FSA Weekly Review No.532 April 6, 2023

FSA Weekly Review No.532: April 6, 2023

What’s New on the FSA Website

Week of March 24, 2023 - March 30, 2023

This page contains the latest in events, developments, and updates to the FSA website.

Public Comments

March 30, 2023	Publication of the finalized "Cabinet Office Order to Amend the Cabinet Office Order on the Surcharge and Delinquent Charge under the Provisions of Chapter VI-2 (Surcharge) of the Financial Instruments and Exchange Act" alongside the finalized "Cabinet Office Order to Amend the Cabinet Office Order on Financial Instruments Firms Association, etc." after public consultation <Summary> The FSA finalized the following Cabinet Office Orders after public consultation: (1) The "Cabinet Office Order to Amend the Cabinet Office Order on the Surcharge and Delinquent Charge under the Provisions of Chapter VI-2 (Surcharge) of the Financial Instruments and Exchange Act" (hereinafter referred to as the finalized "Cabinet Office Order [1]"), and (2) The "Cabinet Office Order to Amend the Cabinet Office Order on Financial Instruments Firms Association, etc." (hereinafter referred to as the finalized "Cabinet Office Order [2]"). The finalized Cabinet Office Order [1] mainly provides amendments in response to the government-wide policy to abolish the use of fax machines for administrative operations and procedures, whereas the draft Cabinet Office Order [2] mainly provides amendments in response to the enforcement of the "Act Partially Amending the Income Tax Act, etc." (Act No. 4, 2022). The finalized Cabinet Office Order [1] was enforced on March 31, 2023, whereas the finalized Cabinet Office Order [2] was enforced on April 1, 2023. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/shouken/20230330-2/20230330-2.html
March 30, 2023	Publication of the finalized regulatory notice and the Cabinet Office Order in regard to the amendments to the LEX (Large Exposure) framework after public consultation <Summary> The FSA published the finalized "regulatory notice designating the criteria for indicating the status of soundness of corporate management in regard to large exposures, etc., which is set forth by the highest designated parent company as the criteria for judging soundness in the management of such highest designated parent company and its subsidiary companies, etc." (provisional English title), alongside the finalized "Cabinet Office Order to Amend the Regulation for Enforcement of the Banking Act, etc." after public consultation. The finalized regulatory notice and the Cabinet Office Order make necessary amendments, etc., mainly in regard to the Large Exposures (LEX) Framework as follows: - Introduction of the LEX Framework to the highest designated parent company group - Development of the calculation method for exposures in trading accounts of banks, etc., and - Other relevant and applicable matters. The finalized regulatory notice and the Cabinet Office Order will respectively take effect or be enforced on March 31, 2024. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/shouken/20230330/20230330.html
March 30, 2023	Publication of the finalized amendments to the "Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc." after public consultation <Summary> The FSA finalized the amendments to the "Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc." after public consultation. The finalized amendments to the Guidelines are provided in response to recommendations made by the Financial Stability Board (FSB) and the International Organization of Securities Commission (IOSCO) in terms of the following: 1.Updating rules to require fund managers and specially permitted business for qualified institutional investors (SPBQII) to file monitoring reports on the funds they manage. This amendment is provided in response to a policy recommendation made in 2019 by the FSB on structural vulnerabilities arising from activities of the asset management sector, followed by a recommendation by the IOSCO on a framework for assessing the leverage of investment funds in 2020. 2.Updating rules to require MRF (Money Reserve Fund) and MMF (Money Market Fund) managers to develop contingency plans to address any vulnerabilities in their MRFs and MMFs. This amendment is provided in response to a policy proposal made in October 2021 by the FSB to improve the resilience of MMFs, followed by the voluntary amendments to the self-regulatory rules of Investment Trusts Association, Japan, aimed at encouraging investment managers to take appropriate measures for contingency plans stipulated in its rules, thereby improving the resilience of MMFs, etc. The finalized amendments took effect on March 30, 2023. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/shouken/20230330-3/20230330-3.html
March 29, 2023	Publication of the "Cabinet Office Order to Amend the Regulation for Enforcement of the Banking Act, etc." <Summary> The FSA published the "Cabinet Office Order to Amend the Regulation for Enforcement of the Banking Act, etc." The amendments to the said Regulation for Enforcement are in conjunction with the amendments to the regulatory notice on "Particulars Specified Separately by the Commissioner of the Financial Services Agency Concerning the Condition of Adequacy of Equity Capital, etc., Pursuant to Article 19-2, Paragraph 1, Item (v) (d), etc. of the Regulation for Enforcement of the Banking Act" (The FSA Regulatory Notice No. 7 of 2014), etc., in response to the finalization of Basel III, etc. The amendments mainly pertain to technical amendments, and no public consultation was conducted, for the amendments fall under cases prescribed in the "Administrative Procedures Act" as being insignificantly changed and not requiring the implementation of procedures for public consultation, such as the arrangement of the provisions necessary in accordance with the establishment, amendment or repeal of other laws and regulations. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/ginkou/20230329.html
March 28, 2023	Publication of the finalized regulatory notice regarding the TLAC (Total Loss-Absorbing Capacity) framework for foreign securities companies, alongside the finalized amendments to the "Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc." after public consultation <Summary> The FSA published the finalized "regulatory notice partially amending the measures to be taken with a parent company of a financial instruments business operator, etc. whose parent company is a foreign company, to ensure the continuous implementation of business operations in line with the business management structure required to be developed by the person/entity designated by the FSA, pursuant to Article 70-2(6) of the Cabinet Office Order on the Financial Instruments Business, etc." (provisional English title), alongside the finalized amendments to the "Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc." after public consultation (conducted in December 2023). The finalized regulatory notice amends the "internal TLAC (Total Loss-Absorbing Capacity) [calibration] level adjustment factor" from "90% to 75%, which is individually set forth for Goldman Sachs Japan Co., Ltd. and Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., whereas the finalized amendments to the said Comprehensive Guidelines mainly reflect the corresponding amendments in conjunction with the TLAC framework for foreign securities companies. The finalized regulatory notice and the finalized amendments to the said Comprehensive Guidelines took effect on March 31, 2023. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/shouken/20221223/20221223.html
