Financial Instruments and Exchange Act

The Prime Minister must refuse to effect a registration if the applicant for registration falls under any of the following items, or if the written application for registration or a document or electronic or magnetic record that is required to accompany it contains a false statement or record or omits a statement or record of a material fact:

a person that has had the registration referred to in Article 33-2 rescinded pursuant to the provisions of Article 52-2, paragraph (1), has had the registration referred to in Article 66 rescinded pursuant to the provisions of Article 66-20, paragraph (1), has had the registration referred to in Article 66-27 rescinded pursuant to Article 66-42, paragraph (1), has had the registration referred to in Article 66-50 rescinded pursuant to Article 66-63, paragraph (1), or has had the registration referred to in Article 66-71 rescinded pursuant to Article 66-85, paragraph (1), or that has had the registration referred to in Article 12 of the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto (limited to the registration related to the type of securities, etc. intermediary business operations) rescinded pursuant to the provisions of Article 38, paragraph (1) of that Act (excluding items (ii), (iii), and (v)), for whom five years have not passed since the date of that rescission; or a person that had a registration of the same kind (including permission or any other administrative disposition similar to the registration) obtained in a foreign state rescinded pursuant to the provisions of a law or regulation of that foreign state that is equivalent to this Act or the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, for whom five years have not passed since the date of the rescission;

a person that has been sentenced to a fine (including an equivalent sentence under a law or regulation of a foreign state) for violating the provisions of this Act; the Secured Bond Trust Act; the Act on Engagement in Trust Business by Financial Institutions; the Commodity Derivatives Transaction Act; the Act on Investment Trusts and Investment Corporations; the Real Estate Brokerage Act; the Act Regulating the Receipt of Contributions, the Receipt of Deposits, and Interest Rates; the Installment Sales Act; the Money Lending Business Act; the Act on Deposit Transactions; the Act on Regulation of Commodity Investment; the Act on Specified Joint Real Estate Ventures; the Act on the Securitization of Assets; the Act on Issuance, etc. of Bonds for Financial Corporations' Loan Business; the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto; the Trust Business Act; the Payment Services Act; the Act on the Promotion of Business Financing, etc.; or any other laws specified by Cabinet Order, or for violating the provisions of a law or regulation of a foreign state that is equivalent to any of these laws, and five years have not passed since the day on which the person finished serving the sentence or ceased to be subject to its enforcement;

a person falling under any of the following:

a person found not to have secured, for each registered financial institution business, officers or employees who have sufficient knowledge and experience necessary for its execution;

a person found likely to cause registered financial institution business to lose credibility, in light of the person's relationship with an organized crime group prescribed in Article 2, item (ii) of the Act on Prevention of Unjust Acts by Organized Crime Group Members or an organized crime group member prescribed in item (vi) of that Article, and other circumstances;

any other person that falls under the criteria specified by Cabinet Office Order as a person that does not have a personnel structure sufficient to perform registered financial institution business appropriately;

a person that has not joined an association and that has not prepared internal rules (meaning rules with which that person or its officers or employees should comply) that have contents equivalent to the articles of incorporation or other rules (limited to those for ensuring fair and smooth purchase and sales and other transactions of securities or ensuring fair and smooth derivatives transactions, etc. or for protecting investors) of the association or that has not established a system for complying with the relevant internal rules;

a person that is found not to have in place the necessary system for performing services of a registered financial institution in an appropriate manner.

If the Prime Minister registers that a bank or cooperative financial institution, or any other financial institution specified by Cabinet Order, performs the act specified in Article 33, paragraph (2), item (v) in connection with transactions set forth in that item on a regular basis, the Prime Minister must add the conditions specified by Cabinet Office Order within the necessary scope for ensuring fair transactions in connection with share certificates.

If the particulars set forth in the items of Article 33-3, paragraph (1) changes, the registered financial institution 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 a financial institutions register.

If a registered financial institution seeks to change a part of the business outline or business method that it has stated in the documents set forth in Article 33-3, paragraph (2), item (ii) and that constitutes a specified part of the business outline or business method, the registered financial institution 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 registered financial institution must notify the Prime Minister of this without delay, pursuant to the provisions of Cabinet Office Order.

The provisions of Article 33 do not preclude the Prime Minister from granting the registration referred to in Article 29 or the authorization referred to in Article 30, paragraph (1) to a person in which a bank or cooperative financial institution, or any other financial institution specified by Cabinet Order, holds the majority of the voting rights held by all the shareholders, etc.

