Financial Instruments and Exchange Act

A financial instruments business operator, etc. must not perform any of the acts set forth in Article 2, paragraph (8), items (i) through (iv) and (x) in connection with the securities for professional investors with a general investor (meaning a person other than a professional investor, etc. or issuer of securities for professional investors, or any other person specified by Cabinet Office Order; hereinafter the same applies in this Article); provided, however, that this does not apply in a case in which disclosure has been made (meaning a case in which disclosure has been made as prescribed in Article 4, paragraph (7); the same applies in Article 40-5, paragraph (1) and Article 66-14-2) with regard to the relevant securities for professional investors, nor does it apply in a case in which the financial instruments business operator, etc. intermediates a sale for the general investor without having solicited the general investors, nor does it in any case specified by Cabinet Office Order as one in which there is little likelihood of this resulting in insufficient investor protection.

If a financial instruments business operator, etc. sells securities for professional investors in a case not falling under the category of a case in which disclosure has been made, or performs any other act specified by Cabinet Order in connection with such securities, without issuing a solicitation for acquisition or a solicitation for selling, etc., it must notify the other party to the sale or other act, pursuant to the provisions of Cabinet Office Order and with regard to the securities for professional investors, that the case does not fall under the category of a case in which disclosure has been made, as well as notifying the other party of any other matters that are specified by Cabinet Office Order.

The first time that a financial instruments business operator, etc. receives an offer from a professional investor, etc. (excluding a person set forth in Article 2, paragraph (31), items (i) through (iii)) for a contract for transactions in securities for professional investors (meaning a contract for performing an act set forth in Article 2, paragraph (8), items (i) through (iv), or item (x) in connection with securities for professional investors (excluding a contract for making a purchase and sale of securities for professional investors through an act set forth in item (x) of that paragraph (limited to a purchase and sale conducted through the intermediation, brokerage, or agency of the financial instruments business operator that performs that act) or any other contract that is specified by Cabinet Office Order taking into account of the content of the contract and the features of the counterparty); hereinafter the same applies in this paragraph), the business operator, etc. must notify the professional investor, etc. of the following particulars and deliver a document to the professional investor, etc. that states those particulars, before concluding the contract for transactions in securities for professional investors related to the offer:

the contents of the information provided in connection with the securities for professional investors, the nature of the transaction, and any other matters specified by Cabinet Office Order as material matters of which an investor must be made aware in connection with securities for professional investors; and

an indication of the risk of insufficient protection involved, if a transaction of securities for professional investors will be conducted by a person whose knowledge or experience, or the state of whose assets, makes it inappropriate for the person to do so.

The provisions of Article 34-2, paragraph (4) apply mutatis mutandis to the delivery of the documents set forth in the preceding paragraph.

When a financial instruments business operator, etc. accepts entrustment of a commodity-related market derivatives transaction, etc. (meaning a commodity-related derivatives transaction, or intermediation, brokerage, or agency for the entrustment; hereinafter the same applies in this Article), the business operator, etc. must not close a transaction by becoming the counterparty without conducting commodity-related derivatives transaction, etc. in relation to that entrustment.

When a financial instruments business operator, etc. (limited to a financial instruments business operator, etc. that conducts over-the-counter derivatives transactions on a regular basis) conducts specified over-the-counter derivatives transactions (meaning over-the-counter derivatives transactions specified by Cabinet Office Order as transactions that require expeditious disclosure of information concerning the outline of the relevant transactions for securing fairness in the relevant transactions, in light of the transaction volume and other transaction status; the same applies in the following paragraph, Article 58-2 and Article 60-14, paragraph (1)), it must use the electronic data processing system used by the relevant financial instruments business operator, etc. for its business of over-the-counter derivatives transactions or the electronic data processing system used by another financial instruments business operator, etc. (limited to a financial instruments business operator, etc. that conducts over-the-counter derivatives transactions, etc. on a regular basis) or a business operator authorized to conduct electronic over-the-counter derivatives transactions, etc. prescribed in Article 60-14, paragraph (2) for its business of over-the-counter derivatives transactions, etc.

A person that used the electronic data processing system pursuant to the provisions of the preceding paragraph must, with regard to the specified over-the-counter derivatives transactions conducted using the relevant electronic data processing system, publicly announce the price, quantity and other outline of the transaction pursuant to the provisions of Cabinet Office Order.

A financial instruments business operator, etc. must work faithfully on behalf of its customers in providing its investment advisory business.

A financial instruments business operator, etc. must provide its investment advisory business with the due care of a prudent manager to its customers.