March 28, 2023	Publication of the finalized amendments to the regulatory notice pertaining to Pillar 1 and Pillar 3 requirements of capital adequacy applicable to shinkin banks and the federations of shinkin banks, as well as to the highest designated parent company, alongside the finalized amendments to other relevant and applicable regulatory notices and guidelines after public consultation <Summary> On March 28, 2023, the FSA finalized the amendments to the regulatory notice pertaining to Pillar 1 and Pillar 3 requirements of capital adequacy applicable to shinkin banks and the federations of shinkin banks, as well as to the highest designated parent company, alongside the finalized amendments to other relevant and applicable regulatory notices and guidelines after public consultation. The finalized amendments correspond to the promulgated amendments applicable to banks and bank holding companies, which were published in April and November 2022. The amendments pertain to the implementation of the finalized Basel III framework,* and a series of public consultations were held in March, September, and October 2021, as well as in September 2022. The implementation dates of the regulatory notices in conjunction with the finalization of the Basel III framework are scheduled as follows: - Internationally active financial institutions and non-internationally active financial institutions that use internal model-based approaches for measuring risks, except for the highest designated parent company: March 31, 2024 - Non-internationally active financial institutions that do not use internal model-based approaches for measuring risks, and the highest designated parent company: March 31, 2025 - Financial institutions that desire an early implementation on or after March 31, 2023, may do so by submitting a notification to the FSA. Note: The implementation date applicable to the highest designated parent company has been changed in consideration of the nature of its business model. *The finalized Basel III framework refers to a consolidated package of the "Basel III framework"(December 2017) and the "market risk capital framework (minimum capital requirements for market risk)" (January 2019). The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/ginkou/20230328/20230328.html
March 27, 2023	Publication of the finalized "Cabinet Office Order to Amend the Cabinet Office Order on the Audit Certification of Financial Statements" after public consultation <Summary> The FSA published the finalized "Cabinet Office Order to Amend the Cabinet Office Order on the Audit Certification of Financial Statements" after public consultation. From the perspective of public interest in auditing, it is beneficial to make information about the business relationship that a certified public accountant or an audit firm has with an audited company available to interested parties. In response, new provisions regarding disclosure of matters related to remuneration have been set forth in the "Code of Ethics" of the Japanese Institute of Certified Public Accountants (JICPA). In this context, the finalized Cabinet Office Order sets forth matters related to remuneration a certified public accountant or an audit firm receives from an audited entity as the matters to be included in the audit report. The finalized Cabinet Office Order was enforced on April 1, 2023. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/sonota/20230327_2/20230327_2.html
March 27, 2023	Publication of the finalized "Cabinet Office Order to Amend the Regulation on Terminology, Forms and Preparation Methods of Consolidated Financial Statements" after public consultation <Summary> The FSA published the finalized "Cabinet Office Order to Amend the Regulation on Terminology, Forms and Preparation Methods of Consolidated Financial Statements" after public consultation. The finalized Cabinet Office Order provides amendments to the "Regulation for Terminology, Forms and Preparation Methods of Consolidated Financial Statements" in response to ASBJ (Accounting Standards Board of Japan) Statement No. 27 pertaining to the amendments to "Accounting Standard for Income Taxes" and other applicable accounting standards. The FSA also finalized the amendments to the FSA's regulatory notice concerning the "designated IFRS (International Financial Reporting Standards)" stipulated in the "Regulation for Terminology, Forms and Preparation Methods of Consolidated Financial Statements" after public consultation. The finalized amendments mainly define the international accounting standards that have been published through December 31, 2022, by the IASB (International Accounting Standards Board) as "designated international accounting standards" set forth under Article 93 of the Regulation for Consolidated Financial Statements. The finalized Cabinet Office Order alongside the finalized amendments to the aforementioned regulatory notice were enforced on March 27, 2023. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/sonota/20230327/20230327.html
March 24, 2023	Publication of the finalized amendments to the "Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc." and others after public consultation <Summary> The FSA finalized the amendments to the "Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc.," and others after public consultation. The finalized amendments to the guidelines and others are in regard to books and documents related to the business of financial instruments business operators, etc., for which the obligation to prepare and preserve such books and documents is stipulated in laws and regulations, aimed at clarifying the points to be noted concerning the preservation of such books and documents offshore. The finalized amendments took effect on March 24, 2023. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/shouken/20230324/20230324.html
March 24, 2023	Publication of the finalized amendments to the "Guidelines for Administrative Processes" regarding crypto-asset (virtual currency) exchange service providers after public consultation <Summary> The FSA finalized the amendments to the "Guidelines for Administrative Processes" regarding crypto-asset (virtual currency) exchange service providers after public consultation. The finalized amendments mainly set forth the following in the Guidelines: - Clarification of interpretation regarding the applicability of various tokens including items and contents issued on the blockchain as crypto-assets - Supervisory/regulatory response to crypto-asset exchange service providers in light of the diversification of their business models, and - Supervisory/regulatory response to crypto-asset exchange service providers in cases where a major shareholder of a crypto-asset exchange service provider sells or transfers the crypto asset exchange business by transferring shares to another business entity, and so forth. The finalized amendments took effect on March 24, 2023. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/sonota/20230324-2/20230324-2.html

