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3. Registration Screening Procedure and Registration Requirements

(1) Overview of registration screening procedure and registration application documents

1) Flow of registration screening procedure

The outline of the procedure for screening of registration of a Financial Instruments Business is generally as described below.
Please note that, to smoothly complete the procedure from prior consultation to registration, the registration applicant should determine in an early stage (i) the specific business description and methods, (ii) personnel structure, and (iii) internal control system


(See 2) 
  below)
 (See 3) below)
(See 4) below)
(See 5) below)

2) Contact with Financial Services Agency/Local Finance Bureau or Local Finance Office

< Consultation before commencement of registration screening procedure >
 If you wish to have a consultation concerning legal interpretations, business models or inquiries about this Guidebook prior to commencement of registration screening procedure for Financial Instruments Business, contact the Financial Services Agency’s Financial Market Entry Consultation Desk. The FSA’s Financial Market Entry Consultation Desk is a one-stop consultation service for financial business operators considering establishing business base in Japan. It provides comprehensive consultations regarding procedures under financial laws and regulations pertaining to establishment of business base in Japan.
<Reference URL>
Financial Market Entry Consultation Desk (Financial Services Agency)
 
Financial Services Agency Financial Market Entry Consultation Desk
(within the Strategy Development Division)
100-8967 3-2-1 Kasumigaseki, Chiyoda-ku, Tokyo
Central Common Government Building No. 7
E-mail: marketentry@fsa.go.jp
Phone: +81-3-3506-7109
Securities Business Division, Supervision Bureau 03-3506-6000 (Representative)
Attn. staff in charge of investment management business/investment advisory business/Type II Business, etc.

 The Tokyo Metropolitan Government (Business Development Center Tokyo) provides free comprehensive consulting and support such as for completing administrative procedures, including supporting the establishment of company and introducing appropriate financial experts in the joint consultation service with the FSA for foreign financial companies considering the establishment of business in Tokyo as a "Financial One-Stop Support Service."
<Reference URL>
Financial One-Stop Support Service (Tokyo Metropolitan Government)

< Contact with Local Finance Bureau/Local Finance Office >
 The local finance bureau or finance office with jurisdiction over the location of the head office of the registration applicant is in charge of registration procedures, including receiving registration application forms. If you wish to be registered as Financial Instruments Business Operator, contact the department in charge of the relevant local finance bureau/local finance office (if you are a foreign business operator that does not have an office in Japan, contact Kanto Local Finance Bureau/Tokyo Local Finance Office) before preparing a “Summary of Registration Applicant.”
 For specific contact points of each local finance bureau/local finance office, please refer to (Reference 2) “Contacts at Local Finance Bureaus/Local Finance Offices”.

 

3) Prior consultations

  • The purpose of a prior consultation is to confirm the registration applicants’ planned business scheme including its organizational structures, and examine in advance their compliance with laws/regulations and Guidelines for Supervision, as well as the information entered in documents to be submitted.
  • In a prior consultation, in general, the registration applicant explains its business schemes including organizational structures, and, as necessary, more specific details are confirmed in interviews and by other methods. In interviews, the registration applicant may use reference documents (e.g. company overview, business scheme diagram and organization chart) for explanation. To confirm the matters required under laws and regulations or the Guidelines for Supervision, the registration applicant should also prepare a “Summary of Registration Applicant ” or other document, based on which details will be confirmed.
  • Registration applicants for registration of Financial Instruments Business are asked to prepare a “Summary of Registration Applicant ” during the period of prior consultation, with the aim of facilitating smooth dialogue in confirming legal requirements and viewpoints shown in the Guidelines for Supervision. The “Summary of Registration Applicant ” should be prepared upon consultation with the local finance bureau/local finance office. So if you are to apply for registration, contact the relevant office before preparing a summary.
  • In prior consultation, matters listed below, for example, will be confirmed, though they may differ depending on the type of registration and registration applicant’s business schemes.

