[Explanations of Laws and Regulations]

Between June 19 and July 21, 2009, the Financial Services Agency (FSA) invited public comments on the “Draft Cabinet Ordinance for Partial Amendment of the Cabinet Ordinances related to Financial Instruments Business, etc.,” the “Draft Cabinet Ordinance for Partial Amendment of the Ordinance for Enforcement of the Act on Investment Trusts and Investment Corporations,” the “Draft Cabinet Ordinance for Partial Amendment of the Cabinet Ordinance Relating to Definitions Prescribed in Article 2 of the Financial Instruments and Exchange Act,” and the “Draft Points to Consider Regarding the Financial Instruments and Exchange Act, etc.” On September 9, the FSA published the results of those public comments. Revised cabinet ordinances were promulgated and enforced on the same date. Furthermore, the Points to Consider Regarding the Financial Instruments and Exchange Act, etc. (Guidelines on the Financial Instruments and Exchange Act, etc.) and the revised Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc. have both been applicable since this same date.

The following is an overview of the revisions.

(1) Checks conducted by local finance bureaus to confirm the accidental nature of losses resulting in compensation can now be substituted by checks conducted by financial instruments firms associations.

In the past, if a business operator provided compensation for a loss, in principle, a local finance bureau was required to check that the loss related to the compensation was attributable to an accident. An exception had been established, though, whereby a loss could be compensated without the need for a check by a local finance bureau if, for instance, it was a settlement with a lawyer or judicial scrivener acting on behalf of the client, and if the loss did not exceed 10 million yen (or 1.4 million yen in the case of a judicial scrivener).

Recently, this exception was supplemented. Now, if a committee within a financial instruments firms association, which contains a lawyer or judicial scrivener, has conducted a check, and if the loss does not exceed 10 million yen (or 1.4 million yen in the case of a committee comprised only of judicial scriveners), then the check conducted by the local finance bureau can be replaced with a check conducted by the committee within the financial instruments firms association.

(2) Overdrawn general savings accounts for securities trading at registered financial institutions are now permissible under certain conditions.

Specifically, securities trading using overdraft on a general savings account at a registered financial institution is now allowed if the following requirements are met:

(a) Payment will be made in full within one month,

(b) The transactions pertain to a contract for cumulative investment, and

(c) The credit limit is 100,000 yen.

(3) Methods for electronically issuing investment reports, etc. for investment trusts have been supplemented.

With regard to the electronic issuance of prospectuses, in the past, if a firm had completed arrangements whereby it could issue prospectuses via email or other such means at the request of an investor for a period of five years following issuance of a prospectus in writing, it would not be required to keep a copy of its prospectus posted on its website at all times. However, there were no similar provisions for the electronic issuance of investment trust reports and investment trust contracts.

In this regard, a system similar to prospectuses has now also been allowed for investment trust reports and investment trust contracts.

(4) A review was done of items recorded in pre-contract documents relating to certified investor protection organizations.

In the past, there was a requirement for pre-contract documents to state the certified investor protection organizations in which the target business operator was a member, and if the operator was a member of multiple organizations, then it needed to state all organizations.

In this regard, there is now a requirement for pre-contract documents to state the organizations in which the target business operator is a member with respect to transactions for which the operator is intending to conclude a contract.

(5) A review was done of the treatment of transaction balance reports which relate to transactions that do not involve the transfer of securities or money.

In the past, there had been a requirement for transaction balance reports to be issued if there had been a transaction during the quarter, even for transactions which did not involve the transfer of securities or money with customers via an intermediary or the like. This is no longer a requirement.

(6) The treatment in the Financial Instruments and Exchange Act, etc. of stock ownership schemes conducted via employee stock owner groups was clarified.

