Prior to accepting a discretionary futures trading order from a principal, a managed futures enterprise shall provide a trading risk disclosure statement and a mandate contract for discretionary futures trading, and appoint a registered, qualified associated person to apprise the principal of the nature of trades or investments, the possible risks, and the content of the mandate contract; in addition, it shall provide the principal with written materials on the following matters, along with a detailed explanation thereof:
1. The characteristics, possible risks, and statutory and regulatory restrictions, of the subjects of trades or investments.
2. The balance sheets and statements of comprehensive income of the managed futures enterprise for the previous two fiscal years.
3. The total number of accounts and the total amount of assets accepted for discretionary futures trading by the managed futures enterprise for the five fiscal years prior to the given quarter; the numbers of closed accounts which showed positive returns and the number which showed negative returns for the same period; and the numbers of open accounts showing positive returns and the number showing negative returns for the same period, provided that managed futures enterprises not yet in operation for a full year may be exempted from the requirement to provide such written materials and explanations to the principal.
4. For each person making trading decisions in discretionary trading for the managed futures enterprise: educational and professional background; any sanctions imposed by the Competent Authority in the most recent two years pursuant to Article 101 of the Act, Article 104 of the Securities Investment Trust and Consulting Act, or Article 56 of the Securities and Exchange Act; for the five years prior to that quarter, the number of accounts and total amount of managed assets for which trade or investment decisions were made; the number of closed accounts which showed positive returns and the number which showed negative returns; and the number of open accounts showing positive returns and the number showing negative returns, provided that a managed futures enterprise not yet in operation for a full year may be exempted from the requirement to provide such written materials and explanations to the principal.
5. If any person making trading decisions for discretionary trading at the managed futures enterprise simultaneously manages another futures trust fund or securities investment trust fund, the name of any fund that person manages, and any measures adopted to prevent conflicts of interest, shall be disclosed.
6. The circumstances regarding any litigious or non-litigious matters that have occurred, or are on-going, and that arose from the managed futures enterprise's operation of discretionary securities investment or discretionary futures trading business in the most recent two years.
7. The circumstances of any sanction imposed on the managed futures enterprise or any of its responsible persons by the Competent Authority pursuant to Articles 100 or 101 of the Act, Articles 103 or 104 of the Securities Investment Trust and Consulting Act, or Articles 56 or 66 of the Securities and Exchange Act.
8. Cautionary statements regarding the risks of discretionary trading.
9. Other matters as required by the Competent Authority.
Prior to the signing of a mandate contract for discretionary futures trading between the principal and the managed futures enterprise, the principal shall be given a seven-day period in which to review all contract clauses, and a data sheet on the principal shall be compiled based on a thorough understanding of the principal's financial resources, investing experience, and investment goals, which shall be retained for reference along with other related documentation.
The principal shall place his or her signature or seal along with a date notation on the risk disclosure statement and the written materials referred to in paragraph 1, which shall be an attachment to the mandate contract for discretionary futures trading and be delivered to the principal to be retained along with the contract.