- Outline of the registration applicant (e.g. amount of capital, number of officers, major shareholders, and main bank)

- Background and purpose of the application for registration, the management plan and revenue and expenditure plan

- Business description and methods (e.g. business schemes, kinds of financial instruments to be handled and investment period, customer attributes, method of soliciting and explaining customers)

- Operating structure of the business (e.g. sufficient personnel structure to properly perform the business, status of preparation of internal rules)

- Other measures for various obligations and points of attention specified in laws and regulations and the Guidelines for Supervision (e.g. control environment for business execution and customer solicitation/explanation, measures to prevent internal collusion and duty of loyalty)
 

  • After confirmation of the necessary information, the registration applicant prepares drafts of application documents (including attachments) based on which the matters required to be specified and contents of attachments will be confirmed.
  • The average period for prior consultation is three to four months, though it may largely differ depending on the scale or complexity of business schemes and various other circumstances. Please note that, if the business scheme changes, additional time for reconfirmation will be required.

 

4) Registration application (submission of application forms)

  • Upon completion of the confirmation of required matters in prior consultation, the registration applicant prepares and submits the application documents. Along with the application, payment of 150,000 yen as registration and license tax is required.  Please note that the tax should be paid to the tax office with jurisdiction over the location of each local finance bureau. (Contact the relevant finance bureau to find out which tax office you should pay.)
 
  • The registration application form should be submitted along with various attachment documents. Major attachments are as follows:

< Major attachments >
Documents to be attached Juridical person
Individual
(Type II Financial Instruments Business, Investment Advisory and Agency Business Only)
Remarks Related articles
Affidavit of the registration applicant   Article 29-2(2)(i) of the Act
Document describing the business and business methods For matters to be specified, see Article 8 of the FIB Cabinet Office Ordinance. Refer also to VI-3-1-1 (2) of the Guidelines for Supervision for Investment Management Business and VI-3-1-2 (4) of the Guidelines for Supervision for Investment Management Business for Qualified Investors. Article 29-2(2)(ii) of the Act, Article 8 of FIB Cabinet Office Ordinance
Documents describing the business execution systems such as personnel structure and organization structure relating to the business For matters to be specified, refer to VI-3-1-1 (3) of the Guidelines for Supervision for Investment Management Business and VI-3-1-2 (5) of the Guidelines for Supervision for Investment Management Business for Qualified Investors. Article 29-2(2)(ii) of the Act, Article 9(i) of FIB Cabinet Office Ordinance
Resumes of officers and important employees If an officer of the registration applicant is a juridical person, the background of such juridical person officer. Article 29-2(2)(ii) of the Act, Article 9(ii)(a) of FIB Cabinet Office Ordinance
Resumes of the registration applicant and important employees   Article 29-2(2)(ii) of the Act, Article 9(iii)(a) of the FIB Cabinet Office Ordinance
Extracts of the certificates of residence of officers and important employees Or equivalent document (affidavit or similar document), if the individual is a foreigner, or does not reside in Japan.
If the officer of the registration applicant is a juridical person, certificate of registered matters or any equivalent document (affidavit or similar document)
Article 29-2(2)(ii) of the Act, Article 9(ii)(b) of FIB Cabinet Office Ordinance
Extracts of certificates of residence of the registration applicant and important employees Or equivalent document (affidavit or similar document), if the individual is a foreigner, or does not reside in Japan. Article 29-2(2)(ii) of the Act, Article 9(iii)(b) of FIB Cabinet Office Ordinance
Identification of officers and important employees To be issued by the municipality of their registered domicile.
Or equivalent document (affidavit or similar document) in the case of foreigners.
Article 29-2(2)(ii) of the Act, Article 9(ii)(d) of FIB Cabinet Office Ordinance
Identification of the registration applicant and important employees To be issued by the municipality of their registered domicile.
Or equivalent document (affidavit or similar document) in the case of foreigners.
Article 29-2(2)(ii) of the Act, Article 9(iii)(d) of FIB Cabinet Office Ordinance
Certificates of the Legal Affairs Bureau of officers and important employees (official title: Certificates of Not Being Registered) Or equivalent document (affidavit or similar document) in the case of foreigners. Article 29-2(2)(ii) of the Act, Article 9(ii)(d) of FIB Cabinet Office Ordinance
Certificates of the Legal Affairs Bureau of the registration applicant and important employees (official title: Certificates of Not Being Registered) Or equivalent document (affidavit or similar document) in the case of foreigners. Article 29-2(2)(ii) of the Act, Article 9(iii)(d) of FIB Cabinet Office Ordinance
Affidavits of officers and important employees   Article 29-2(2)(ii) of the Act, Article 9(ii)(e) of FIB Cabinet Office Ordinance
Affidavits of important employees   Article 29-2(2)(ii) of the Act, Article 9(iii)(e) of FIB Cabinet Office Ordinance
Document describing the status of persons with specified relationships (parent company, etc., subsidiaries, etc., and holding companies) Including associated companies (Article 177(6) of  FIB Cabinet Office Ordinance ) in the case of Type I Financial Instruments Business. Article 29-2(2)(ii) of the Act, Article 9(iv) of FIB Cabinet Office Ordinance
Document evidencing that the registration applicant does not fall under the criteria provided in Article 13 (iv) of FIB Cabinet Office Ordinance
(Type II Financial Instruments Business only)

