Discretionary vestment Services Contract Copy



Discretionary Investment Services Contract (Template)

Party A : _______________________ (Name/Title)

Party B : ________________Corp., a business entity which has been approved by the Financial Supervisory Commission , Executive Yuan (the “FSC”) to carry out securities discretionary investment business and is validly existing under the law of the R.O.C. (Business License Number: _____________)

Pursuant to the “Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises” (the “Management Regulations”), Party B has already interpreted and delivered the provisions of this Contract and the discretionary investment prospectus attached hereto as Appendix 1 to Party A seven (7) days prior to the execution of this Contract. In addition, Party B has thoroughly understood the financial capability, investment experiences, objectives and requirements of Party A. Taking the above matters into consideration, Party B has also consulted with Party A and deliberated on the amount or price of mandated investment funds (assets) as well as investment basic guidelines and investment scope with Party A circumspectly. After confirming and pre-reading the content of this Contract, Party A agrees that Party B, based on its professional investment judgment and within the scope of authorization provided by this Contract, is fully authorized to execute securities investment for Party A in accordance with this Contract, relevant laws as well as relevant rules and regulations stipulated by the Securities Investment Trust and Consulting Association of the R.O.C. (“SITCA”);

Party A agrees to place the discretionary investment funds (assets) under the custody of the custodian institution for the same to carry out the opening of the securities investment account, custody of funds and certificates, trading settlement, account servicing, and other relevant matters according to this Contract and the Mandate Contract with the custodian institution.

Both parties hereby agree as follows:

Article 1 (The Content, Amount or Price of Discretionary Investment Funds (Assets))

The minimum amount of discretionary investment funds (assets) initially accepted by Party B from Party A shall comply with requirements specified by the FSC. The types, quantity, amount or price of the same have been agreed by both parties, and are specified in the Appendix 2.

The discretionary investment funds (assets) referred to in the preceding paragraph, and any proceed and profits derived from the investment and application of such funds (assets) during the term of this Contract shall belong to discretionary investment funds (assets).

For the funds (assets) referred to in the preceding two paragraphs other than in cash, its value shall be calculated in accordance the appraisal method stipulated by SITCA and based on the asset value determination date specified in Appendix 2.

Article 2 ( Agreement of Basic Investment Guidelines and Investment Scope and its Change)

Party B shall undertake the investment and use of discretionary investment funds (assets) with its discretion in accordance with the basic investment guidelines and within the scope of investment and the scope of use of the idle funds stipulated in the Appendix 3.

During the term of this Contract, any change of the basic investment guidelines and the scope of investment upon consent of both parties shall be made in accordance with Article 18 hereof and shall be made an appendix hereto.

Article 3 (Granting and Restrictions of Investment Decision-making Right and Assets Application Instruction Right)

Unless otherwise restricted by this Contract or relevant laws and regulations, according to the basic investment guidelines and the scope of investment and application specified in the preceding Article, Party A grants Party B the right of investment decision-making and right of assets application instruction to the discretionary investment funds (assets) referred to in Article 1 within the scope that such discretionary investment funds (assets) could be used and settled.

Within the scope of the authorization specified in the preceding paragraph, Party B may, for the benefits of Party A, conduct trading of securities, other trading behaviors and application of idle funds on behalf of Party A with full authority and discretion. Party A shall be responsible to urge the custodian institution to proceed according to the instructions of Party B and may not rescind, terminate or alter the above-mentioned authority of agency granted to Party B, or conduct other acts that hinder investment decision of Party B. However, the above provisions shall not apply in the event of the rescission, termination or amendment of this Contract.

Within the scope of the authorization specified in the preceding paragraph, Party B has the right to instruct the custodian institution to execute settlement of funds and certificates required for application of the discretionary investment funds (assets) and a separate consent or authorization from Party A is not required.

Article 4 (Designation and Change of Investment Manager)

Before executing this Contract, Party B have prepared information related to the education background and experience of each investment manager it retains to Party A for his reference and the investment manager has been designated upon consent of both parties. Details thereof are provided in Appendix 4. Party B shall establish a deputy system. Same applies when there is any change of the designation of the investment manager during the term of this Contract.