A financial instruments business operator, etc. must not perform any of the following acts in connection with the investment advisory business it conducts:

giving advice to customers to conduct a transaction between themselves that would be detrimental to a particular customer's interests in the interest of another customer;

giving advice regarding a particular financial instrument, financial index, or option for which there is no justifiable basis, with the aim of using fluctuations in the price, indicator, figure, or amount receivable based on a customer's transaction, to benefit itself or a third party other than that customer;

giving advice to a customer to conduct a transaction under terms and conditions that are different from the ordinary terms and conditions and detrimental to the customer's interests (other than an act that falls under the act set forth in item (i));

making a purchase and sale or other transaction of securities, or a derivatives transaction (hereinafter referred to as "purchase and sale or other transaction of securities"), on its own account, using information from a transaction conducted by a customer that has received its advice;

providing an economic benefit to a customer or a third party or having a third party provide an economic benefit to a customer, in order to cover the whole or part of a loss incurred by the customer due to a transaction about which the customer has received its advice, or in order to add to the profit that a customer has accrued in connection with a transaction about which the customer has received its advice (unless this is to cover the whole or part of a loss incurred due to problematic conduct); and

beyond what is set forth in the preceding items, any act specified by Cabinet Office Order as resulting in insufficient investor protection, harming the fairness of transactions, or causing a loss of confidence in the financial instruments business.

A financial instruments business operator, etc. must not perform any of the acts set forth in Article 2, paragraph (8), items (i) through (iv), in connection with the investment advisory business it conducts, with a customer as the counterparty or on behalf of a customer; provided, however, that this does not apply if it does so as Type-I financial instruments business, or if it does so in a case that is specified by Cabinet Order.

A financial instruments business operator, etc. must not, for any reason, receive a deposit of money or Securities from a customer, or have a person specified by Cabinet Order as being closely related to the financial instruments business operator, etc. deposit a customer's money or securities, in connection with the investment advisory business it conducts, unless it does so as securities, etc. management, or unless it does so in a case that is specified by Cabinet Order.

A financial instruments business operator, etc. must not lend money or securities to a customer or perform intermediation, brokerage, or agency for a third party's lending of money or securities to a customer in connection with the investment advisory business it conducts; provided, however, that this does not apply if a financial instruments business operator lends money or securities to a customer in the course of a margin transaction prescribed in Article 156-24, paragraph (1), or if it performs any of such acts in a case that is specified by Cabinet Order.

A financial instruments business operator, etc. must work faithfully on behalf of right holders (meaning persons prescribed in the following items in accordance with the category of business set forth in each item; hereinafter the same applies in this Subsection) in providing investment management business:

the business of performing the act specified in Article 2, paragraph (8), item (xii):the other party to the contract set forth in (a) or (b) of that item;

the business of performing the act specified in Article 2, paragraph (8), item (xiv):the person that holds the rights indicated on the securities provided for in that item or other rights specified by Cabinet Order; and

the business of performing the act specified in Article 2, paragraph (8), item (xv):the person that holds rights set forth in (a) through (c) of that item or other rights specified by Cabinet Order as prescribed in that item.

A financial instruments business operator, etc. must conduct investment management business with the due care of a prudent manager for right holders.

A financial instruments business operator, etc. must not perform any of the following acts in connection with the investment management business it conducts; provided, however, that this excludes acts set forth in items (i) and (ii) which are specified by Cabinet Office Order as being unlikely to result in insufficient investor protection, harm the fairness of transactions, or cause the financial instruments business to lose credibility:

making an investment that involves a transaction with the financial instruments business operator, etc. or its director or executive officer;

making an investment that involves a transaction being conducted between or among investment properties;

making an investment in a particular financial instrument, financial index, or option, which involves a transaction being conducted for which there is no justifiable basis, with the aim of using fluctuations in the price, index, figure, or amount receivable based on the transaction, to benefit itself or a third party other than the rights holder;

making an investment that involves a transaction being conducted under terms and conditions that are different from the ordinary terms and conditions, and that are detrimental to the rights holder's interests;

making a purchase and sale or other transaction of securities on its own account using information about a transaction that it has conducted as an investment;

providing an economic benefit to a rights holder or a third party or having a third party provide an economic benefit to a rights holder or third party, in order to cover the whole or part of a loss that a rights holder has incurred due to a transaction conducted as an investment in investment property, or in order to add to the profit that a rights holder has accrued from a transaction conducted as an investment in investment property (unless this is done to cover the whole or part of a loss incurred due to problematic conduct or a loss caused to the principal of an investment rust specified by Cabinet Office Order as those of which beneficial interest is acquired or held for the purpose of providing it for paying or receiving money in the purchase and sale of securities or any other transactions between the right holder and the financial instruments business operator, etc.); and

beyond what is set forth in the preceding items, any act specified by Cabinet Office Order as resulting in insufficient investor protection, harming the fairness of transactions, or causing a loss of confidence in the financial instruments business.