With respect to those stock ownership schemes conducted via employee stock owner groups which meet certain conditions, in addition to establishing exemptions related to the underwriting business in a cabinet ordinance, new “Points to Consider Regarding the Financial Instruments and Exchange Act, etc.” were established, and it was clarified that these particular schemes do not correspond to collective investment schemes, and that they do not violate Article 7 of the Act on Investment Trust and Investment Corporations.

*For further details, please refer to Results of public comments on the “Draft Cabinet Ordinance for Partial Amendment of the Cabinet Ordinances related to Financial Instruments Business, etc.” (September 9, 2009) in the “Press Releases” section of the FSA website. (Available in Japanese)

[Minister in His Own Words]

This section provides information regarding the hot topics of the moment, selected from questions and answers given at the Minister's press conferences, etc.

If you wish to find out more, we invite you to visit the “Press Conferences” section of the FSA website.

A: (omitted) In response to your first comment, as I said before, each country has its own culture. Everything is different. Traditions are different, and lifestyles are different. Corporate activities are conducted in the midst of these cultures, and so it is not necessarily the case that everyone would be happy if they were all be governed by a single set of standards like a Kintaro candy with the same picture all the way through. In the future though, I think that if the whole universe, from the US and Europe to Japan, could be governed by a single set of standards, then this would be more convenient. But I don't think we could easily achieve this straight away. Then again, we live in a global age, and so I think we need to try to do things like this together. That sums it up.

[Extract from the press conference following the Cabinet meeting on October 27, 2009 (magazine and freelance journalists)](Available in Japanese only)

A: As for the capital adequacy ratio, as I have been saying, it is absolutely necessary that banks that raise funds and do other business activities internationally conform to the international standards. However, I do not think that it is necessary to strictly apply the Basel accord to banks that do not operate internationally. Although it is important to conduct business while conforming to such standards as a certain yardstick, a drop below the yardstick level would not immediately become an issue to fuss about. Ideally, all financial institutions should operate in accordance with a universal standard in the future. However, that would be difficult. Each country has its own circumstances, and we have already been arguing this point.

Regarding executive pay, too, circumstances vary from country to country. While it is natural that managers receive pay based on the assessment of their financial business, while fulfilling the social responsibility, there are variable factors, including the salary base in each country, so we cannot apply a universal standard around the world.

[Extract from the press conference following the Cabinet meeting on November 4, 2009]

○Use of the “e-Gov e-Application System”

As an initiative to improve services and convenience for Japan's citizens, applications and notifications for which the Financial Services Agency (FSA) is the competent authority can be made electronically using the “e-Gov e-Application System” (http://shinsei.e-gov.go.jp/menu/smenu.html). Everyone is encouraged to actively use the system.

For details of the applications and notifications that can be processed using this system, please check with the “Search Via List of Laws” in the “Guide to Appliction & Notification Procedures, About the FSA Certification Authority” (http://www.fsa.go.jp/common/shinsei/index.html). Please also note that, to use this system, you are required to agree to the “Rules for Using the e-Gov e-Application System”.

○ Advantages of using the “e-Gov e-Application System”

*For a detailed description of how to use the “e-Gov e-Application System,” please check with “Click here to use the e-Gov e-Application System” on the e-Gov top page.

○ Subscribing to the Email Information Service (Japanese/English)

The Financial Services Agency provides an Email Information Service (Japanese and English) through its website. If you register your email address on the Japanese subscription page, we will email you once a day with the latest information, such as the monthly publication, “Access FSA,” and daily press releases.

If you register on the English subscription page, we will email you once a day with the latest information, such as the “What's New” information on the English website as well as the “FSA Newsletter.”

To register in Japanese, please access , and to register in English, please access Subscribing to E-mail Information Service

○ Subscribing to the SESC Email Information Service

The Securities and Exchange Surveillance Commission (SESC) provides an Email Information Service (Japanese/English) through its website. If you register your email address, we will email you with the latest information from the SESC website, such as recommendations relating to administrative action against financial instruments business operators and recommendations relating to orders for the payment of administrative monetary penalties.