When the investment manager leaves office or for some reasons cannot perform his/her duties, Party B shall notify Party A immediately and appoint the deputy designated pursuant to paragraph 1 hereunder to perform his/her duties before both parties designate another investment manager according to provisions of the same paragraph.

The investment manager and the deputy referred to in the preceding two paragraphs are assistants of Party B for performance of this Contract. The assistants shall be responsible for investment analysis, judgment, decision making and other related obligations to the discretionary investment funds (assets) based on the investment basic guideline and within the investment scope provided by this Contract, as well as based on his professional knowledge and exercising due care of a good administrator.

Article 5 (Designation and Change of Custodian Institution for Discretionary Investment Assets)

Party A designates ______________ as a custodian institution; according to provisions of the Management Regulations, Party A shall enter into a Mandate Contract with said custodian institution, and place the investment funds (assets) under the custody of the custodian institution. Party A, Party B and the custodian institution shall enter into a Tripartite Agreement of Discretionary Investment. The above-mentioned Mandate Contract and the Tripartite Agreement of Discretionary Investment shall be attached as Appendix 5 and 6 of this Contract, and constitute a part of this Contract.

If Party B has relationships with the above custodian institution as specified in paragraph 3 of Article 11 of the Management Regulations, Party B shall notify Party A when entering into the Contract. See the Appendix 7 for details.

In the event that the custodian institution referred to in the first paragraph is unable to perform the Mandate Contract due to some reasons or fails to continue operating custody business due to the revocation, rescission or termination of the Mandate Contract, Party A or the custodian institution shall notify Party B immediately. The custodian institution shall be responsible for settlement of trades that already have been completed prior to the receipt of notice by Party B in accordance with Mandate Contract. Any loss arisen due to failure in settlement by the custodian institution shall be borne by Party A, and Party B shall have no responsibility thereto.

During the term of this Contract, Party A may change the custodian institution provided that Party A shall notify Party B in written and proceed in accordance with paragraph 1 of this Article and Article 18 of this Contract. The matters related to the transfer of discretionary investment funds (assets) and the investment decision and consignment of trading during period of transfer will be jointly deliberated and determined by Party A, Party B, the original custodian institution and the newly- appointed custodian institution.

Article 6 (the Method of Custody of the Discretionary Investment Funds (Assets))

It shall be specified in the agreement between Party A and the custodian institution that the latter shall open an account for each customer separately and manage it accordingly. In the event Party A’s funds (assets) consigned to one custodian institution were managed by Party B and other investment trust or investment consulting enterprise, respectively, for discretionary investment, such investment funds (assets) under custody shall be divided according to the categories of investment trust and investment consulting enterprises, and separate accounts shall be set up accordingly; the aforesaid shall be set forth clearly in the Mandate Contract.

The discretionary investment funds (assets) of Party A shall be placed under the custody of the custodian institution during the term of this Contract; if they were securities, however, unless otherwise provided in other laws, they should be placed under the custody of the centralized securities depository enterprises mandated by the custodian institution.

During the term of this Contract, Party A may not voluntarily take back the discretionary investment funds (assets). Party B and its representatives, employees, the persons performing the obligation for him, or other performance assistants may not be mandated to keep the discretionary investment funds (assets) under his custody or have any third party to do so for him for any reason before, after or during the term of this Contract.

Article 7 (Opening of the Discretionary Investment Account)

After entering into the Tripartite Agreement of Discretionary Investment with Party A and the custodian institution, Party B shall notify the custodian institution to enter into an account opening and brokerage agreement or other necessary contracts with the securities firm on behalf of Party A, and to open an investment trading account.

Party B shall cooperate in the account opening, execution of contracts and other related procedures referred to in the preceding paragraph in accordance with the Regulations Governing Operation of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises of Securities Investment Trust and Consulting Association of the ROC (the “Operation Rules”). The account opening and brokerage agreement referred to in the preceding paragraph shall stipulate clearly the responsibility of Party B in the Ultra Vires Transactions as referred to in Article 10 of this Contract.