A managed futures enterprise that agrees to conduct discretionary futures trading for a principal shall enter into a mandate contract for discretionary futures trading with the principal, and deliver a copy of the contract to the custodian institution.
The mandate contract for discretionary futures trading referred to in the preceding paragraph shall set forth the following:
1. The names and addresses of the parties to the contract.
2. The managed futures enterprise's obligation to provide notice and explanations prior to the signing of the contract, pursuant to the provisions of the preceding article.
3. The conditions and time limits under which the contract may be rescinded after signing.
4. The discretionary assets submitted for management when the discretionary trading mandate is given.
5. Stipulations and amendments regarding basic trading and investment policies, and the scope of trading and investment. The scope of trading and investment shall also list the types or names of the subjects of futures trading and futures-related spot commodity investments.
6. The granting of and any limitations on the right to make and execute trading decisions.
7. The granting of and any limitations on the right to give instructions regarding utilization of the discretionary assets.
8. The names of the personnel making discretionary trading decisions and their deputies.
9. Stipulations regarding designation of the custodian institution and its execution of related matters.
10. The agreement regarding the futures broker and securities broker that are retained; if a counterparty of the agreement and the managed futures enterprise have any relationship of mutual investment or control or subordination, it shall be disclosed in the contract.
11. Confidentiality obligations and the duty of care of a good custodian.
12. Reporting obligations.
13. The fees that shall be borne by the principal, including compensation of the managed futures enterprise, and the means of calculation and the time and method of payment of the same.
14. The date on which the contract takes effect and its effective term.
15. Provisions for amendment to and termination of the contract.
16. The obligation to provide notification in the event of major changes and the means of notification.
17. Provisions regarding settlement obligations after termination of the mandate relationship.
18. Provisions regarding handling of breach of contract.
19. Provisions for dealing with bankruptcy or dissolution, or dispositions requiring suspension of business or voidance or revocation of the business permission.
20. Provisions for dispute resolution and the relevant jurisdictional court.
21. Other necessary provisions in regard to the rights and obligations of the parties to the contract.
At the time the principal signs the contract, it shall deliver in full the discretionary assets referred to in subparagraph 4 of the preceding paragraph to the custodian institution to handle related matters; it shall do likewise when any discretionary assets are added.
The basic trading and investment policies and the scope of trading and investment referred to in subparagraph 5 of paragraph 2 shall be carefully drafted, taking into account the principal's financial resources, trading experience and objectives, and any statutory or regulatory restrictions.
The right to give instructions regarding the utilization of discretionary assets referred to in subparagraph 7 of paragraph 2 involving the utilization and scope of, and the qualifications for trading counterparties and investment vehicles for, idle funds shall be determined by the Competent Authority.
If the managed futures enterprise is concurrently operated by a futures broker, that futures broker may not be retained as the retained futures broker or securities broker as referred to in paragraph 2, subparagraph 10. However, this restriction shall not apply if the principal is clearly advised of the relevant risks and conflicts of interest and measures to control them, and consent from the principal is obtained in writing and separate from the contract.
"Compensation of the managed futures enterprise," as used in subparagraph 13 of paragraph 2, may include incentive fees collected in accordance with the regulations of the Competent Authority.
Termination of the contract as referred to in paragraph 2, subparagraph 15 may be effected at any time during the term of the contract upon written notice from the principal; termination by the consignee shall be effected through written notice to the principal one month prior to termination.
In regard to the methods for dispute resolution as referred to in subparagraph 20 of paragraph 2 and the mandate contract for discretionary futures trading, the CNFA shall adopt regulations governing mediation procedures and draft a contract template, which shall be submitted to the Competent Authority for recordation; the same shall apply for any amendments thereto.
The mandate contract for discretionary futures trading and the related materials referred to in paragraph 1 shall be retained for a period of five years after the extinguishment of the mandate relationship, provided that where a dispute occurs, they shall be retained until the resolution of the dispute.

When a managed futures enterprise accepts a joint mandate to engage in discretionary futures trading, it shall sign a mandate contract for discretionary futures trading with all of the joint principals.
The mandate contract for discretionary futures trading referred to in the preceding paragraph is subject to the provisions of the preceding article, and shall also state the matters listed below:
1. The discretionary assets submitted by each of the joint principals.
2. How the mandate relationship between the managed futures enterprise and joint principals will be handled in the event that one of the joint principals goes bankrupt, dies, is dissolved, or loses legal capacity to act.
3. How the joint principals share the responsibility for margin calls and recovery of over-loss arising in discretionary futures trading.
Joint principals referred to in paragraph 1 may not number more than 15 persons, and may not concurrently include both juristic and natural persons. When the joint principals are juristic persons, they shall be limited to those having the relationship of affiliated enterprises as defined in Chapter VI-1 of the Company Act.
To terminate a mandate contract for discretionary futures trading during the duration of the contract, a joint principal must obtain written permission from all of the joint principals.

