The SESC's Efforts

As the “Guardian of the Market” independent from the supervisory functions of the FSA, the SESC is playing the primary role in maintaining fair, equitable, transparent, and sound markets through exerting its authority of daily market surveillance, inspection of financial instruments business operators, investigation of market misconduct, disclosure statements inspection and criminal investigation. The specific activities of the SESC are as follows.

Market Surveillance

The SESC receives a wide range of information from the public and other market participants, and promptly forwards it to the responsible division within the SESC (or to the relevant division within the FSA).

The SESC has also made efforts to collect and analyze information that covers both primary and secondary markets.

The SESC extracts the stocks based on its criteria of the daily oversight of market trends and various information, and then examines transactions with suspected market manipulation, insider trading or fraudulent means, which impair market fairness.

Inspections of Financial Instruments Businesses

The SESC conducts inspections of financial instruments business operators, financial institutions, credit rating agencies and self-regulatory organizations.

As a result of an inspection, the SESC urges the financial instruments business operator that has been found to have problems to make improvements, giving it the inspection completion notice. If serious legal violations are found, the SESC recommends the prime minister and the FSA commissioner to take administrative disciplinary action against the firm.

Petitions for Court Injunctions

The SESC takes strict actions against the sale of funds by firms that are not registered as a financial instruments business operator by using its various measures, including filing petitions for court injunction and publicizing the names of such firms.

Investigation of Market Misconduct

The SESC conducts investigations on market misconduct such as possible violation of the spreading of rumors regarding stock markets, fraudulent means, market manipulation and insider trading.

In cases where violations are revealed, the SESC makes a recommendation to the prime minister and the commissioner of the FSA for the issuance of an order to pay administrative monetary penalties.

Disclosure Statements Inspection

The SESC requests submitters of disclosure statements to produce relevant reports and conducts an on-site inspection when it deems necessary and appropriate for the public interest and the protection of investors.

As a result of such inspections, when material misstatements are found in the disclosure statements, the SESC makes a recommendation to the prime minister and the FSA commissioner to issue an order to impose administrative monetary penalties on a submitter.

Investigation of Criminal Cases

Investigators under the SESC constantly monitor the trades in the markets and may utilize their power to investigate cases with the non-compulsory and the compulsory process, especially for finding offences such as misleading financial statements, market manipulation and insider trading.

The investigators can perform these actions to find proof of violations, and when convinced there are offences, the SESC must file charges against the suspects with a public prosecutor.

Policy Proposals

To ensure market integrity and protect investors, where necessary, the SESC can submit policy proposals to the prime minister, the commissioner of the FSA or the Minister of Finance, based on the results of the market surveillance, inspections or investigations of criminal offences.

Dialogues, Lectures and Contributions

As part of its delivery of information for enhanced market integrity, the SESC holds dialogues and lectures for market participants and contributes articles to kinds of media.

The SESC also holds seminars for undergraduate and postgraduate students. Through its website and e-mail magazine, the SESC is also working to provide information on the status of its activities and its messages to the market on a timely basis.

Cooperation with Overseas Regulators

The SESC uses Multilateral Memorandums of Understanding (MMOU) of International Organization of Securities Commissions (IOSCO) and bilateral Memorandums of Understanding (MOU) and obtains necessary information through overseas regulators in order to investigate market misconduct using cross-border transactions.

With respect to the inspection of foreign-owned financial institutions and Japanese financial institutions with overseas offices, the SESC shares information with overseas regulators. Moreover, the SESC participates in supervisory colleges which have been established for large and globally active financial institutions. The SESC is working on enhancing cooperation with overseas regulators.

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