(Type II Financial Instruments Business only)
Required to be submitted only in the case of conducting a Business of Transaction, etc. of Beneficial Interest in Real Property Trust . See section 3 (2) 2) (v) (a). Article 29-2(2)(ii) of the Act, Article 9(vi) of FIB Cabinet Office Ordinance
Document describing the ability to carry out  the Specified Investment Management Business Related to Real Property
(Investment Management Business only)
Required to be submitted only in the case of conducting a Specified Investment Management Business Related to Real Property. See section 3 (2) 2) (v) (b). Article 29-2(2)(ii) of the Act, Article 9(vii) of FIB Cabinet Office Ordinance
Articles of incorporation   Article 29-2(2)(iii) of the Act
Certificate of registered matters Or equivalent documents (which certify the location of the head office and places of business in Japan, and its officers) if the registration applicant is a foreign juridical person who is to register only for Investment Advisory and Agency Business and will not establish an office in Japan. Article 29-2(2)(iii) of the Act
Final balance sheet (including related footnotes) and income statement (including related footnotes)   Article 29-2(2)(iii) of the Act, Article 10(1)(i) of FIB Cabinet Office Ordinance
Internal rules concerning financial instruments business
(Except Investment Advisory and Agency Business)
  Article 29-2(2)(iii) of the Act, Article 10(1)(ii) of FIB Cabinet Office Ordinance
Document describing the calculated net assets
(Type I Financial Instruments Business and Investment Management Business only)
  Article 29-2(2)(iii) of the Act, Article 10(1)(iii)(a) of FIB Cabinet Office Ordinance
Document describing the Major Shareholders’ trade name or individual name,, and the locations of their head offices or principal offices (in cases where a Major Shareholder is an individual, the domicile or residence), as well as the number of the Subject Voting Rights held by the Major Shareholders
(Type I Financial Instruments Business and Investment Management Business only)
If the registration applicant is a foreign juridical person, including a document certifying that confirmation by the relevant foreign regulatory authority has been made regard to the persons equivalent to Major Shareholders, or any equivalent document Article 29-2(2)(iii) of the Act, Article 10(1)(iii)(b) and (c) of FIB Cabinet Office Ordinance
Document evidencing that the registration applicant is a person conducting the same type of business as Type I Financial Instruments Business in a foreign country in accordance with the laws and regulations of the said country (including a case where the person holding all of its shares or equity in investment engages in the same type of business as Type I Financial Instruments Business)
(Only in the case of Type I Financial Instruments Business and when the registration applicant is a foreign juridical person)
  Article 29-2(2)(iii) of the Act, Article 10(1)(iv)(a) of FIB Cabinet Office Ordinance
Document describing the calculated capital adequacy ratio
(Type I Financial Instruments Business only)
  Article 29-2(2)(iii) of the Act, Article 10(1)(iv)(b) of FIB Cabinet Office Ordinance
Seal registration certificate For the seal affixed to the application form (in the case of a juridical person, the seal of its representative)
Not required if signature is affixed to the application form.
 