The preceding paragraph shall apply mutatis mutandis to relevant contracts entered into by and between Party B and other trading counterparty for the discretionary investment business.

The opening of a discretionary investment account shall comply with the purpose and objective of the Operation Rules and this Contract. Party B may start the discretionarily investment only after the procedures of contract execution and account-opening prescribed in each paragraph of this Article have been completed.

During the term of this Contract, Party A may not use the investment trading account referred to in paragraph 1.

Article 8 (Designation and Change of the Securities Firm or other Trading Counterparty )

The securities brokerage firm referred to in the preceding Article shall be designated by Party A, and is not limited to one; if Party A does not make said designation, Party B may make the designation for him provided that Party B shall assess the financial ability, business and credit conditions of the designee, give due attention to appropriate diversification and avoidance of over-concentration when making the designation, and notify the custodian institution immediately after the designation.

Party B that has mutual investment or control and subordination relationship with the designated securities brokerage firm has disclosed and specified such fact in the Appendix 8.

During the term of this Agreement, Party A may change the securities brokerage firm, provided that Party A shall notify Party B in writing one month prior to said change and shall proceed in accordance with the preceding paragraph.

The preceding two paragraphs shall apply mutatis mutandis to other trading counterparties referred to in the paragraph 1 of the preceding Article.

Article 9 (Collection and Payment Instruction)

After confirming the content of transaction with the securities brokerage firm or other trading counterparty on the transaction day, Party B shall immediately issue the settlement instruction letter that specifies the trading counterparty, object, time and method of settlement, and the amount and quantity of settlement funds and certificates. The custodian institution shall carry out the settlement immediately within the scope of the available funds and certificates of discretionary investment funds (assets) after the custodian institution confirms that there is no Ultra Vires Transaction on the relevant settlement voucher.

The Mandate Contract that entered into by Party A and the custodian institution shall state clearly that in the event the custodian institution determines that there is an Ultra Vires Transaction on the settlement instruction letter referred to in the preceding paragraph or there is a dispute over the Ultra Vires Transaction, the custodian institution shall immediately notify Party A and Party B in writing with reasons specified and shall proceed according to the written instruction of Party A. If the custodian institution fails to notify Party A or fails to receive Party A’s written instruction in time, and the dispute cannot be timely settled through negotiation, the custodian institution shall issue an Ultra Vires Transaction notice, which states clearly the facts, reasons and details of the Ultra Vires Transaction before 11:00 AM of the next business day of the transaction day, and shall notify Party A, Party B, the trading counterparty and SITCA of the same respectively.

Article 10 (The Handling of Ultra Vires Transactions)

In the event of Ultra Vires Transaction by Party B when applying discretionary investment funds (assets) to trade securities, except that Party A issues a written consent for settlement and upon examination by the custodian institution that it complies with relevant laws, Party B shall be responsible for allocating funds and certificates for the transaction determined as ultra vires by the custodian institution to the investment custodian account before the settlement day for the custodian institution to proceed the settlement.

The securities borrowing procedure required by the Party B for the performance of securities allocation and payment duties referred to in the preceding paragraph shall be processed in accordance with relevant laws and regulations. Required collateral and fees shall be provided and paid by Party B.

Upon the receipt of the Ultra Vires Transaction notice, Party B shall conduct opposite sale or purchase of the funds and certificates to offset the same purchased or sold in the Ultra Vires Transaction and shall settle the profits and loss in accordance with Article 56 of the Operation Rules. Party B is liable for the loss and related trading tax and expenses arisen therefrom. All benefits incurred shall belong to Party A, which will be deducted from the offset income; if there is any balance after said deduction, Party A shall be responsible to urge the custodian institution to return such balance to Party B after Party B completes the settlement and offset procedures according to this Article; Party B shall be responsible for making up any deficiency for said deduction by depositing the same into the investment custodial account, or, the custodian institution may claim compensation against Party B on behalf of Party A according to the Mandate Contract.

When there is a dispute about the Ultra Vires Transaction between Party B and the custodian institution, Party B shall proceed according to the content of the notice issued by the custodian institution. If afterwards, it is discovered that the mistake was made by the custodian institution or other matters obviously attributable to the custodian institution, the custodian institution shall be responsible to recover the loss.

