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*Please note that not all items, including regulations and articles posted on the website, have been translated into English. Therefore some of the items that are mentioned in the following articles may not be translated fully into English.

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On June 30, 2009, the Securities and Exchange Surveillance Commission (SESC) published “The Casebook on the Administrative Monetary Penalties under the Financial Instruments and Exchange Act” (hereinafter, referred to as the “Casebook”).

The “Plan for Strengthening the Competitiveness of Japan's Financial and Capital Markets,” which was published by the Financial Services Agency on December 21, 2007, states, “In order to enhance the transparency of market surveillance and promote self-discipline by market participants, the SESC will put together a collection of case examples related to administrative monetary penalties by the end of June 2008 and update it every year thereafter.” In June 2008, the SESC put together its first collection of case examples and published the Casebook.

The recently published Collection of Administrative Monetary Penalty Cases updates the Casebook that was published last year. The new Casebook consists 57 case examples (74 recommendations for administrative monetary penalties), of which 33 case examples (50 recommendations for administrative monetary penalties) are related to insider trading, 1 case example (1 recommendations for administrative monetary penalties) to market manipulation, and 23 case examples (23 recommendations for administrative monetary penalties) to false statements in disclosure documents. Furthermore, based on views and opinions received on the structure and contents of the Casebook, improvements have been made to its contents. For instance, with regard to cases relating to insider trading, as much information on the communication of material facts and so forth as possible has been included according to the characteristics of each case, and similarly, with regard to cases relating to false statements in disclosure documents, information on the circumstances of the false statements has been included.

The SESC hopes that, by utilizing the Casebook, the transparency of market surveillance will be enhanced and self-discipline by market participants will be promoted, thereby contributing to the deterrence of violations.

*For details on the Casebook, please refer to the Collection of Administrative Monetary Penalty Cases (Available in Japanese only) on the SESC website.

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On July 3, 2009, the Financial Services Agency published the “Collection of Examples of Issues Pointed out in Financial Inspections (Program Year 2008)” and the “Collection of Examples of Opinions Submitted (Case Examples of Submissions up to Program Year 2008).”

1. Collection of Examples of Issues Pointed out in Financial Inspections

The Collection of Examples of Issues Pointed out in Financial Inspections has been compiled and published since Program Year (PY) 2005 from the perspective of both further improving the transparency and predictability of financial administration and encouraging financial institutions to strengthen their internal control systems based on the principle of self-responsibility. This year's collection is the fifth publication.

This collection of examples has been compiled based on examples where inspections were completed (inspection results notified) during PY2008 (July 2008 — June 2009).

Continuing on from the previous collection, from the perspective of improving the quality of financial regulation (Better Regulation) and motivating financial institutions to make voluntary and sustained efforts toward improving their management, as well as presenting examples of “A grade” institutions, the current Collection of Examples of Issues Pointed out in Financial Inspections also presents “B grade” institutions divided into three categories: “B that is close to A,” “average B” and “B that is close to C,” so that a comparison of levels can be made.

Also, examples have been presented as a separate category with regard to “ensuring smooth financing to small and medium-sized enterprises and support for regional industries,” which was made an inspection priority in the “Basic Policy for Financial Inspections in Program Year 2008.”

Furthermore, in order to maintain the “enhancement of dialogue with financial institutions and the dissemination of information,” which was raised in the “Measures to Promote the Better Regulation Initiative in Inspections (Action Plan II),” the number of examples presented have been increased (see Note).

Note: The number of examples presented has been increased from the previous collection to 69 examples of grading and 364 examples of issues pointed out (compared to 65 and 341 examples respectively in the previous collection).

2. Collection of Examples of Opinions Submitted

The “Collection of Examples of Opinions Submitted” selects cases of opinions, which have been submitted since the introduction of the Opinion Submission System (January 2000), that are instructive for business management, and presents an outline of those examples. It has been compiled and published since 2005. Each program year, the examples are added to and revised. In the current “Collection of Examples of Opinions Submitted,” three examples have been added from among the opinions submitted for recent inspections, bringing the total number of examples presented to 27.

*For further details, please refer to the Publication of the "Collection of Examples of Issues Pointed out in Financial Inspections" (July 3, 2009) in the “Press Releases” section of the FSA website.

Past collections can also be viewed from the Press Releases section: Program Year 2004 (July 27, 2005), Program Year 2005 (July 5, 2006), Program Year 2006 (July 5, 2007), and Program Year 2007 (July 4, 2008).

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1. Background

In recent years, the number of TOBs and M&As has increased dramatically (see Note), and it is assumed that situations are also growing rapidly where the regulations on TOBs are to be checked in relation to the purchase of stocks.

Amid such a situation, the inquiries to the authority make it apparent that some uncertainness of interpretation by the authority does not necessary bring favorable results to investors by, for example, obstructing the implementation of the takeover or bearing excess administrative and financial costs.

Furthermore, due to the fact that fake statements made in tender offer notifications and failing to submit statements are now subject to administrative monetary penalties, clarifying the interpretation of authorities has become more necessary than ever before.

Given these circumstances, the aim of these Q&A are to clarify the authority's interpretation of laws and regulations. They are regarded as an integral part of “Better Regulation”, which aims to increase the transparency and predictability of regulatory actions for the purpose of improving convenience for users.

2. Content of the Q&A

Of the questions and inquires frequently asked to the authorities, the following 6 items are selected for the clarification of interpretation as there is a possibility of impending business practice by their uncertainty. (For further details, please refer to http://www.fsa.go.jp/policy/m_con/20090703.html.)

• (1) Are tender offers required to be made for a company that is exempt from submitting annual securities reports?

  • → Since a company exempting from submitting annual securities reports does not fall into “ the issuer who is required to submit annual securities reports” who is subject to the tender offer regulation, a tender offer is not required for it.

    If the target company or the person making the tender offer has submitted a quarterly securities report or the like, are they required to submit an amendment of tender offer notification?

  • → If a material fact has arisen relating to matters that should be stated in the tender offer notification, then an amendment must be submitted; but just because the person has submitted a quarterly securities report or the like is submitted does not necessarily mean that they are required to submit an amendment.

• (3) Do sub-subsidiaries and sub-sub-subsidiaries fall into the category of “a party in special relationship”?

  • → According to the provision, a sub-subsidiary does literally fall into this category, but a sub-sub-subsidiary does not.

• (4) If shares are sold after the reference date for a shareholders' meeting, and the voting rights attached to those shares of the shareholders at that shareholders' meeting are transferred by proxy, does the seller fall into the category of “a party in special relationship”?

  • → Normally, by reason of the said proxy alone, the seller would not be regarded as falling under the category of “a party in special relationship” based on the substantial criteria.

• (5) Which transactions are to be counted in the 5% and 10%, being the requirements of the so-called “rapid buy-ups, etc.” regulation?

  • → Off-market (excluding tender offers) or after-hours acquisitions shall count toward the 5%, while purchases, of stocks in general or acquisitions and new issues shall count toward the 10%.

• (6) When selling shares for the purpose of disposing odd-lots of shares arisen as part of a “squeeze-out” process, does the buyer need to make a tender offer?

  • → Normally, the buyer would not be required to make a tender offer.

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