Receipt for payment of registration and license tax    
 
  • Basically, the documents to be submitted should be prepared in Japanese. For any document that cannot be prepared in Japanese due to special circumstances, the Japanese translation thereof should be attached. If such documents are articles of incorporation or minutes of a shareholders’ meeting or a board of officers’ meeting that are prepared in English, a translation of the outline thereof is to be sufficient.
  • Samples of the forms of registration application for Type II Financial Instruments Business and Investment Advisory and Agency Business, as well as the examples of a part of the attachments (Japanese only) are provided at the URLs below:
Type II Financial Instruments Business
Investment Advisory and Agency Business

 


5) Joining a self-regulatory organization 

  • Types of self-regulatory organizations (Financial Instruments Firms Associations)

 Self-regulatory organizations related to Financial Instruments Businesses in Japan (Financial Instruments Firms Associations) (hereinafter, “Association(s)”) and a rough scope of businesses of each Association are as provided below. (For the specific scope of applicable businesses and membership qualifications, please refer to the website of each Association or contact the Association directly.)

Japan Securities Dealers Association Type I Financial Instruments Business
Japan Investment Advisers Association Investment Management Business (discretionary investment business and fund management business),
Investment Advisory and Agency Business
The Investment Trusts Association, Japan Investment Management Business (investment corporation asset management business and investment trust management business)
Type II Financial Instruments Firms Association Type II Financial Instruments Business
The Financial Futures Association of Japan Currency-related derivatives transactions and other certain derivative transactions

 

  • Membership of an Association

 Membership of an Association is not mandatory.  However, if a Financial Instruments Business Operator does not join one, except in the case of conducting only Investment Advisory and Agency Business, it is necessary for it to have in place internal rules that have contents equivalent to the articles of incorporation or other rules of the Association and to establish an internal system for compliance with those internal rules (Article 29-4(1)(iv)(d) of the Act). And therefore, explanation of the status of establishment of such internal rules and internal system and submission of supporting documents will be required in the registration screening procedure.  At present, Financial Instruments Business Operators conducting Type I Financial Instruments Business or Investment Management Business basically have membership to their applicable Associations.

  • ADR measures

 Financial Instruments Business Operators are required to implement designated complaint processing and dispute resolution measures (ADR measures) before starting business operations (Article 37-7 of the Act). At present, to conduct Type I Financial Instruments Business, ADR measures using the Financial Instruments Mediation Assistance Center (FINMAC), a Designated Dispute Resolution Organization, should be implemented. FINMAC are also available for other types of Financial Instruments Business Operators by joining their applicable Association. In addition, Type II Financial Instruments Business Operators may use FINMAC as their ADR measures without having a membership to the Type II Financial Instruments Firms Association by making an individual user registration with FINMAC. Although FINMAC is not available for Investment Management Business Operators and Investment Advisory and Agency Business Operators that do not have membership with an Association, they can take other complaint processing and dispute resolution measures (see Article 37-7 of the Act, Article 115-2 of FIB Cabinet Office Ordinance). So check carefully in advance.

  • Membership procedures

 Financial Instruments Business Operators are eligible for membership with an Association upon completion of the registration for the Financial Instruments Business Operator. Since the membership procedure takes a certain period of time, it is advisable to discuss with the relevant Association about the membership at the time of the prior consultation with the local financial bureau or local financial office. For details of the membership procedures of each Association, please see the website of each Association or directly contact the appropriate Association.


 

(2) Requirements for registration by type of Financial Instruments Business

 

1) Overview of registration requirements specified in the FIEA and the Guidelines for Supervision

