Press Conference by the Commissioner

(Excerpt)

March 8 , 2004

Q.

Please explain the key points in the draft for the revised Securities and Exchange Law submitted to the Diet last Friday. Also, what is your opinion on the introduction of a registration system for banks' sales agents services for securities companies?

A.

The Japanese securities market is facing the need of structural reform, to promote individual investors to participate in the market, to shift from indirect financing to direct financing. From this point, the Financial System Council deliberated the issue last year, and submitted a report titled ''Towards a Financial System led by Market Functions'' in December. The draft for the revised Securities and Exchange Law has been prepared based on the report. One of the key points is lifting the ban on sales agents services for securities companies imposed on banks. It is also concerned, for example, with introducing a penalty system, and strengthening market surveillance functions and frameworks, including expanding the scope of inspections by the Securities and Exchange Surveillance Commission. Furthermore, expanding the scope of investor protection to collective investment scheme in the form of partnership such as venture capital investment limited partnership, as well as obliging securities companies to ensure best execution when they receive orders.

As for the bank's sales agents services for securities companies, the Financial System Council's report last year suggested an approval system in view of firewall protection. In response, in considering the draft, we took into account the recent trend towards deregulation, and the trend towards changing the administrative approach, from ex-ante checking to ex-post checking, and we ultimately chose a registration system. As a measure to secure a firewall protection, the law thoroughly prescribes the prohibited practices on firewall, and we have introduced a framework for government authorities to take proper action based on those provisions. Therefore, the draft is generally in agreement with the Financial System Council's report in terms of securing a firewall protection, although there is a difference in checking as to whether it is ex-ante or ex-post.