*For further details and to register in Japanese, please access , and to register in English, please access Subscribing to E-mail Information Service on the SESC website.

○ Subscribing to the CPAAOB Email Information Service

The Certified Public Accountants and Auditing Oversight Board (CPAAOB) provides an Email Information Service (Japanese/English) through its website. If you register your email address, we will email you with the latest information from the CPAAOB website.

*For further details and to register in Japanese, please access , and to register in English, please access Subscribing to E-mail Information Service on the CPAAOB website.

[Main press releases in July/August]

September 3	Access		First trial date for the case of a violation of the Financial Instruments and Exchange Act in relation to insider trading by an employee of Ajinomoto Co., Inc.
7	Access		The Group of Central Bank Governors and Heads of Supervision puts out press release on their “Comprehensive Response to the Global Banking Crisis”
9	Access		Results of public comments on the “Draft Cabinet Ordinance for Partial Amendment of the Cabinet Ordinances related to Financial Instruments Business, etc.”
11	Access		Decision for the purchase of trust beneficiary rights, etc. for The Shinkumi Federation Bank
	Access		Decision on capital injection into The Michinoku Bank, Ltd., the Kirayaka Bank, Ltd. and The Daisan Bank, Ltd.
	Access		Administrative action against New Asia Asset Management
	Access		Administrative action against ISO Inc.
	Access		Easing of lending terms based on the “Measures to Facilitate the Easing of Lending Terms for Loans to Small- and Medium-Sized Enterprises” (April - June, 2009)
	Access		Exposures of Japanese deposit-taking institutions to subprime-related products and securitized products
	Access		Outline of the report for The Howa Bank, Ltd. on the implementation of the approved business restructuring plan based on the Act on Special Measures for Industrial Revitalization and Innovation of Industrial Activities
	Access		Outline of the report for The Bank of Fukuoka, Ltd. and The Kumamoto Family Bank, Ltd. on the implementation of the approved business restructuring plan based on the Act on Special Measures for Industrial Revitalization and Innovation of Industrial Activities
	Access		Outline of the report for The Yamaguchi Bank, Ltd. and The Momiji Bank, Ltd. on the implementation of the approved business restructuring plan based on the Act on Special Measures for Industrial Revitalization and Innovation of Industrial Activities
	Access		Second trial date for the case of a violation of the Financial Instruments and Exchange Act in relation to insider trading by an employee of Ajinomoto Co., Inc.
	Access		First trial date for the case of a violation of the Financial Instruments and Exchange Act in relation to false statements contained in a prospectus relating to the secondary distribution of shares in BicCamera Inc. held by an officer of BicCamera Inc.
	Access		Approval for establishment of a bank holding company
14	Access		CPAAOB and FSA publish “A Framework for Inspection/Supervision of Foreign Audit Firms, etc.”
	Access		FSA publishes draft amendments to the “Points to be Considered regarding the Disclosure of Corporate Information, etc.” (Corporate Information Disclosure Guidelines)
15	Access		Extension of the period prescribed in Article 8(1) of the Financial Instruments and Exchange Act in relation to a securities registration statement submitted by Japan Digital Contents Trust Inc.
	Access		Administrative action against Japan Digital Contents Trust Inc.
18	Access		Administrative action against Libra Corporation
	Access		Approval of the business restructuring plan based on the Act on Special Measures for Industrial Revitalization and Innovation of Industrial Activities for The Shonai Bank, Ltd. and The Hokuto Bank, Ltd.
	Access		Approval of the business restructuring plan based on the Act on Special Measures for Industrial Revitalization and Innovation of Industrial Activities for The Bank of Ikeda, Ltd. and The Senshu Bank, Ltd.
24	Access		Results of public comments on the partial draft amendments to the “Comprehensive Guidelines for Supervision of Major Banks, etc.,” the “Comprehensive Guidelines for Supervision of Small- and Medium-Sized Enterprises and Regional Financial Institutions,” and the “Comprehensive Guidelines for Supervision of Insurance Companies”