< Registration requirements specified in the FIEA >

  Type I
Financial Instruments Business
Type II
Financial Instruments Business
Investment Management Business Investment Management Business for Qualified Investors Investment Advisory and Agency Business Related articles
The registration applicant or its officers and important employees have not received any specified administrative penalty, punishment or other sanction in the past. Article 29-4(1)(i)(a) through (c) of the Act
(ii) and (iii) of the same paragraph
Other businesses are not contrary to the public interest. Article 29-4(1)(i)(d) of the Act
Having a sufficient personnel structure to perform Financial Instruments Business in an appropriate manner
*See “Requirements related to personnel structure and systems specified in the Guidelines for Supervision” below.
Article 29-4(1)(i)(e) of the Act
Having the necessary system in place for performing Financial Instruments Business in an appropriate manner
*See “Requirements related to personnel structure and systems specified in the Guidelines for Supervision” below.
Article 29-4(1)(i)(f) of the Act
Capital 50 million yen 10 million yen 50 million yen 10 million yen Article 29-4(1)(iv)(a) of the Act
Business office in Japan Article 29-4(1)(iv)(b) of the Act
(In the case of a foreign judicial person) representative in Japan Article 29-4(1)(iv)(c) of the Act
(If not joining an Association), preparation of internal rules that have contents equivalent to the articles of incorporation or other rules of the Association and establishment of an internal system in compliance therewith Article 29-4(1)(iv)(d) of the Act
Legal form as a stock company (limited to one that has a board of directors and either a company auditor/auditors, an audit or supervisory committee or a nominating committee, etc.) or a judicial person of the same kind as a company with a board of directors established in compliance with foreign laws and regulations
*In the case where a foreign juridical person seeks to engage in Type I Financial Instruments Business, it is also necessary to be a person that engages in the same kind of business as Type I Financial Instruments Business in a foreign country in compliance with the laws and regulations of said country (including a case where the person holding all of its shares or the equity in investment engages in the same kind of business as Type I Financial Instruments Business).

(A board of directors is not required)
Article 29-4(1)(v)(a) of the Act
Net assets 50 million yen 50 million yen 10 million yen Article 29-4(1)(v)(b) of the Act
No business that compromises investor protection due to difficulties in managing the risk of losses Article 29-4(1)(v)(c) of the Act
No non-qualified Major Shareholders Article 29-4(1)(v)(d) through (f) of the Act
Capital adequacy ratio 120% Article 29-4(1)(vi)(a) of the Act
Not using a trade name that another Type I Financial Instruments Business Operator is already using or a trade name that could give rise to the misconception that it is another Financial Instruments Business Operator Article 29-4(1)(vi)(b) of the Act
Deposit 10 million yen
(Limited to individuals)
5 million yen Article 31-2 of the Act
Rights holders consist exclusively of Qualified Investors. Article 29-5(1)(i) of the Act
The total amount of investment assets is 20 billion yen or less. Article 29-5(1)(ii)
 
<Reference URL>  

< Requirements related to personnel structure and systems specified in the Guideline for Supervision >

  Type I
Financial Instruments Business
Type II
Financial Instruments Business
Investment management business Investment management business for qualified investors Investment advisory/agency business
Top managers Top managers must be sufficiently qualified to conduct Financial Instruments Business in a fair and appropriate manner, in terms of their backgrounds and capabilities. Same Same Same Same
Managing directors Managing directors must understand the viewpoints regarding governance indicated in the FIEA and various other laws and regulations, and have sufficient knowledge and experience to conduct governance, in addition to sufficient knowledge and experience regarding compliance and risk management to conduct Financial Instruments Business in a fair and appropriate manner. Same Same Same Same
Staff The staff must include two or more permanent officers or employees with more than three years of experience regarding the relevant Type I Financial Instruments Business.
Persons in charge of asset management or investment advice. Persons with sufficient knowledge and experience regarding investment assets must be secured for the position responsible for making asset investment on behalf of rights holders. With regard to the position responsible for making asset investment on behalf of rights holders, whether at least one or two persons who fall under either of the following items have been secured as persons with sufficient knowledge and experience regarding investment assets.
A.  A person who has been engaged in the business of providing advice or managing  the relevant assets for no less than one year
B.  A person equivalent to A
Persons with sufficient knowledge and experience regarding the values of securities and financial instruments must be secured for the position of providing advice on investment decisions based on the analysis of the values of securities or financial instruments and other items.
Personnel structure of each division The Financial Instruments Business Operator must be staffed and organized so that managers in charge of internal control are appropriately allocated, and personnel necessary for conducting relevant business in an appropriate manner are allocated to individual divisions. (Regarding the conduct of underwriting business in particular, it is necessary to ensure a sufficient control environment and secure staff to conduct the business in a fair and appropriate manner.) The Financial Instruments Business Operator must be staffed and organized so that managers in charge of internal control are appropriately allocated, and personnel necessary for conducting relevant business in an appropriate manner are allocated to individual divisions.
 
