Financial Instruments and Exchange Act

With regard to the application of the provisions of Article 29-2, paragraph (1), item (v) and Article 29-4, paragraph (1), item (v), (a) (including as applied mutatis mutandis pursuant to Article 31, paragraph (5); hereinafter the same applies in this paragraph) to an investment management business that satisfies all of the following requirements (hereinafter referred to as "investment management business for qualified investors" in this Article) in cases where a person that seeks to obtain registration under Article 29 or registration of change under Article 31, paragraph (4) seeks to engage in an investment management business for qualified investors, the term "what category of businesses the person seeks to conduct" in Article 29-2, paragraph (1), item (v) is deemed to be replaced with "what category of businesses the person seeks to conduct (in the case of an investment management business for qualified investors prescribed in Article 29-5, paragraph (1), including a statement to that effect)"; and the terms "a board of directors, company auditors", and "a company with a board of directors" in Article 29-4, paragraph (1), item (v), (a) is deemed to be replaced with "company auditors", and "a company with company auditors, a company with supervisory committee, or a company with nominating committee, etc." respectively:

right holders (meaning right holders prescribed in Article 42, paragraph (1), including investors (meaning investors prescribed in Article 2, paragraph (16) of the Act on Investment Trust and Investment Corporations) of registered investment corporations (meaning registered investment corporations prescribed in Article 2, paragraph (13) of that Act) that are counterparties to the contracts referred to in Article 2, paragraph (8), item (xii), (a), or any other person specified by Cabinet Order as being equivalent to them) for all investment properties (meaning investment properties prescribed in Article 35, paragraph (1), item (xv); the same applies in the following item) consist exclusively of qualified investors; and

the total amount of all investment properties does not exceed the amount specified by Cabinet Order in consideration of the actual state of the investment management business, the impact exerted on Japan's capital market and other circumstances.

With regard to the application of the provisions of this Act and other laws and regulations to cases where a financial instruments business operator that obtained registration under Article 29 or registration of change under Article 31, paragraph (4) for engaging in an investment management business for qualified investors has been entrusted with full authority to invest money or other property invested or contributed from a person that holds rights indicated on the following securities under a contract referred to in Article 2, paragraph (8), item (xii), (b), business involving dealings in private placement of the relevant securities made with qualified investors by the relevant financial instruments business operator (limited to those specified by Cabinet Order as being not likely to involve the transfer of the relevant securities from the qualified institutional investor that acquired them to persons other than qualified investors, etc.) is deemed to be type-II financial instruments business:

securities set forth in Article 2, paragraph (1), item (x);

securities set forth in Article 2, paragraph (1), item (xi);

securities set forth in Article 2, paragraph (1), item (xiv) or securities set forth in item (xvii) of that paragraph (limited to those having the nature of the securities set forth in item (xiv) of that paragraph);

securities set forth in Article 2, paragraph (1), item (xxi) that indicate the rights specified by Cabinet Order as prescribed to in Article 2, paragraph (8), item (xiv) or (xv); or

rights to be indicated on securities set forth in the preceding items that are deemed to be securities under the provisions of Article 2, paragraph (2).

"qualified investor" referred to in paragraph (1), item (i) and the preceding paragraph means professional investor, or any other person specified by Cabinet Office Order as those equivalent to professional investor in light of the knowledge, experience and state of property or person specified by Cabinet Order as having a close relationship with a financial instruments business operator (including those that seek to obtain registration under Article 29).

With regard to the application of the provisions of paragraphs (1) and (2), the following persons is deemed not to be qualified investors prescribed in the preceding paragraph:

a special purpose company (meaning the special purpose company provided in Article 2, paragraph (3) of the Act on Securitization of Assets), if asset backed securities (meaning the asset backed securities provided in Article 2, paragraph (11) of that Act) issued by it are held by persons other than qualified investors (meaning qualified investors prescribed in the preceding paragraph; the same applies in the following item);

a person that engages, or seeks to engage in a securities investment business based on a contract or any other juristic acts (limited to rights based on the relevant contract or other juristic acts that fall under the rights referred to in Article 2, paragraph (2), item (v) or (vi)) related to the securities investment business to which the counterparty is a person other than a qualified investor by appropriating money or other property invested or contributed from the relevant counterparty (excluding cases in which the investment of property related to the relevant investment business is conducted by a financial instruments business operator, etc. prescribed in Article 34 (limited to those that engage in investment management business) or any other person specified by Cabinet Order); or

a person that is specified by Cabinet Office Order as a person equivalent to the persons listed in the preceding two items.

With regard to the application of the provisions of Article 66-2, paragraph (1), item (iv) to cases where a financial instruments business operator that obtained the registration under Article 29 or registration of change under Article 31, paragraph (4) for engaging in an investment management business for qualified investors engages in an investment management business for qualified investors, the phrase "investment management business" in that item is deemed to be replaced with "investment management business (excluding the investment management business for qualified investors defined in Article 29-5, paragraph (1))".