In conducting discretionary futures trading business, if the scope of permitted trading or investment increases due to a change in laws or regulations, the relevant risk monitoring and management measures and accounting treatment matters shall be added to the internal control system, and submitted to the board of directors for approval.
After a managed futures enterprise enters into a mandate contract for discretionary futures trading, if the scope of permitted trading or investment increases due to a change in acts or regulations, it shall complete revision of the mandate contract for discretionary futures trading before commencing to engage in trading or investment within such expected scope.

When a managed futures enterprise, for purposes of conducting discretionary futures trading on behalf of a principal, opens a futures trading account at a retained futures broker or securities broker, it shall do so in the name of the principal.
The managed futures enterprise shall execute futures trades or investment on behalf of the principal through the retained futures broker or securities broker in accordance with the principal's authorization.
When a managed futures enterprise allocates discretionary assets to engage in futures trading or futures-related spot commodity investments, if any service fees are returned or other benefits are paid by the futures broker, securities broker, or other trading counterparty, the managed futures enterprise shall apply them as offsets against principal's transaction costs.

In accepting a mandate from a principal for discretionary futures trading, the managed futures enterprise may not in any way or for any reason take custody of any of the discretionary assets provided by the principal or of any subject matter obtained in trading or investment of those assets.
Where a managed futures enterprise accepts a mandate for discretionary futures trading, the principal shall designate a custodian institution and enter into a separate mandate contract with the custodian institution, appointing the custodian institution to undertake the opening of accounts, deposits of margins and premiums, custody of funds and securities, clearing and settlement, account servicing and other related matters for futures trading and investment in futures-related spot commodities.
In carrying out the operations referred to in the preceding paragraph, the custodian institution shall first review the scope and limitations of the mandate contract for discretionary futures trading.
The content and contract template for the mandate contract referred to in paragraph 2, and any amendments thereto, shall be drafted by the CNFA and submitted to the Competent Authority for recordation.
If the principal of discretionary futures trading business is a trust enterprise or other business approved by the Competent Authority, the principal may itself keep custody of the discretionary assets, exempt from the provisions of paragraph 2.

Custodian institutions designated by principals shall be limited to the following:
1. Banks approved by the competent authority for custodial operations that meet the conditions prescribed by the competent authority.
2. Futures clearing houses approved by the Competent Authority for the custodial operations referred to in paragraph 2 of the preceding article.
At the time the principal designates a bank of the kind referred to in the preceding paragraph as custodian institution, the assets consigned for trading shall be deposited by the principal for custody with the bank, and the bank consigned to carry out the related matters set out in paragraph 2 of the preceding article.
At the time the principal designates a futures clearing house as referred to in paragraph 1, subparagraph 2 as custodian institution, the assets consigned for trading shall be deposited by the principal in a bank deposit account in the principal's name, and the given futures clearing house consigned to carry out the related matters set out in paragraph 2 of the preceding article.

Where any of the following circumstances applies to the custodian institution designated by the principal, the managed futures enterprise is obligated to report to the principal:
1. The custodian institution has shareholdings of ten percent or more of the issued and outstanding shares of the managed futures enterprise.
2. The custodian institution serves as a director or supervisor of the managed futures enterprise, or one of its directors or supervisors serves as a director, supervisor, or managerial officer of the managed futures enterprise.
3. The managed futures enterprise has shareholdings of ten percent or more of the issued and outstanding shares of the custodian institution.
4. The managed futures enterprise or its representative serves as a director or supervisor of the custodian institution.
5. Any other substantial controlling relationship existing between the custodian institution and the managed futures enterprise.
Where a director or supervisor is a juristic person and its representative or designated representative holds executive power on its behalf, the provisions of paragraph 1, subparagraph 2 shall apply mutatis mutandis.

When a managed futures enterprise conducts discretionary futures trading business, the minimum amount of assets it may accept from a principal when the principal engages it to handle discretionary trading will be prescribed by the Competent Authority.

