assignor FCM shall cancel any accounts opened in its name with the TAIFEX on the afternoon of its final business day, and after final settlement of all accounts, shall close any accounts opened in its name with other FCMs.
  11. When the agreement for assignment of operating assets signed between the assignor FCM and the assignee FCM provides for the assignee FCM to succeed to consignment contracts signed between the assignor FCM and consignors, while also providing that the assignee FCM be responsible for seeking the consent of consignors, the assignee FCM shall notify the consignors before the final business day of the assignor FCM. For those consignment trading accounts of clients of the assignor FCM where the client expresses consent or has no opinion, the assignee FCM shall apply to the TAIFEX to update the computer files for such accounts prior to carrying out any consigned trades. When a consignor expresses opposition, the assignee FCM shall immediately notify the assignor FCM; the assignor FCM shall immediately notify the consignor to terminate its contract and on its final day of business shall close the consignor’s account in accordance with the abovementioned agreement.
  12. Where the agreement for assignment of operating assets contains provisions that the assignee FCM shall succeed to the consignment contracts signed between the assignor FCM and its clients, the assignor shall, on the afternoon of its last day of business, transfer all evidentiary documents relating to consignment trading that law and the TAIFEX’s regulations require it to keep in custody to the custody of the assignee.
  13. With the exception of the assigned property and equipment which need to be retained for business use, the assignee FCM shall dispose of such fixed assets in accordance with the regulations of the competent authority.

Appendix 2
  1. Documents required on the final business day in cases of application for assignment of operations:
    1. Letter of application (the applicant’s standard form for official letters)
    2. Photocopy of the competent authority’s approval letter
    3. Minutes of meetings regarding setting the date of the final day of business
  2. Documents required for commencement of business by branches established after notification of final day of business:
    1. Forms for notification of commencement of business by the FCM and the clearing member
    2. Basic registration information for the FCM and the clearing member
    3. Photocopy of the approval certificate license and evidentiary documentation of company registration and commercial registration of the branch office
    4. Certificate of auction equipment connection
    5. Proof of completion of circuits testing
    6. Statements for the segregated margin accounts of the FCM and the clearing member
    7. Copy of the financial institution agreement for opening segregated client margin accounts
    8. A succession agreement or evidentiary document showing consent of another FCM to succeed [to the FCMs operations]
5     These Guidelines and any amendments hereto shall be promulgated and implemented following submission to the competent authority for recordation.