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 Greeting by Minister Shozaburo Jimi at |
 Greeting by Senior Vice-Minister of Shozo Azuma |
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[Photo Gallery]
Meeting of 4th Disclosure System Working Group
* On December 17, the 4th Disclosure System Working Group was held (Chairman: Etsuro KURONUMA, Professor, Waseda Law School, Waseda University). It put together a report on expansion of the scope of English disclosure, and handed it to Senior Vice-Minister of Cabinet Office Azuma.
For details, please go to the FSA web site and access “ ‘FSA Disclosure System Working Group Report’ ~ Expansion of Scope of Disclosures in English ~” published (December 17, 2010) from the Press Releases section. (Available in Japanese only)
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(Etsuro KURONUMA, Professor, Waseda Law School, Waseda University (left) hands report |
Loan Sharking Harm Prevention - Joint Campaign
* As part of the activities to spread awareness in the Loan Sharking Harm Prevention Joint Campaign sponsored by the Tokyo Metropolitan Government, publicity activities were held in the square facing the Shinjuku Station West Exit on December 6.
Parliamentary Secretary Wada also participated from the FSA, handing out campaign goods on the street.
Tokyo Metropolitan Police Department's mascot Pipo-kun with Parliamentary Secretary Wada (center) urging elimination of loan sharking
Parliamentary Secretary Wada hands out campaign goods on the street
“Stop! Borrowing cash on credit cards” Campaign
* As part of the “Stop! Borrowing cash on credit cards“ campaign sponsored by the Consumer Affairs Agency, campaign goods were handed out in the square facing the Shinbashi Station Hibiya Exit SL Square on December 22.
From the FSA, Parliamentary Secretary Wada participated in the street activities.
Parliamentary Secretary Wada hands out campaign goods on the street
[Featured]
Develop and Strengthen System of Support for Entry into Asia by Small and Medium-sized Enterprises, through Cooperation of Japanese financial institutions, Japan Bank for International Cooperation, Japan External Trade Organization, etc.
On December 21, 2010, under the cooperation of the FSA, Ministry of Finance, and Ministry of Economy, Trade and Industry, it was decided to work on developing an environment for developing and strengthening a system for client enterprises to receive foreign market entry support, especially in Asia, from financial institutions without locations there.
Specifically, by cooperation between regional financial institutions and the Japan External Trade Organization (JETRO) and Japan Bank for International Cooperation (JBIC) which are public institutions, small and medium-sized enterprises entering Asia are to be supported by 1. Information provision and consultation, 2. Funding.
* For details, please go to the FSA web site and access “Develop and Strengthen System of Support for Entry into Asia by Small and Medium-sized Enterprises, through Cooperation of Japanese financial institutions, Japan Bank for International Cooperation, Japan External Trade Organization, etc.” (December 27, 2010) from the Press Releases section. (Available in Japanese only)
[Topics]
The New Growth Strategy (June 18, 2010 Cabinet Decision) incorporated “Establishment of an Integrated Exchange Handling Securities and Other Financial Instruments as well as Commodities” as one of 21 National Strategic Projects. Based on this strategy, in order to study how to create rules which meet convenience and needs of users, investors, and domestic and foreign market participants, the Integrated Exchange Study Team was launched, comprised of the Senior Vice Ministers and the Parliamentary Secretaries of the FSA, the Ministry of Agriculture, Forestry and Fisheries, and the Ministry of Economy, Trade and Industry.
The team held conferences six times in 2010, and proceeded with its study through open hearings and exchanges of opinions with market participants, experts, etc. The team published the interim report on December 22, 2010.
In this interim report, based on the common understanding of establishing an integrated exchange (securities, other financial instruments, and commodities), the legal framework should be developed without delay with the aim of establishing an integrated exchange in 2013. The report also states that preparations should be made as soon as possible, for the purpose of submitting related bills to the ordinary session of the Diet in 2012 at the latest. In addition, the paper confirms that there are five issues for establishing an integrated exchange: (1) Exchanges, (2) Clearing houses, (3) Regulation and supervision, (4) Tax system, and (5) Further regulatory reform. As to issues to be discussed continuously, the team will continue to study and conclude.
A forum will be established to exchange opinions with private businesses. In order to create an internationally competitive integrated exchange from exchanges existing in Japan, the FSA intends to work on various system developments and policy implementation which will center on integrating some existing regulation and supervision.