Same as Type II Financial Instruments Business Same as Type II Financial Instruments Business The Financial Instruments Business Operator must be staffed and organized so that managers in charge of internal control and personnel necessary for conducting relevant business in an appropriate manner are appropriately allocated.
Staff in charge of compliance The compliance division (staff in charge of compliance) must be independent from the sales division and staffed with personnel who have necessary knowledge and experience.
 
Same as Type I Financial Instruments Business The compliance division (staff in charge of compliance) must be independent from the asset investment division and staffed with personnel with sufficient knowledge and experience. With regard to establishment of an independent compliance division (staff in charge of compliance), whether at least one or two persons who fall under either of the following items have been secured as persons in charge of compliance (excluding cases where compliance work is outsourced).
A.  A person who has been engaged in business related to guidance for ensuring compliance with laws and regulations with regard to the Financial Instruments Businesses for no less than one year
B.  A person equivalent to A
Persons with sufficient knowledge and experience to be in charge of compliance must be secured.
Appointment of staff capable of setting up the internal structure for the relevant business Staff capable of conducting the following processes should be secured, with regard to the relevant business:
a. Compilation and 
    management of
    account books,
    reports and other
    documents
b. Disclosure
c. Segregated
    management of
    customer assets
d. Risk management
e. Computer system
    management
f. Trading management,
   customer management
g. advertisement
    screening
h. Customer information
    management
i.  Processing of
    complaints and
    disputes
j.  Internal audits
Staff capable of conducting the following processes should be secured, with regard to the relevant business:
a. Compilation and
    management of
    account books,
    reports and other
    documents
b. Disclosure
c. Risk management
d. Computer system
    management
e. Trading management, 
    customer management
f. Advertisement
   screening
g. Customer information
    management
h. Processing of
    complaints and
    disputes
i.  Internal audits
Staff capable of conducting the following processes should be secured, with regard to the relevant business:
a. Compilation and
    management of
    account books,
    reports and other
    documents
b. Disclosure
c. Segregated
    management of
    investment assets
d. Risk management
e. Computer system
    management
f. Trading management
   and customer
   management by relevant
   management divisions
g. Management of
    sensitive corporate
    information
h. Advertisement
    screening
i.  Customer information
    management
j.  Processing of complaints
    and disputes
k. Execution of asset 
    management business
    by the investment
    division
l.  Internal audits
m. Accounting and
    screening related to
    investment trust assets
    in the case of
    management of
    investment trust assets
Whether at least one or two personnel needed for the same processes as Investment Management Business (excluding those not required for the relevant business to be conducted in an appropriate manner, considering the investment policy, the amount of assets managed and other circumstances of the Investment Management Business for Qualified Investors) have been secured.
(In cases where arrangements and procedures for enabling proper compliance with laws and regulations are deemed to have been established, the same personnel as the staff in charge of compliance may be appointed.)
 
Staff capable of conducting the following processes should be secured, with regard to the relevant business:
a. Compilation and
    management of
    account books,
    reports and other
    documents.
b. Disclosure
c. Risk management
d. Computer system
    management
e. Customer
    management
f. Advertisement
   screening
g. Customer information
    management
h. Processing of
    complaints and
    disputes
i.  Internal audits

2) Personnel requirements

The personnel and internal structure for each business operator will be determined on a case-by-case basis depending on the business model of each registration applicant. It is therefore impossible to set uniform standards, but please note the points below.

(i) Outsourcing of compliance operations

  As stated in the above (“Requirements related to personnel structure and systems specified in the Guidelines for Supervision,” the row of “Staff in charge of compliance”), a Financial Instruments Business Operator is required to have a compliance division/staff in charge, in principle. For Investment Management Business for Qualified Investors, however, points to be noted in outsourcing compliance operations are provided in the Guidelines for Supervision as follows (Guidelines for Supervision VI-2-7-1(2)). The following points are provided as general supervisory viewpoints, and additional examination may be required in view of the business operations of the Investment Management Business for Qualified Investors.