When Party B did not attend to the issue of the Ultra Vires Transaction in accordance with provisions of this Article, which results in the failure of the custodian institution to complete the settlement, any duties arisen therefrom shall be borne by Party B to the securities brokerage firm or other trading counterparties. Party A shall bear no responsibility thereto.

Article 11 (Returned Service Charge from Securities Firms)

The services fee settled and rebated monthly by the securities firm due to the application of discretionary investment funds (assets) to trade securities by Party B shall be used to deduct Party A’s transaction cost. Unless otherwise agreed by Party A and said securities firm, Party B shall negotiate the service charge rate with said securities firm for Party A according to the principle of fairness and faithfulness. Party A shall be responsible to urge the custodian institution to stipulate the above services charge return method in the account-opening contract that entered into with the securities firm.

Party B shall disclose in the related reports of Party A’ discretionary investment funds (assets) the amount of service charge returned from the securities firm in Party A’s discretionary investment account with an individual account title.

Article 12 (Proceeds and Profits of the Discretionary Investment Funds (Assets) and Ownership and Exercise of Equity Rights)

During the term of this Contract, the proceeds and profits derived from Party A’s discretionary investment funds (assets) shall be all taken by the custodian institution, who shall notify Party B in writing. The aforementioned proceeds and profits, during the term of this Contract, belong to the discretionary investment funds (assets).

Party A agrees that the right to subscribe securities with consideration or the right to convert securities, which are derived from discretionary investment funds (assets), shall be exercised by Party B according to the content of Appendix 9. However, if relevant laws and regulations provide otherwise, such laws and regulations shall apply.

The right to attend shareholder’s meeting and the right to vote of the stocks of the issuing company held by the investment custodial account shall be exercised by Party A.

Relevant procedures with regard to title transfer and exercise of right of the securities shall be carried out by the custodian institution according to the Mandate Contract, relevant securities laws and regulations and rules governing the operation of the centralized securities depository enterprises.

Article 13 (Confidentiality Obligations, and Obligation to Exercise Due Care of a Good Administrator)

When conducting discretionary investment business of this Contract, Party B shall act according to the principle of good faith and comply with relevant laws and regulations, and faithfully perform the obligations hereunder with due care of a good administrator.

Party B and its responsible persons, employees shall keep strict confidential with regard to the name (title) of Party A, discretionary investment funds (assets) and other related information learned from the execution and performance of this Contract, except for inquiry conducted pursuant to the laws or the Operation Rules, provided that Party A provides a separate written consent to Party B each time for it to publicly disclose or use the above information, which shall indicate the scope, method and circumstances of the disclosure.

Article 14 (Legal Obligations Associated with Change in Shareholding of Insiders of Public Company)

Party B has explained to Party A upon the execution of this Contract that if Party A is a director, supervisor, managerial officer, or shareholder holding more than ten percent of the shares of a public company (the "Insider”), Party A shall comply with provisions of Article 22-2, paragraphs 2 and 4 of Article 25, Article 28-2, paragraph 1 of Article 43-1, Article 157, Article 157-1 of the Securities and Exchange Law and other relevant provision governing change in shareholding .

Where Party B receives a written notice from Party A that he is the Insider, unless receiving a notice from Party A made according to the paragraph 3 afterwards, Party B shall notify Party A in writing of the proposed quantity and time to purchase or sell the securities issued by the public company which Party A is subordinate to prior to the transaction when applying Party A’s discretionary investment funds (assets) to trade such securities. Upon receiving the written instruction from Party A, which approves or restricts the transaction, Party B shall trade according to the content of said instruction, and report the quality transacted to Party A on the transaction day.

Party A shall immediately notify Party B in writing when Party A losses its status as the Insider after his delivery of the notice referred to in the preceding paragraph.

Matters to be paid attention to or to be handled by Party A according to relevant provisions of Securities and Exchange Law as referred to in paragraph 1 shall be handled by Party A itself. In addition, Party A shall also be responsible for the liability arisen from the violation of said regulations by himself.

