FSA Weekly Review No.558

From the perspective of ensuring "visualization" of the efficiency of financial intermediation by financial institutions (including major banks and regional banks), the FSA published the list of KPIs (key performance indicators)* for financial institutions, which reflect their respective performances in terms of the efficiency of financial intermediation for the second half of FY2022 (October 2022, to March 2023). The list also contains the website addresses of the respective financial institutions publicizing their initiatives taken for financial intermediation. 

 

* On September 9, 2019, the FSA set forth the KPIs to objectively reflect the efficiency of financial intermediation. Since then, the FSA has required financial institutions to publish their respective KPI results on their websites in the hope that they fully commit to providing managerial support (inclusive of lending) to small and medium-sized enterprises for the improvement of their business feasibility and productivity, without overly relying on collateral and personal guarantees. 

The Kanto Local Finance Bureau took administrative action against MIKI SECURITIES CO., LTD., ordering it to partially suspend its business operations (in terms of the solicitation of new transactions of foreign stocks) from October 6 to November 5, 2023, and improve its business operations pursuant to the "Financial Instruments and Exchange Act." 

 

The administrative action was taken in response to the recommendation (as of September 15, 2023) from the Securities and Exchange Surveillance Commission (SESC) for administrative action against the said entity, which was ascertained to have been acting in violation of the FIEA mainly in terms of the following, based on the results of onsite inspection conducted by the SESC: 

(1) Solicitation violating the principle of suitability, and

(2) Insufficient systems in place to ensure compliance with the principle of suitability.

 

The business improvement order against the entity includes the following:

- Revamp of the business management structure to ensure compliance with laws and regulations, etc.

- Establishment of a business operational (business conduct) structure that ensures appropriate solicitation of investments and explanatory accountability to customers in accordance with the principle of suitability

- Enhancement of business management and internal control systems

- Establishment of a business model based on compliance with laws and regulations and appropriate and sound business operations

- Clarification of where responsibility lies, including that of the management, and 

- Explanation to the entity's clients regarding the details of the administrative action taken against the entity by the Bureau.

The Kanto Local Finance Bureau took administrative action against Godo Kaisha honey b., a notifier of specially permitted business for qualified institutional investors (SPBQII), based on facts found to be in violation of the "Financial Instruments and Exchange Act" (FIEA), such as where the entity failed to file the mandatory business reports (i.e. "jigyo-hokokusho" in Japanese) with the Bureau by the filing due date, and failed to respond to the business improvement order issued by the Bureau in June 2023, thereby ordering the abolition of the notifier's entire specially permitted business for qualified institutional investors, and the improvement of its business operations, pursuant to the FIEA.

 

The business improvement order includes the following:

(1) To promptly explain to all investors who have acquired fund interests in all funds involved in the notifier's specially permitted business for qualified institutional investors in regard to the facts and reasons for the administrative action taken by the Bureau against the said notifier

(2) To keep track of the status of the fund asset management and custody services, and take all possible measures to protect investors

(3) To promptly formulate and implement a policy regarding the return of fund assets, etc., while giving due consideration to fairness for investors, and

(4) To report in writing on the status of actions and implementation of (1) through (3) above until completion (as soon as improvement measures are formulated and implemented).

 

Note: As the said entity has no English corporate name, the Romanized version of the Japanese corporate name is stated here. Godo Kaisha (Godo Gaisha) stated in Godo Kaisha honey b. means "limited liability company," in Japanese.