* For details, please go to the FSA web site and access “Integrated Exchange Study Team Interim Report” (December 24, 2010) from the Press Releases section. (Available in Japanese only)
Also, for the study team's details such as the interim report described above and outlines of the past proceedings, please go to the FSA web site and access “Integrated Exchange Study Team” from the Councils section. (Available in Japanese only)
Based on the “New Growth Strategy” (June 18, 2010 Cabinet Decision), the FSA performed work for creating the “The Action Plan for the New Growth Strategy,” and published an interim draft on December 7, 2010. On December 24, based on opinions from related parties, the final action plan was put together.
This action plan put together policy for initiatives on which the FSA will work to develop an environment for finance to fully perform two roles expected of it under the “New Growth Strategy” (1. Support the real economy, 2. Finance is to lead the economy as a growing industry itself).
It's outline is as follows.
(1) Supply of Funds to the Companies Commensurate with Borrowers' Size and Stage of Development
Encourage achievement of diverse facilitated supply of funds corresponding to the needs of various enterprises which require funds, ranging from small and medium-sized enterprises and emerging companies to globally active large enterprises.
1. Facilitated Supply of Funds for Small- and Medium-sized Enterprises (SMEs), etc.
- Promotion of Region-based Relationship Banking
- Review of Guidelines of Accounting Standards for SMEs and Internal Controls Reporting System, including Those for SMEs
- Expansion of the Scope of the Act on Specified Commitment Line Contract
- Lifting the Ban on Finance Leases and Related Transactions by Banks, Insurance Companies, etc.
- Review of Habitual Practice of Third Party Joint and Several Guarantee (Except Managers')
2. Appropriate Supply of Risk Money for Emerging Companies, etc.
- Restoring Confidence in and Activating Markets for Emerging Companies
- Lifting the Ban on Subordinated Loans, etc. by Subsidiaries of Banks and Insurance Companies which Mainly Invest in Venture Companies, etc.
- Promotion of Financial Institution's Efforts such as Loans in Consideration of Growth Potential of Companies
- Encouragement of Proactive Utilization of the “Fund-Provisioning Measure to Support Strengthening the Foundations for Economic Growth (BOJ's Scheme)”
- Clarification of Application of the Financial Instruments and Exchange Act to Partnerships Based on the Civil Code
3. Flexible Supply of Funds, etc.
- Development of Debt Capital Markets for Professional Investors
- Review of Disclosure Rules and Operations
- Promotion of Addressing and Consideration about the Disclosure of Earnings Forecast by Stock Exchanges and Participants
- Relaxing Quarterly Securities Report Requirements
- From the viewpoint of further diversifying capital increase techniques, development of the disclosure rules for smooth implementation of “Rights offering” (Note)
(Note) Method of capital increase by allotment of share options to all shareholders without contribution
- Vitalization of the Corporate Bond Market
- Transition to the Notification System Concerning Representative and Alternate Services in the Insurance Group
(2) Financial Sector Serving as a Bridge between Asian and Japanese Economies
By creating a financial and capital market which is highly convenient and reliable for fundraisers and investors, enhance the attractions of Japan's market and achieve a Japanese market which serves as Asia's main market. Also push Japanese financial institutions to expand their activities in Asia.
1. Establishing Japan's Status as a Main Financial Market in Asia
- Development of Systems and Measures to Promote the Establishment of an Integrated Exchange Handling Securities and Other Financial Instruments as well as Commodities
- Development of a System to Expand the Scope of English Language Disclosure by Foreign Companies, etc.
- Review of CPA exam and qualification system
- Facilitation of Block Trading
- Response to Possible Unfair Trade Related to Public Offering
- Change of Tax System for Cross-Border Transactions
- Perpetuation and Expansion of the Japanese Bond Income Tax Exemption Scheme (J-BIEM)
- Support for the Activities towards the International Convergence of Accounting Standards
- Active Engagement in International Financial Regulatory Reforms
- Enhancement of Surveillance on Cross-Border Trading
2. Expansion of Japanese Financial Institutions' Activities in Asia
- Promoting Policy Coordination regarding Financial and Capital Markets in Asia
- Development and Strengthening of Support System by Financial Institutions for Small and Medium-sized Enterprises' Entry into the Asian Area etc.