To comply with provisions of the Securities and Exchange Law referred to in paragraph 1, Party A may give a written notice to Party B to suspend or to continue trading of securities of the public company which Party A is subordinate to, and Party B shall proceed in accordance with Party A’s instructions .

Article 15 (Reporting Obligations)

Party B shall compile a monthly report and an annual report containing trading record and current conditions of the assets for Party A. The monthly report shall be delivered to Party A within 7 business days after the end of every month; the annual report shall be delivered to Party A within 15 business days after the end of every year.

Party B shall inspect changes of net value of Party A’s discretionary investment funds (assets) everyday. When depreciation of net asset value reaches 20% or more of the original discretionary investment funds (assets), Party B shall produce an assets trading record and current status report and deliver it to Party A within two business days after occurrence of the above situation. Same applies when depreciation of net asset value reaches 10 percent or more of the net asset value recorded in the previous report.

The report referred to in the preceding two paragraphs, may be delivered by mail, facsimile and other methods as agreed by both parties.

Party A may inquire about assets trading status of his discretionary investment account and the quantity and amount of the mandated asset in stock in writing or other methods as agreed by both parties, and Party B may not refuse it.

When receiving said inquiry, Party B shall confirm that the application is made by Party A or his authorized agent before advising or providing required information. Party B shall also fill out an inquiry record for recordation.

Article 16 (Calculation, Method and Time of Payment for Compensation for Commissioned Service and Expenses)

The compensation for commissioned service under this Contract shall be allocated and paid by the custodian institution according to methods of calculation and payment and time of payment specified in the Appendix 10 of this Contract after receiving a notice from Party B. However, Party A does not need to pay any compensation if Party A expresses its intent to terminate this Contract within seven days after signing the Contract.

If the Contract is terminated before the term thereof expires, Party B shall return compensation paid or request compensation payable by proportion to Party A on the termination day based on the percentage of current remaining period for calculation of compensation to the term of this Contract.

The transaction fee, taxes, and the other relevant expenses incurred in the discretionarily investment shall all be borne by Party A and shall be deducted from the discretionary investment funds (assets). Party A shall also be responsible to make up the deficiency.

Article 17 (The Effective Date and the Term of the Contract)

This Contract comes into force upon the execution of the Contract by both parties. However, Party B may only exercise investment decisions right, and assets utilization instruction right according to this Contract, and calculate compensation for commissioned service referred to in the paragraph 1 of the preceding paragraph under the conditions that the Mandate Contract as well as the Tripartite Agreement of Discretionary Investment referred to in paragraph 1 of Article 5 are valid, and are able to be actually implemented. Same applies to any amendment to either agreement aforementioned or changes of the custodian institution.

The term of this Contract shall be ____ years from to . If Party B advises Party A in writing that it intends to renew this Contract a month prior to the expiration of this Contract, and Party A does have any objection prior to the expiration of this Contract, this Contract shall be deemed as continuously valid for another one year with the same terms of this Contract. Same applies to subsequent expiration of this Contract.

Article 18 (Amendment to the Contract)

Unless otherwise provided by laws, the content of this Contract and its appendices may be amended in accordance with the paragraph 1 of the preceding Article with the written consent of both parties. However, in the event that the amended parts of this Contract involves matters requiring assistance and cooperation of the custodian institution or shall be handled by the same, the amendment shall be first negotiated by Party A, Party B and the custodian institution jointly and a written statement shall be issued to confirm that the amendment is not in violation of this Contract or the Mandate Contract and that parties undertake to cooperate in relevant procedures. Afterwards, the amendment may be processed. The above provisions shall be stipulated clearly in the Tripartite Agreement of Discretionary Investment.

Article 19 (Termination of Contract)

This Contract may be terminated by Party A within seven days after the execution of this Contract or be terminated upon written consent of both parties.

When either Party breaches the provision of this Contract, and fails to rectify within the period prescribed by the other party in writing, the other Party may terminate the Contract before the expiration of this Contract.

Party B may terminate this Contract in the event the discretionary investment funds (assets) of Party A are attached by the court or under the compulsory enforcement proceeding by the court.