Press Releases

Banks

March 30, 2023	Overview of modifications to lending conditions by financial institutions <Summary> The FSA published an overview of modifications to lending conditions made by financial institutions for the period from March 10, 2020 to February 28, 2023. * The majority of the data reflects the data until February 28, 2023, whereas the data of cooperative financial institutions reflects the data until December 31, 2022. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/ordinary/coronavirus202001/kashitsuke/20200430.html
March 24, 2023	Updated : Preparation for permanent cessation of LIBOR
March 24, 2023	Summary of Results of the Fourth Survey on the Use of LIBOR
March 24, 2023	Approval of a business adaptation plan for The Hiroshima Bank, Ltd. <Summary> The FSA approved a business adaptation plan for The Hiroshima Bank, Ltd., pursuant to the "Industrial Competitiveness Enhancement Act." The implementation period of the adaptation plan will be from March 2023 to March 2025. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/ginkou/20230324-2/20230324-2.html

Securities

March 24, 2023	Points that need to be addressed in a securities report (FY 2023 and thereafter) and securities report review from FY 2023 onwards <Summary> The FSA published points that need to be addressed in a securities report from FY 2023 onwards as follows: 1) Points related to the newly applied disclosure regulations 2) Points related to the results of the securities report review of the prior year Also, the FSA is to conduct securities report review for the reports submitted in FY 2023 and thereafter. The main three pillars of the review are: ・ the review on the application of the newly applied regulations; ・ the review on the implementation of key priority themes; and ・ the review by utilizing information from disclosure, media, and retail investors. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/sonota/20230324-3/20230324-3.html

March 24, 2023

Points that need to be addressed in a securities report (FY 2023 and thereafter) and securities report review from FY 2023 onwards
<Summary>
The FSA published points that need to be addressed in a securities report from FY 2023 onwards as follows:
1) Points related to the newly applied disclosure regulations
2) Points related to the results of the securities report review of the prior year
Also, the FSA is to conduct securities report review for the reports submitted in FY 2023 and thereafter.
The main three pillars of the review are:

・ the review on the application of the newly applied regulations;

・ the review on the implementation of key priority themes; and

・ the review by utilizing information from disclosure, media, and retail investors.