A financial instruments business operator must obtain the authorization of the Prime Minister when it intends to conduct, as a business, the acts set forth in Article 2, paragraph (8), item (x); provided, however, that this does not apply in the case where it conducts those acts only with respect to the following securities, and the sum of the trading volume of the securities pertaining to those acts is equal to or less than the standard specified by Cabinet Order as a standard recognized as one under which, even if it became difficult to conduct those acts stably, it is unlikely to affect a large number of persons.

securities set forth in Article 2, paragraph (1), item (ix) (excluding securities listed on a financial instruments exchange, over-the-counter traded securities, and other securities specified by Cabinet Order);

securities set forth in Article 2, paragraph (1), item (xiv) (excluding securities listed on a financial instruments exchange, over-the-counter traded securities, and the securities specified by Cabinet Order prescribed in the preceding item);

rights that are to be indicated on the securities set forth in the preceding two items and that are deemed to be securities pursuant to the provisions of Article 2, paragraph (2);

securities specified by Cabinet Order, other than those set forth in the preceding three items, as securities recognized as ones for which, even if it became difficult to conduct those acts stably, it is unlikely to affect a large number of persons.

Upon granting the authorization referred to in the preceding paragraph to a financial instruments business operator, the Prime Minister must note this in the relevant financial instruments business operator's registration.

The Prime Minister may attach conditions to the authorization referred to in paragraph (1) of the preceding Article.

The conditions referred to in the preceding paragraph must constitute the minimum level of conditions that are necessary in the public interest and for the protection of investors.

A financial instruments business operator seeking the authorization referred to in Article 30, paragraph (1) must submit a written application for authorization to the Prime Minister, in which it states the following particulars:

its trade name; and

the date of registration and its registration number.

A document stating how the person manages the risk of loss, how duties are divided, and the other things specified by Cabinet Office Order as constituting the business outline and business methods, and other documents specified by Cabinet Office Order must accompany the written application for authorization referred to in the preceding paragraph.

Before seeking to grant the authorization referred to in Article 30, paragraph (1), the Prime Minister must examine whether there is compliance with the following criteria:

an appropriate system and regulations are in place for managing the risk of loss;

the amount of stated capital exceeds the amount of money that is specified by Cabinet Order as necessary and appropriate in the public interest or for the protection of investors;

the amount of net assets exceeds the amount of money prescribed in the preceding item;

the provisions of Article 46-6, paragraph (2) are not being violated; and

the applicant's method for deciding the trading price, its methods of transfer and other settlement, and its Cabinet Office Order-specified business outline and business methods are necessary and appropriate in the public interest or for the protection of investors.

If a particular set forth in the items of Article 29-2, paragraph (1) (excluding items (v) through (vi), item (vii), (b), item (viii), and item (ix)) changes, the financial instruments business operator must notify the Prime Minister of this within two weeks from the day of the change.

Upon accepting a notification under the preceding paragraph, the Prime Minister must register the particulars given in the notification in the financial instruments business operator register.

If a financial instruments business operator seeks to change a part of the business outline or business method that it has stated in the documents set forth in Article 29-2, paragraph (2), item (ii) that relates to any of the acts prescribed in paragraph (1), item (viii) or (ix) of that Article and that is specified by Cabinet Office Order as particularly necessary in the public interest or for the protection of investors (hereinafter referred to as a "specified part of the business outline or business method"), it must notify the Prime Minister of this in advance, and if a part of the business outline or business method other than a specified part of the business outline or business method changes, the financial instruments business operator must notify the Prime Minister of this without delay, pursuant to the provisions of Cabinet Office Order.

If a financial instruments business operator seeks to change the particular set forth in Article 29-2, paragraph (1), items (v) through (vi), item (vii), (b), item (viii), or item (ix), it must have that change registered by the Prime Minister pursuant to the provisions of Cabinet Office Order.

The provisions of Article 29-3 and Article 29-4 apply mutatis mutandis to the registration of a change referred to in the preceding paragraph. In this case, in Article 29-3, paragraph (1), the phrase "the following particulars" is deemed to be replaced with "the particulars subject to the change"; in Article 29-4, paragraph (1), the phrase "the following items" is deemed to be replaced with "the following items (excluding item (i), (a) through (d), item (ii), and item (iii), (b))"; and any other necessary technical replacement of terms is specified by Cabinet Order.

Notwithstanding the provisions of paragraph (3), if a financial instruments business operator that has obtained the authorization referred to in Article 30, paragraph (1) seeks to change the way it manages the risk of loss, its method for deciding the trading price, its methods of transfer and other settlement, or the Cabinet Office Order specified business outline and business methods for which it has obtained that authorization, it must obtain the authorization of the Prime Minister.

Notwithstanding the provisions of paragraph (3), if a financial instruments business operator seeks to change, among the business outline or business method stated in the document set forth in Article 29-2, paragraph (2), item (ii), the part that relates to the acts set forth in Article 2, paragraph (8), item (x) (limited to those conducted pursuant to the proviso to Article 30, paragraph (1)) and that is specified by Cabinet Office Order as particularly necessary in the public interest or for the protection of investors, in consideration of the necessity of ensuring fairness in securities trading, the necessity of ensuring settlement, and other circumstances, it must notify the Prime Minister of this no later than 30 days before the day of the change, pursuant to Cabinet Office Order.