(a) Whether the business operator has clearly specified a policy and procedures for selecting the contractors.

(b) In cases where compliance work is entrusted to a group corporation in Japan or overseas, whether the business operator can evaluate that a system has been developed for compliance of an Investment Management Business Operator for Qualified Investors, considering the degree to which the said corporation possesses compliance functions and its execution of the outsourced business.

(c) In cases where compliance work is entrusted to an attorney, a legal professional corporation or a person equivalent thereto (collectively, “attorney, etc.”), whether the business operator has considered the following points,

A. Whether the attorney, etc. entrusted with the work is a person recognized as being capable of properly carrying out the necessary guidance, etc. for complying with laws and regulations regarding Financial Instruments Business.

B. Whether the following items have been stipulated in the outsourcing contract concluded with the said attorney, etc.:

a. Identification and examination of actual business conditions from a perspective of legal compliance

b. Preparation and management of a compliance manual, and periodic implementation of compliance training

c. Periodic preparation of a report on compliance, as well as the storing and provision of reports to the trustor

d. System of communication between the trustor and contractor (including responses in the event of a dispute)

e. Other matters in addition to those listed in a. through d. above, which are needed for compliance work pertaining to the Investment Management Business for Qualified Investors


(ii) Independence of staff in charge of compliance

  In Type I Financial Instruments Business, Type II Financial Instruments Business, and Investment Management Business, division/staff in charge of compliance must be independent from sales division and asset management division, and staff members in charge of compliance are not allowed to concurrently serve for such divisions. See Guideline for Supervision IV-4-1(2)1) E, V-3-1(1)1)D, VI-3-1-1(1)1)D.

(iii) Separation of division for making investment decisions from division for taking orders
   In the case of a general Investment Management Business, the division for making investment decisions and the division for taking orders should be separated (in cases where organizational separation is difficult, at least different persons should be responsible for these roles). See Guidelines for Supervision VI-2-2-1 (2) 1) and 2), VI-2-3-1 (2) 1) and 2), VI-2-5-1 (2) 1) and 2). In the case of an Investment Management Business for Qualified Investors, on the other hand, it is allowed not to separate the division (or personnel) in charge of making investment decisions from the division (or personnel) in charge of taking orders if measures have been implemented for preventing prohibited acts applicable to Investment Management Business, in view of the investment policy, the amount of assets under management and other circumstances of the Investment Management Business for Qualified Investors. See Guidelines for Supervision VI-2-7-1(1).

(iv) Actual examples
   As stated above, the personnel structure necessary for each business operator should be determined on a case-by-case basis in view of the actual conditions of the business model. However, some examples of personnel structure of business operators that have been actually registered are shown below for your reference. Please note that these are provided just for reference, and each Financial Instruments Business Operator should carefully examine and determine its personnel structure necessary to properly conduct its business operations, in view of the type of business, kind of financial instruments it handles, scale of business or other features of planned business schemes.

(a) Investment Management Business (discretionary investment business)
● Business description
Engaged in only management of funds for foreign institutional investors (discretionary investment business) and not conducting solicitation of investors by itself. Customers are expected to be one to three companies.

- Six persons: (1) director in charge of asset management (two persons), (2) person in charge of asset management, (3) officer and staff in charge of compliance and various administrative operations (excluding internal audit operations), (4) corporate auditor in charge of internal audits, and (5) part-time officer
 

(b) Investment Management Business for Qualified Investors (discretionary investment business)
● Business description
Engaged in only management of funds for foreign institutional investors (discretionary investment business) and not conducting solicitation of investors by itself.

- Three persons: (1) director in charge of asset management, (2) director in charge of various administrative operations (excluding internal audit operations), (3) corporate auditor in charge of internal audits. Compliance services are outsourced to a law firm.
 

(c) Investment Management Business (investment trust management business)
● Business description
Establishing and managing publicly offered investment trusts (for individual investors) and privately offered investment trusts (for institutional investors) (investment trust management business).  Sells investment trusts via distributors and will not solicit investors by itself.