When a managed futures enterprise conducts discretionary futures trading business, the total dollar amount of discretionary trading or investments it handles may not exceed a specific multiple of its net worth; the specific multiple will be prescribed by the Competent Authority, provided that if the managed futures enterprise is operated by another enterprise on a concurrent basis and operating capital is required to be allocated pursuant to regulations, its net worth shall, instead, be calculated based on the net worth of the allocated operating capital.
The "net worth" referred to in the preceding paragraph will be determined with reference to the financial report for the most recent period that has been CPA-audited and attested, passed by the board of directors, and recognized by the supervisors.

The scope within which a managed futures enterprise allocates discretionary assets to engage in trades and investments shall comply with the following provisions:
1. Futures trades that futures commission merchants are permitted to handle on a brokerage basis as announced by the Competent Authority pursuant to Article 5 of the Act.
2. Off-exchange futures trades derived from currencies, securities, interest rates, indices, or other products, as approved by the Competent Authority.
3. Beneficial interest certificates of a futures trust fund issued by another futures trust enterprise or a futures fund offered or managed by a foreign fund management institution.
4. Securities other than those of the preceding subparagraph.
5. Futures-related spot commodities other than securities.
The term "securities" in the preceding paragraph means securities under Article 6 of the Securities and Exchange Act; trading in foreign securities shall be limited to the following:
1. Stocks, warrants, beneficial interest certificates, depositary receipts, and other securities traded on a foreign securities market.
2. Bonds with an appropriate rating or higher as rated by a credit rating company recognized by the Competent Authority.
3. Offshore funds that are approved by or effectively registered with the Competent Authority for domestic offering and sale.
4. Other securities approved by the Competent Authority.
"Foreign securities market" in subparagraph 1 of the preceding paragraph means any organized securities trading market administered by the competent securities authority of that country, including securities exchanges and OTC markets.
The bonds referred to in paragraph 2, subparagraph 2 do not include the subject matters set forth in Article 5, paragraph 2 of the Regulations Governing Trading of Foreign Securities by Securities Firms.
The Competent Authority shall prescribe ratios and regulations relating to trades and investments utilizing discretionary assets in which managed futures enterprises engage under the subparagraphs of paragraph 1.
Before allocating discretionary assets to engage in any investment under paragraph 1, subparagraph 5, a managed futures enterprise shall submit an investment and risk-management plan to the Competent Authority and obtain its approval.

A managed futures enterprise that allocates discretionary assets to engage in a trade under paragraph 1, subparagraph 2 of the preceding Article shall ensure that it obtains a fair or reasonable price for the trade.
When a managed futures enterprise allocates discretionary assets to engage in the writing of an off-exchange traded call option contract under the preceding paragraph, it shall hold the underlying spot commodities, or other assets of the same or higher market value thereof, as security.
The counterparty of any trade under paragraph 1 shall be a financial institution that meets the conditions prescribed by the competent authority.

When allocating discretionary assets, a managed futures enterprise shall comply with the following provisions, except as otherwise provided by the Competent Authority:
1. It may not loan them.
2. It may not allocate them for any trade or investment involving any futures trust fund, securities investment trust fund, or other futures or securities discretionary investment account, proprietary futures or securities trading account, or proprietary capital managed by the managed futures enterprise itself; however, this restriction shall not apply to trades conducted through the central securities exchange market in which it happens that one of the above unintentionally turns out to be a counterparty.
3. It may not allocate them for investment in any securities issued by the managed futures enterprise itself.
Without the written consent of the principal or a special contractual stipulation, a managed futures enterprise may not:
1. Invest in securities issued by a company that is an interested party of that managed futures enterprise.
2. Invest in securities that are underwritten by a securities underwriter that is an interested party of the managed futures enterprise.
3. Engage in securities margin trading.
4. Lend or borrow securities.
5. Purchase beneficial interest certificates of a futures trust fund or securities investment trust fund that is issued by the managed futures enterprise.
The term "securities that are underwritten" in subparagraph 2 of the preceding paragraph includes securities that have been acquired by the underwriter on a firm commitment basis and not yet disposed of.
The term "a company that is an interested party" in subparagraphs 1 and 2 of the preceding paragraph means a company to which any of the following circumstances applies:
1. A company that has an affiliated enterprise relationship, as specified in Chapter 6-1 of the Company Act, with the managed futures enterprise.
2. A company that is a director or supervisor of the managed futures enterprise, or that is a shareholder thereof with combined shareholding of 5 percent or higher.
3. A company in which any director, supervisor, managerial officer, or shareholder holding 10 percent or more of the issued shares is the same person as, or is the spouse of, a person in the preceding subparagraph or a managerial officer of the managed futures enterprise.
The term "combined shareholding" in subparagraph 2 of the preceding paragraph means the sum of the shares in the managed futures enterprise held by a given enterprise plus the shares in the same managed futures enterprise held by directors, supervisors, and managerial officers of the given enterprise, and by other enterprises controlled directly or indirectly by the given enterprise.
If a director or supervisor is a juristic person, the provisions of paragraph 4 shall apply mutatis mutandis to its representative or designated representative in the exercise of duties thereby.

