Supervisory Focus Points and Actions
in Light of the Losses
Resulting from the Default of a U.S. Investment Fund

The Financial Services Agency (“FSA”) worked closely with regulators in the U.K., U.S., and other jurisdictions to analyze the causes that led to Archegos’ failure and the deficiencies in the risk management and governance of firms that were counterparties to Archegos. This letter sets out the observations on the firms’ practices that were identified through these monitoring and analysis, as well as the FSA's future actions.

The identified issues are not necessarily unique to this case, but can be applied broadly to transactions with hedge funds or family offices and other relevant transactions. It is of great importance to draw lessons from the shortcomings of the firms’ practices observed in this incident in order to prevent similar cases from happening in the future.

Accordingly, the FSA expects that this letter will serve as a guide for firms, regardless of the types of entities or businesses, to improve their governance and risk management framework, as well as an aid to foster a sound risk culture.

• Supervisory Focus Points and Actions in Light of the Losses Resulting from the Default of a U.S. Investment Fund

Contact

Securities Business Division, Supervision Bureau, Financial Services Agency

+81-(0)3-3506-6000(main) (ext. 2700, 2224)