- 11 persons: (1) director in charge of asset management, (2) staff in charge of asset management, (3) staff in charge of sales (three persons), (4) staff in charge of compliance, (5) staff in charge of various administrative operations (two persons) and (6) part-time officers (three persons)
 

(d) Type II Financial Instruments Business
         ● Business description
Sales of foreign-based funds (Article 2(2)(vi) of the Act) targeting only domestic Qualified Institutional Investors (such as banks, insurance companies, investment management business operators and trust banks) (handling of private placements)

- Six persons: (1) director in charge of sales (two persons), (2) corporate auditor in charge of internal audit operations, (3) staff in charge of compliance, (4) staff in charge of various administrative operations (excluding internal audit operations) (two persons)

 
(e) Investment Advisory and Agency Business
● Business description
(1) Investment advisory services for foreign group company, and (2) intermediary services for discretionary investment contracts between the foreign group company and domestic institutional investors

- Three persons: (1) director in charge of compliance and sales, (2) staff in charge of investment advisory operations, (3) staff in charge of customer management operations. Outsourcing various compliance operations and other administrative operations to foreign group company, while conducting compliance operations in cooperation with external compliance consultants (legal advisor).
 

(v) Additional requirements in the case of conducting real estate-related business
  In the case of handling real estate-related financial instruments, it is necessary to allocate personnel with professional knowledge on the real estate business and establish necessary systems. When conducting any of the businesses below, for example, additional requirements for personnel structure described below should be satisfied.
 
(a) Business of Transaction, etc. of Beneficial Interest in Real Property Trust (Type II Financial Instruments Business)
  To conduct business related to purchase and sale or any other transaction of trust beneficiary interests relating to real estate as trust asset or partnership-type funds investing said trust beneficiary interests (Business of Transaction, etc. of Beneficial Interest in Real Property Trust), the requirements below should be satisfied (Article 13(iv) of the FIB Cabinet Office Ordinance).

● Officer(s) or employee(s) having expert knowledge of and experience in transactions related to real estate are assigned to each of the following divisions:

(i)  division in charge of supervising the Business of Transaction, etc. of Beneficial Interest in Real Property Trust

(ii) division in charge of internal audits

(iii) division in charge of the affairs related to instructions for ensuring compliance with laws and regulations

● Officer(s) or employee(s) conducting the Business of Transaction, etc. of Beneficial Interest in Real Property Trust have sufficient expert knowledge of and experience in transactions of real estate which enable them to provide customers with necessary explanations in an appropriate manner and to the appropriate extent.
 

(b) Specified Investment Management Business Related to Real Property (Investment Management Business [discretionary investment business or fund management business])

  To conduct a discretionary investment business or fund management business that manages trust beneficiary interests relating to real estate as trust assets or partnership-type funds  investing in the said trust beneficiary interests (Specified Investment Management Business Related to Real Property), the business operator must be registered as a comprehensive real estate investment advisory business operator as defined in Article 3(1) of Rules on Registration of Real Estate Investment Advisory Business (public notice of Ministry of Construction No. 1828 of 2000) or must be found to have sufficient knowledge and experience to perform the Specified Investment Management Business Related to Real Property in a fair and appropriate manner at the same level as those who have the said registration in light of its personnel structure and have sufficient social credibility (Article 13(v) of FIB Cabinet Office Ordinance, Determining Requirements for Conducting a Specified Investment Management Business Related to Real Property [public notice of Financial Services Agency No. 54 of 2007]).

(c) Management of a registered investment corporation or investment trust investing in real estate (Investment Management Business [investment corporation asset management business or investment trust management business])

  To conduct management of a registered investment corporation or investment trust (investment trust fund with instruction by trustor) investing in real estate, the business operator is required to have the license of a Real Estate Broker under Article 3(1) of Real Estate Brokerage Act (Article 3(i) and Article 199(i) of the Investment Trust Act). In addition, in a case where the said registered investment corporation or investment trust is aimed at investing over 50% of the assets under management in real estate, the business operator should also be authorized by the Minister of Land, Infrastructure, Transport and Tourism for Entrustment-based Agency Services for Transactions as defined in Article 52-2 of the Real Estate Brokerage Act (Article 3(ii), Article 199(ii) of the Investment Trust Act).


 

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