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On April 24, 2009, the Securities and Exchange Surveillance Commission (SESC)announced the basic inspection policy and Inspection Program for Business Year 2009, which described the Basic Inspection Policy and the number of inspections planned for the year. The outline of the Basic Inspection Policy and Inspection Program for the fiscal year is described below. This time, the period subject to inspection has been changed from a business year basis (from July to June of the following year) to a fiscal year basis (from April to March of the following year).

I. Basic Inspection Policy

(1) Basic concepts

The SESC conducts market surveillance to ensure fairness and transparency of the Japanese markets and to protect investors. Considering the recent expansion of the scope of business operators subject to SESC's inspection and the current global financial risk, it is necessary now, more than ever before, to conduct detailed and rigorous inspections. Under such circumstances, it is important to adopt a ''risk-based, flexible approach,'' which takes into account the size and risk characteristics of each business type and of each operator. In addition, from the perspective of further improving efficiency and effectiveness, it is necessary to conduct inspections that focus more on the status of internal control systems, while ensuring fair trade and the protection of the interests of the public and investors.

Moreover, the inspections need to be performed in a way that responds to market changes in a timely and flexible manner; such an approach should be taken toward the emerging risks in order to prepare for future developments. Bankruptcies of globally operating financial instruments firms could cause considerable confusion in the markets, and possibly systemic risk. In conducting inspections, it is therefore necessary to pay enough attention to the overall status of the management of the risks involved, including the financial soundness of financial instruments firms.

To respond to these considerable changes, it is considered necessary for the SESC to perform more efficient and more effective inspections in pursuit of its basic mission.

''An efficient inspection,'' as mentioned here, indicates that it harnesses and adds to the self-improvement efforts by financial institutions. ''An effective inspection'' indicates that it leads to sustainable improvement in the firms' internal control systems and other outcomes.

More specifically, the SESC's efficient and effective inspection will be achieved on the following terms:

(2) Areas of focus in inspections

In this fiscal year, the SESC will conduct inspections that focus on the areas listed below.

II. Basic Inspection Program

On the basis of this fiscal year's Basic Inspection Program, the SESC will conduct inspections of 130 Type I Financial Instruments Business Operators, etc. (including 110 firms to be inspected by the Local Financial Bureaus), and 65 asset management firms and investment advisories/agencies (including 35 firms to be inspected by the Local Financial Bureaus). In addition, it will perform inspections of SROs and Type II Financial Instruments Business Operators, etc., on an as-needed basis.

* For details, please access Basic Inspection Policy and Inspection Program for Fiscal Year 2009 (April 24, 2009) on the SESC website.

Outline of Basic Inspection Policy and Inspection Program for Business Year 2009

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