With regard to the application of the provisions of Article 33, paragraphs (1) and (2), Article 33-2, Article 33-3, paragraph (1), Article 33-4, paragraph (1), item (i), Article 33-5, paragraph (1), item (iii), (a), Article 33-6, paragraph (1), Article 52-2, paragraph (1), item (iv), and Article 194-6, paragraph (2), if a bank or cooperative financial institution, or any other financial institution specified by Cabinet Order, is a financial institution that has obtained the authorization referred to in Article 1, paragraph (1) of the Act on Engagement in Trust Business by Financial Institutions, in Article 33, paragraph (1), the phrase "securities services or investment management business" is deemed to be replaced with "securities services"; in paragraph (2) of that Article, the phrase "transactions conducted based on its solicitation of a customer for such an order and transactions conducted upon the receipt of an order from the customer in connection with the financial institution's investment advisory business" is deemed to be replaced with "transactions conducted based on its solicitation of a customer for such an order"; in Article 33-2, the phrase "investment advisory and agency business or securities, etc. management" is deemed to be replaced with "investment advisory and agency business, investment management business (excluding the business of performing the acts set forth in Article 2, paragraph (8), item (xiv) or (xv) (limited to acts performed by holding the money or other property referred to in these provisions as trust property); the same applies hereinafter in this Chapter), or securities, etc. management"; in Article 33-3, paragraph (1), the phrase "the following particulars" is deemed to be replaced with "the following particulars and, in the case where investment management-related services are entrusted, an indication of this, the trade name, name, or personal name of the entrustee, the details of the investment management-related services to be entrusted to that entrustee, and other particulars specified by Cabinet Office Order"; in Article 33-4, paragraph (1), item (i), the phrase "set forth in the items of paragraph (1) of the preceding Article" is deemed to be replaced with "prescribed in paragraph (1) of the preceding Article"; in Article 33-5, paragraph (1), item (iii), (a), the phrase "a person found not to have secured, for each registered financial institution business, officers or employees who have sufficient knowledge and experience necessary for its execution" is deemed to be replaced with "a person found not to have secured, for each registered financial institution business, officers or employees who have sufficient knowledge and experience necessary for its execution; provided, however, that with regard to investment management-related services, in the case where the applicant for registration entrusts those investment management-related services to an investment management-related services contractor (limited to a person that has obtained the registration referred to in Article 66-71 or the registration of a change referred to in Article 66-75, paragraph (4) for performing those investment management-related services), it is to be sufficient if the applicant has secured officers or employees with the ability to appropriately supervise that business"; in Article 33-6, paragraph (1), the phrase "set forth in the items of Article 33-3, paragraph (1)" is deemed to be replaced with "prescribed in Article 33-3, paragraph (1)"; in Article 52-2, paragraph (1), item (iv), the phrase "investment advisory and agency business" is deemed to be replaced with "investment advisory and agency business or investment management business"; and in Article 194-6, paragraph (2), the phrase "set forth" is deemed to be replaced with "prescribed".

The provisions of Article 29 do not apply if a person set forth in any of the following items acts as the agent for a registered financial institution in providing the services prescribed in the relevant item (hereinafter referred to as "specified financial instruments business" in this Article) pursuant to the provisions of Cabinet Order. In this case, the person that provides specified financial instruments business is deemed to be an employee of the registered financial institution that the person acts as the agent for, and the provisions of this Act apply:

a person that acts as the agent for a registered financial institution and that is specified by Cabinet Order:the business of performing acts specified in Article 33, paragraph (2), item (ii) with regard to securities set forth in that item;

a person that acts as agent for a registered financial institution and that is set forth in the following: among transactions set forth in Article 2, paragraph (22), item (ii) that are connected with the financial indexes set forth in Article 2, paragraph (25), item (ii), the business of performing acts in which the registered financial institution promises to receive money from the other party to a transaction and to pay the other party the amount of money calculated based on the difference between the agreed figure and the actual figure (but only if that other party has no risk of incurring a loss exceeding the amount of money the other party has paid in advance due to the fluctuation of a financial index set forth in Article 2, paragraph (25), item (ii)):

a non-life insurance agent (meaning a non-life insurance agent as prescribed in Article 2, paragraph (21) of the Insurance Business Act; hereinafter the same applies in this item) that is an individual;

the employee of an individual non-life insurance agent, for which the notification under the provisions of Article 302 of the Insurance Business Act has been made;

the officer or employee of a corporate non-life insurance agent, for which a notification under the provisions of Article 302 of the Insurance Business Act has been made; and

an officer that holds the authority of representation for a corporate non-life insurance agent.

A registered financial institution for which a person that provides specified financial instruments business acts as an agent is liable for the damages that the person causes to a customer in connection with specified financial instruments transaction services; provided, however, that this does not apply if the registered financial institution exercises due care in appointing the person, and endeavors to prevent the damage that the person causes to a customer in connection with the specified financial instruments business that the person performs.

If a financial instruments business operator, etc. (meaning a financial instruments business operator or registered financial institution; the same applies hereinafter) receives an offer from a professional investor (limited to one set forth in Article 2, paragraph (31), item (iv)) for a contract for the financial instruments business operator, etc. to perform an act that constitutes a financial instruments transaction (meaning an act as set forth in the items of Article 2, paragraph (8); the same applies hereinafter) with the customer as the other party or on behalf of the customer (hereinafter the contract is referred to as a "financial instruments transaction contract"), and has never in the past concluded a financial instruments transaction contract with that professional investor of a type specified by Cabinet Office Order as constituting the same contract type as the financial instruments transaction contract to which the offer concerns (hereinafter referred to as a "contract type" in this Subsection), the financial instruments business operator, etc., before concluding the financial instruments transaction contract to which the offer concerns, must notify that professional investor that the professional investor may make a request under the provisions of paragraph (1) of the following Article.