- Review of Regulatory Barriers to Overseas Real Estate Investment and Acquisition of Foreign Insurance Companies by Japanese Insurance Companies
(3) Provision of Asset Management Capabilities to Utilize Japanese National Assets Safely and Effectively
In order to provide suitable investment opportunities to various parties, the FSA will develop the environment which enables them to safely and effectively use financial assets, take suitable risks corresponding to their asset size and knowledge, and obtain returns.
- More flexible regulation of asset securitization schemes, to stimulate the real estate market
- Clarification of Tasks and Consideration of Review of Investment Trust and Investment Corporation System
- Relaxing the Regulation of Investment Management Businesses with Limited Types of Clients such as Professional Investors
- Abolishment of the Regulation of the Asset Management Ratio of Insurance Companies
- Extension of Reduced Tax Rate on Securities
- Expansion of Profit/loss Offset Scope etc. for Financial Instruments
- Change to Separate Self-assessment Taxation for OTC Derivative Transactions, etc.
- Measures Required to Enhance Convenience of Designated Accounts
- Steady Implementation of the Financial Services ADR (Alternative Dispute Resolution)
Measures raised in the Action Plan will be implemented quickly one after another, starting with measures which can be executed immediately. The FSA will proceed to prepare for submission of a batch of bills to this year's ordinary session of the Diet. The FSA will also amend related Cabinet Orders and revise supervisory policies in advance as much as possible.
* For details, please go to the FSA web site and access “The Action Plan for the New Growth Strategy” (January 28, 2011) from the Press Releases section.
The Act concerning Temporary Measures to Facilitate Financing for SMEs, etc. was enforced in December 2009. This imposed the obligation on financial institutions to change loan conditions as much as possible when there are requests from small and medium-sized enterprises and housing loan borrowers. Consequently, since this Act was enforced, financial institutions have changed loan conditions in response to over 90% of requests from small and medium-sized enterprises, etc.
In this environment, looking at the current situation,
- Business conditions and cash flow of SMEs are steadily improving, but are still harsh, with sentiment that the future is uncertain. Therefore, there may be a certain demand for loan condition changes.
- In making loan condition changes, it is important to create and execute feasible business turnaround plans. While financial institutions make loan condition changes, it is important to solidly implement the flow of fully demonstrating their consulting function, leading to improved repayment abilities of SMEs.
Therefore, it was decided to take the following measures (published December 14, 2010).
1. Extend to March 31, 2012 the expiration of the Act concerning Temporary Measures to Facilitate Financing for SMEs, etc.
2. Revise supervisory policies to promote consulting functions by financial institutions.
3. Considering the Act's implementation situation until now, in order to reduce the clerical burden of financial institutions, work to greatly simplify the disclosure and reporting documents of financial institutions.
Of these, the amendment bill to extend the expiration of the Act concerning Temporary Measures to Facilitate Financing for SMEs, etc. was submitted to the Diet after its Cabinet Decision on January 15.
By taking these measures, the FSA aims to use its inspection and supervision to create an environment with appropriate financial intermediation functions demonstrated by financial institutions, and strong cash flow of small and medium-sized enterprises, even after the Act expires.
※ For details, please go to the FSA web site and access Extension of Expiration of Act concerning Temporary Measures to Facilitate Financing for SMEs, etc. from the Press Releases section, and “Talk by Minister of State for Financial Services ~ Extension of expiration of Act concerning Temporary Measures to Facilitate Financing for SMEs, etc.” (both published December 14, 2010) from the Speeches & Material section. (Available in Japanese only)
At the Securities and Exchange Surveillance Commission
(SESC), Kenichi SADO was reappointed as Chairman and Shinya FUKUDA as Commissioner. Also, Masayuki YOSHIDA was newly appointed as Commissioner. The SESC entered the 7th term.
The SESC announces its Policy Statement every three years. This latest statement was made public on January 18, 2011 
~ Policy Statement of New SESC ~.
January 18, 2011
Securities and Exchange Surveillance Commission
Towards Enhanced Market Integrity
- SESC's Policy Statement for the 7th Term -
1. Mission
The Securities and Exchange Surveillance Commission (SESC) is committed to pursuing the following mission:
- To ensure integrity of capital markets, and
- To protect investors
2. Policy Directions
The Japanese capital markets have been experiencing dynamic changes. Global efforts to rebuild the international regulatory frameworks are ongoing based upon lessons learned from the global financial crisis. A series of amendments have been made to the Financial Instruments and Exchange Act (FIEA). Innovations are continuing in financial products and trading methods. In response to this rapidly changing market environment, and to continue to be “feared by wrongdoers and trusted by ordinary investors”, the SESC is determined to pursue our mission through the following three policy directions.