The original press release is available in Japanese at the following URL.
https://www.fsa.go.jp/news/r4/sonota/20230324-3/20230324-3.html open new window

Others

March 30, 2023	Publication of the final reports, etc. of commissioned research as "Enhancing Efficiency of Business Improvement Support Utilizing AI and ICT Technology" and "Enhancing Efficiency of Business Improvement Support by Business Sector" (provisional English titles) <Summary> The FSA commissioned KPMG AZSA LLC to conduct research on the potential utilization of AI technologies by financial institutions’ staff for prioritizing client companies for business improvement support according to specific challenges faced by these companies. To ensure that regional financial institutions' staff members can smoothly launch support for companies regardless of whether they have sufficient experience, the FSA also commissioned Japan Productivity Center to compile business support methods appropriate for respective industries, with a focus on industries where needs for business support are likely to arise, based on the knowledge of experts. The original press releases are available in Japanese at the following URLs. https://www.fsa.go.jp/common/about/research/20230330_1/20230330_1.html https://www.fsa.go.jp/common/about/research/20230330_2/20230330_2.html
March 29, 2023	Updated list of entities that are operating financial instruments businesses without proper registration (The Kanto Local Finance Bureau) <Summary> The FSA and the Kanto Local Finance Bureau issued warnings to entities that are operating financial instruments businesses without proper registration. (See the updated lists of Japan-based entities* and foreign-based entities). These lists also include the warned non-registered entities with untraceable/unidentified addresses. (Postal and/or web addresses on the list of the warned non-registered foreign-based entities reflect those shown on their respective webpages, not necessarily the addresses that could be traced and identified). The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/ordinary/chuui/mutouroku.html
March 29, 2023	Certification of a certified association of electronic payment service providers <Summary> The FSA has certified Japan Association for Financial APIs as a certified association of electronic payment service providers pursuant to the "Banking Act." The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/sonota/20230329/20230329.html
March 27, 2023	Warning against "too good to be true investment schemes, which are in reality fraudulent investment solicitations" targeting young adults through SNS (Social Network Services), dating applications (apps), or other services/apps <Summary> The FSA issued a warning against "too good to be true investment schemes, which are in reality fraudulent investment solicitations" targeting young adults through SNS (Social Network Services), dating applications (apps), or other services/apps. There has been an increasing number of cases of fraudulent investment solicitations related to financial products, including FX (Foreign Exchange), binary options, and crypto-assets (virtual currency) reported, in which people, especially young adults, are being solicited to invest in such financial products that are claimed to generate high returns with little or no risk by friends and/or the people they meet on SNS, dating apps, or other services/apps, and are having trouble withdrawing their funds, etc. as a result of trading with foreign business operators they have been introduced to therein. The FSA alerts the public, especially young adults, to use a skeptical eye, and make prudent judgment when they receive seemingly promising investment solicitations from a person/entity they have met through SNS, dating apps, or other services/apps, thereby checking whether the person/entity soliciting investment is registered as a crypto asset exchange service provider or financial instruments business operator, etc., by referring to the "List of Licensed (Registered) Financial Institutions." The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/ordinary/chuui/oishiitoushibanashi.html
March 24, 2023	Revision of the "Principles for the Organizational Management of Audit Firms (Audit Firm Governance Code)" (provisional English title) after public consultation <Summary> The FSA revised the "Principles for the Organizational Management of Audit Firms (Audit Firm Governance Code)" (provisional English title) [available only in Japanese] after public consultation. The revision provides amendments to the Audit Firm Governance Code, which will be made mandatory for audit firms auditing listed companies, etc., pursuant to the Cabinet Order to be developed in conjunction with the amendments to the "Certified Public Accountants Act" enforced in May 2022, so that the content of the Code will be suitable for acceptance by small- and medium-sized audit firms, thereby requiring effective discipline in accordance with their scale and other relevant factors. The revision took effect on March 24, 2023. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/sonota/20230324/20230324.html
March 24, 2023	Publication of the updated FY 2022 edition of the reference casebook of good practices on the disclosure of narrative information, mainly in terms of corporate sustainability, etc. <Summary> Following the publication of the FY 2022 edition of the reference casebook* in January 2023, the FSA published the updated FY 2022 edition by adding good practices on the following section items: - the overview of corporate governance, - the status of audits, - the remuneration, etc. of officers, and - the status of shareholdings. *The FSA has been publishing a series of reference casebooks of good practices on the disclosure of narrative information to encourage the disclosure of enhanced corporate narrative information that contributes to constructive dialogue between investors and corporations. The original press release is available in Japanese at the following URL. https://www.fsa.go.jp/news/r4/singi/20230324/20230324.html
March 24, 2023	Updated list of issuers of gift certificates in repayment procedures based on the ’Payment Services Act’

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