A mandate contract for discretionary futures trading, and brokerage contracts engaging the futures and securities brokers, shall state that if the managed futures enterprise's allocation of assets to engage in trades exceeds the limitations or scope set out in laws or regulations or the mandate contract for discretionary futures trading, the managed futures enterprise itself shall bear the liability.

Regulations for management of the form, content, production, and dissemination of promotional and advertising materials by a managed futures enterprise, and any amendments thereto, shall be drafted by the CNFA and submitted to the Competent Authority for recordation.
The promotional and advertising materials referred to in the preceding paragraph and records relating thereto shall be retained for a period of two years.
The Competent Authority may at any time make a spot check of the promotional and advertising materials and related records, and the managed futures enterprise may not refuse or impede such inspection.

None of the following may be employed by a managed futures enterprise in its text, graphic, or verbal promotions or in advertising produced for dissemination in newspapers, magazines, radio, television, electronic transmission systems, or other mass media in the course of promoting or soliciting business:
1. Making false statements regarding the nature of trading or investments, or emphasizing profits while failing to explain related risks.
2. Content relating to opinions or recommendations based on analyses of trading on the spot market or futures market.
3. Concealing important facts where likely to mislead the general public.
4. Using false materials or presenting only information advantageous to the managed futures enterprise to exaggerate the enterprise's performance record in the futures trading services provided.
5. Using graphs, formulas, computer software or other technical tools for futures analysis without clearly explaining the functional limitations of such tools.
6. Making representations that it will guarantee profit or bear losses.
7. The use of letters of recommendation, thank-you letters, records of past performance, or any other text or representation that could easily cause a belief in the certainty of profit.
8. Any other circumstance in which exaggeration, bias, or a likelihood of misleading the general public would occur.

When a managed futures enterprise allocates discretionary assets to engage in trades or investments, it shall produce a written decision based on its analysis report and execute that decision.
The analysis report referred to in the preceding paragraph shall state the analytical foundation and basis thereof, and the trade or investment recommendation. The written decision shall state the type, quantity, price, and timing of the decided-upon subject trade or investment. The execution record shall state the type, quantity, price, and time of the actual subject transaction, and explain the reason for any discrepancy with the written decision.
The written information referred to in the preceding paragraph shall be recorded sequentially, with the signatures and seals of the personnel responsible for analysis, trading decisions, and execution of trades placed thereon, and retained on file.

In carrying out discretionary futures trading business, a managed futures enterprise shall establish a separate account for each principal, and record on a daily basis trade and investment activities, open futures positions, the amount and value of futures-related spot commodities in inventory, the balance of discretionary assets and other related matters.
The custodian institution shall check and verify the content of the principal's accounts referred to in the preceding paragraph.
Principals may request examination of the information referred to in paragraph 1; the managed futures enterprise may not refuse such requests.

A managed futures enterprise shall compile a regular monthly report of the principal's transactions records and current status, and deliver it to the principal. However, with the principal's written consent, and in compliance with the operating rules specified by the CNFA, it may send such report via e-mail.
When the impairment of the net worth of a principal's originally entrusted assets reaches 20 percent or higher, the managed futures enterprise shall compile the documentation of the preceding paragraph and advise the principal on the date of occurrence of the event. Thereafter, the same procedure shall be followed whenever that asset net value is impaired by 10 percent or more compared to the previous report.