(1) Market oversight with prompt and strategic actions
- Strategic use of our regulatory tools (e.g. market surveillance, inspection of securities firms and other regulated entities, administrative monetary penalty investigation, disclosure statements inspection and investigation into a criminal case) to make our actions more prompt and effective
- Timely and prompt response to changes in market environments, trends of violations, and international regulatory developments. Forward-looking and prompt response to emerging risks
- Enhanced cooperation with self-regulatory organizations (SROs) to increase the effectiveness of the multilayered market oversight activities
(2) Outreach activities for enhanced market integrity
- Contributing to the rule-making processes at the Financial Services Agency (FSA) and other relevant authorities by raising relevant regulatory issues identified through our market oversight activities
- Outreach to market participants, through SROs and other channels, to encourage their self-discipline for market integrity
- Closer communications with market participants, and more effective dissemination of information
(3) Response to the globalization of markets
- Closer cooperation with overseas regulators to conduct market oversight activities on a global basis, in response to growing cross-border transactions and international activities by investment funds and other market participants in today's highly-globalized markets
- More effective inspections of globally active and large-scale securities firms, utilizing the international supervisory frameworks
- Further developments of human resources and organizational structures at the SESC
The SESC believes that our efforts towards fair, transparent and quality capital markets should contribute to vitalizing the Japanese capital markets and their international competitiveness by implementing comprehensive and effective market oversight activities based on the policy directions set out above.
3. Policy Priorities
The SESC is determined to strategically mobilize its regulatory tools and resources with particular emphases on the followings in order to conduct effective and efficient market oversight.
(1) Comprehensive and proactive market surveillance
- Comprehensive and enhanced surveillance on both primary and secondary markets as well as on cross-border transactions in order to preclude any regulatory loopholes in market surveillance
- Extensive surveillance on suspicious transactions which, at first sight, do not appear to contravene rules and regulations
- Proactive market surveillance through collection of a wide range of information with analysis of backgrounds behind individual cases or market developments
- Taking appropriate actions against cross-border market abuse, through exchange-of-information frameworks amongst securities regulators, including investigation requests and enforcement action based upon information provided by overseas regulators
(2) Strict actions to market misconduct and false disclosure statements
- Taking strict actions against market abuse such as insider dealing, market manipulation, fraudulent means including abuse of financing in primary market, and false disclosure statements
- Contribution to the regulatory system related to market misconduct based upon surveillance results
(3) Timely and efficient inspections and investigations in response to disclosure violations
- Implementation of timely and efficient disclosure inspections and investigations in order to ensure that the market participants are fairly and equally provided with accurate corporate information without delay
- Encouraging a listed company or any other issuer, if it has made false disclosure statements, to exercise its initiatives for autonomous and timely disclosure of the accurate financial information to the market as well as encouraging the related parties to achieve such appropriate disclosure
- Taking appropriate actions against public offering of securities such as stocks and corporate bonds without filing securities registration statements, with enhancing cooperation with the FSA and the Local Finance Bureaus and, if necessary, seeking petitions for court injunctions (Article 192 of the FIEA)
(4) Enhanced use of administrative monetary penalty system
- Implementation of timely and efficient inspections and investigations, taking advantage of administrative monetary penalty system, for fraudulent trading, false disclosure statements and other violations
- Exercising initiatives in order to prevent market participants from committing violations by taking various measures such as proactive provision of information regarding case precedents of administrative monetary penalties
(5) Efficient and effective inspections corresponding to the characteristics of firms to be inspected
- Implementation of efficient and effective inspections through developments of knowledge and inspection techniques corresponding to the characteristics of firms to be inspected
- Implementation of inspections of globally active securities firms, verifying the appropriateness of their internal control and risk management systems from a forward-looking perspective, in response to the introduction of consolidated financial regulations
- Taking appropriate actions against malicious financial firms such as fund dealers and investment advisors, verifying their operations and compliance from the perspective of investor protection
- Taking appropriate actions against unregistered entities selling unlisted stocks or other securities, in close cooperation with the FSA, the Local Finance Bureaus and investigative authorities through petitions for court injunctions (Article 192 of the FIEA)
(6) Enhanced cooperation with SROs
- Further cooperation with SROs in areas including oversight of member firms, rule-making, as well as outreach to market participants and investors
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