When Party A is dead, bankrupt or loses its legal capacity, unless Party B is notified by a third party or Party B has already known the fact, this Contract is deemed to be valid and existing. If such termination of this Contract would impair to the interest of Party A, Party B shall continue handling the affairs before Party A, his successor or legal representative could handle the affairs of this Contract.

Except for the events prescribed in the preceding four paragraphs, either party may terminate this Contract with a one-month written notification to the other party in advance. Provided however, if this Contract is terminated without legitimate reasons, the party terminating this Contract shall compensate the other party for the damage caused.

Article 20 (Provisions for Handling any Sanction Requesting Suspension of Business, Dissolution, Revocation or Abolishment of the Business License)

In the event Party B cannot conduct the discretionary investment business due to suspension or cessation of business, re-organization, dissolution, revocation or abolishment of the license, Party B shall inform Party A, the custodian institution and the trading counterparty immediately. This Contract will be terminated automatically since Party B’s incapability of conducting this Contract.

The Contract is terminated automatically when FSC orders to transfer the Contract with Party A’s consent due to the fact that Party B has suspended the business or its business is obviously mismanaged.

Article 21 (Obligations to Settle Pending Business after Termination of the Mandate Relationship)

If the mandate relationship is terminated due to expiration of this Contract without renewal or according to provisions of the preceding two Articles, Party B shall settle the pending business immediately, compile a final report on current situation of the discretionary investment funds (assets) and the investment loss or profit and deliver it to Party A.

This Contract is deemed to be valid and existing within the scope of settlement of the pending business by Party B as referred to in the preceding paragraph.

Article 22 (Provisions for Handling Breach of Contract)

Either party who breaches any provision of this Contract, and fails to rectify it within the period prescribed by the other party in writing, such party shall compensate the other party for the damage caused.

Article 23 (Notice of Material Change and Manner of the Notice)

In the event there is any change in the basic information provided by Party A, in addition to informing Party B of such change promptly, Party A or his authorized agent shall prepare relevant documentation to process relevant proceedings. Unless otherwise provide by this Contract, any notification or expression of intent made by both parties pursuant to this Contract shall be made in writing and delivered to addresses of parties stated in this Contract.

Article 24 (Prohibition of Re-commission and Assignment)

Party B may not re-commission another party to perform the whole or a part of this Contract, or assign the right hereunder to another party.

Article 25 (Special Provisions)

Article 26 (Resolution of Dispute, Arbitration and Jurisdiction)

Both parties agree that any dispute arisen from this Contract shall be resolved according to regulations governing disputes mediation procedures stipulated by SITCA. If such mediation fails, both parties agree that the dispute shall be submitted to arbitration in accordance with the Arbitration Law of R.O.C. In the event that there is no arbitration award rendered or that any litigation arises from the annulment of arbitration award filed by one party against the other party or from the determination of the court which annuls the arbitration award, both parties agree that the District Court of the Party B’s delivery place stipulated in this Contract shall be the court of the first instance to exercise jurisdiction.

Article 27 (The Governing Law and Supplementary Provisions)

This Contract shall be governed by the law of the R.O.C. The validity, interpretation, performance and other relevant matters hereunder shall be governed by the law of the R.O.C.

In the event there is any amendment to securities related laws, articles of incorporation of SITCA or other relevant rules or regulations after execution of this Contract, unless otherwise provided by this Contract, the rights and obligations between parties hereunder shall be subject to the provisions of the amended laws.

Matters not provided herein shall be subject to the provisions of the Securities and Exchange Law, the Management Regulations, the Operation Rules, articles of incorporation of SITCA, and other related laws and regulations; in the absence of such provision in the above-mentioned regulations, the matters shall be subject to the agreement that is negotiated between parties of this Contract in accordance with the principle of good faith.

Party A: (Individual)___________________

Identification Number:_________________________

Address:__________________________________

Party A (Corporate):______________

Representative: _____________________

ID No. of the Representative:_________________

Business Registration Certificate Number:________________

Address:__________________________________

Party B :_________________________________Corp.

Representative: ____________________

Business Registration Certificate Number:________________

Address:__________________________________

Date:

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