Regulations governing the management of discretionary futures trading business by a managed futures enterprise shall be adopted by the CNFA, which shall prescribe matters in relation to contracts, opening of accounts, trades and investments, deposits of margins and premiums, custody of funds and securities, clearing and settlement, and other related matters, and which shall be submitted to the Competent Authority for approval; the same shall apply for any amendment thereto.
Discretionary futures trading operations shall be carried out by managed futures enterprises in accordance with the regulations referred to in the preceding paragraph.

Managed futures enterprises shall keep all certificates, receipts, account books, statistical forms, records, contracts, and evidentiary documents related to their operations at their places of business, available at all times for inspection by the Competent Authority or an agency designated thereby.
The period for which the certificates, receipts, account books, statistical forms, records, contracts, and related evidentiary documents referred to in the preceding paragraph shall be retained shall be determined according to the Business Accounting Act and other relevant acts and regulations, and in addition shall comply with relevant regulations to be adopted by the CNFA..
The regulations to be adopted by the CNFA pursuant to the preceding paragraph, and any amendments thereto, shall be submitted to the Competent Authority for recordation.

The Competent Authority and an agency designated thereby may carry out audits of managed futures enterprises' operations, finances, and other necessary matters.
Managed futures enterprises shall provide explanations and relevant documentation in regard to the audits referred to in the preceding paragraph.

Where bankruptcy, dissolution, suspension of business, or voidance or revocation of the business permission leaves a managed futures enterprise unable to continue discretionary futures trading operations, it shall settle trade and investment business undertaken prior to any of those events pursuant to the regulations governing discretionary futures trading operations referred to in Article 41 and the relevant provisions of the mandate contract for discretionary futures trading.

Managed futures enterprises shall submit statistical forms on the previous month's discretionary futures trading operations to the CNFA prior to the 10th of each month.
The format of the statistical forms referred to in the preceding paragraph, and any amendments thereto, shall be prescribed by the CNFA and submitted to the Competent Authority for recordation.

In addition to complying with other applicable laws and regulations, a managed futures enterprise shall comply with the following provisions in conducting business and engaging in trading:
1. There may not be any breach of trust, improper tunneling of interests, or other violation of law or regulation.
2. Nothing may be done in the interest of the enterprise, its responsible persons, employees, or any principal that harms the interests of other principals.
3. Pursue the greatest benefit for principals, and treat every principal in a fair and reasonable manner.
4. Establish mechanisms for segregating duties and functions, maintain the independence and confidentiality of business operations. The status of allocation of discretionary assets may not be transmitted to non-related associated persons, shareholders, or affiliated enterprises.
5. Information sharing may not harm the rights or interests of principals.
6. It is prohibited to coordinate with other departments or other persons to engage in trades, investments, or other actions with the intent to influence the price of a certain type of futures trade or futures-related spot commodity.
7. The premises and facilities of departments dedicated to handling discretionary investment business shall be adequately segregated from other business premises.
8. Employees other than those of the respective dedicated departments may not participate in the drafting or review of analysis reports and written decisions drafted by departments dedicated to handling discretionary investment business for principals.
9. Compensation or incentives of employees of departments dedicated to handling discretionary investment business may not be directly linked to the performance of other departments.

If another enterprise that concurrently operates a managed futures enterprise fails to sign a mandate contract for discretionary futures trading with a principal within two years after obtaining the concurrent operations permission and permission license from the Competent Authority, its permission to concurrently operate a managed futures enterprise shall be revoked.

When a managed futures enterprise's allocation of discretionary assets involves foreign exchange business, it shall obtain the consent of the Central Bank. Its inward and outward fund remittances shall be conducted in accordance with the Regulations Governing the Declaration of Foreign Exchange Receipts and Disbursements or Transactions and related rules prescribed by the Central Bank.