Regulations Governing the Conduct of Securities Trading Margin Purchase and Short Sale Operations by Securities Firms Article 14

When a securities firm conducts securities margin purchase and short sale business, the total amount of margin purchases, or the total amount of short sales plus securities loaned under Article 22, paragraph 1, subparagraphs 5 to 7, that it provides to customers may not exceed 250% of its net worth.When the regulatory capital adequacy ratio of a securities firm conducting margin purchase and short sale business reaches 250% or more for three consecutive months, the total amount of margin purchases, or the total amount of short sales plus securities loaned under Article 22, paragraph 1, subparagraphs 5 to 7,that it provides to customers may not exceed 400% of its net worth.If, after a securities firm has proceeded in accordance with the preceding paragraph, its regulatory capital adequacy ratio falls below 250% for two consecutive months and moreover the total amount of margin purchases, or the total amount of short sales plus securities loaned under Article 22, paragraph 1, subparagraphs 5 to 7, that it provides to customers exceeds 250% of its net worth, it shall temporarily suspend margin purchases or short sales for customers or securities lending under Article 22, paragraph 1, subparagraphs 5 to 7. Once the total amount of margin purchases or short sales has fallen below 250% of its net worth or its regulatory capital adequacy ratio has reached 250% for three consecutive months, it may then proceed in accordance with the two preceding paragraphs, respectively.When a securities firm conducts margin purchase and short sale business, the total amount of margin purchases that it provides to customers, plus the total amount of any monetary financing that it provides in connection with securities business, may not exceed 400 percent of its net worth; the total amount of short sales and securities loaned under Article 22, paragraph 1, subparagraphs 5 to 7 that it provides to customers, plus the total amount of securities loaned in conducting securities borrowing and lending business, may not exceed 400 percent of its net worth.If a securities firm is concurrently operated by a financial institution, the net worth referred to in the preceding four paragraphs shall be calculated based on the specially allocated operations capital; provided that the amount may not exceed the highest net worth of the securities firm referred to in the preceding four paragraphs in the same period and the limit set by the competent authority.The ratio referred to in paragraph 1 to paragraph 4 above may be adjusted by thecompetent authority, depending on the domestic economic and financial status and the conditions of the securities market and business of securities firms.