	Access		Results of public comments on the “Draft Cabinet Ordinance for Partial Amendment of the Cabinet Ordinance Relating to Definitions Prescribed in Article 2 of the Financial Instruments and Exchange Act,” etc.
28	Access		Second trial date for the case of a violation of the Financial Instruments and Exchange Act in relation to false statements contained in a prospectus relating to the secondary distribution of shares in BicCamera Inc. held by an officer of BicCamera Inc.
29	Access		Examination of the measures for “tighter lending and retraction of credit”
	Access		Merger of life insurance companies
30	Access		Update of the Collection of Statistics on the Money Lending Business
October 1	Access		Administrative action against Argentech Co., Ltd.
2	Access		Invitation for opinions on FY2010 Request for Tax Revisions
	Access		Administrative action against Forest Publishing Co., Ltd.
	Access		International Accounting Standards Committee Foundation (IASCF) Monitoring Board publishes “Statement on Principles for Accounting Standards and Standard Setting”
5	Access		Administrative action against TONK Co., Ltd.
6	Access		Publication of the “Draft Cabinet Ordinance for Partial Amendment of the Cabinet Ordinances related to the Disclosure of Corporate Information, etc.”
7	Access		Decision to order payment of an administrative monetary penalty for insider trading an officer of Harukosan Co., Ltd.
9	Access		Remarks by Senior Vice Minister of Finance (Report to Minister for Financial Services on bill for measures for “tighter lending and retraction of credit”)
	Access		Administrative action against Hoxsinbussan Co., Ltd.
	Access		Status of crime involving counterfeit ATM cards
	Access		Third trial date for the case of a violation of the Financial Instruments and Exchange Act in relation to insider trading by an employee of Ajinomoto Co., Inc.
13	Access		Publication of Collection of Statistics on the Money Lending Business
15	Access		Summary of results of the questionnaire survey on financing of small- and medium-sized enterprises
16	Access		Publication of the draft government ordinance and draft cabinet ordinance, etc. on the 2009 partial revision of the Financial Instruments and Exchange Act etc.
	Access		FY2010 Structure, Personnel and Budget Requests (October 2009)
19	Access		Update of the “Collection of Cases in which Administrative Action Has Been Taken”
20	Access		Administrative action against MJ Co., Ltd.
	Access		Administrative action against Diamond Office Co., Ltd.
22	Access		Third trial date for the case of a violation of the Financial Instruments and Exchange Act in relation to false statements contained in a prospectus relating to the secondary distribution of shares in BicCamera Inc. held by an officer of BicCamera Inc.
23	Access		Administrative action against the Tokyo Branch of BNP Paribas Securities (Japan) Limited
	Access		Administrative action against Nipponkoa Insurance Co., Ltd.
	Access		Extension of temporary measures regarding restrictions on short selling and purchase of own stocks by listed companies
28	Access		Authorization of a trust business license
29	Access		Administrative action against Concord Co., Ltd.
30	Access		Revision of business revitalization plans
	Access		Results of invitation for opinions on FY2010 Request for Tax Revisions, and FY2010 Request for Tax Revisions
	Access		FSA-related bills submitted at the 173rd session of the Diet (Bill concerning Temporary Measures for Facilitating the Financing of Small- and Medium-Sized Enterprises, etc. (submitted October 30, 2009))
	Access		Consultations received at the “Counseling Office for Financial Services Users” (July 1 - September 30, 2009)
	Access		Provision of information regarding the fraudulent use of deposit accounts
	Access		Update of the Collection of Statistics on the Money Lending Business
	Access		Promulgation of Cabinet Ordinances and FSA Regulatory Notices concerning the extension of temporary measures regarding restrictions on short selling and purchase of own stocks by listed companies

Details of any items with an Access symbol, can be viewed by clicking on the Access symbol.

---