Financial Instruments and Exchange Act

If the total asset value (meaning the total monetary value of assets calculated pursuant to the provisions of Cabinet Office Order; hereinafter the same applies in this Article) of a financial instruments business operator (limited to one engaged in type-I financial instruments business, excluding foreign corporations; hereinafter the same applies in this Subsection) exceeds the amount of money specified by Cabinet Order as representing the scope of all assets required for ensuring the sound and appropriate operation of the business of the group consisting of the financial instruments business operator and its subsidiary corporations, etc. (hereinafter referred to as the "total asset value threshold" in this Article), the financial instruments business operator must notify the Prime Minister of this, of the total asset value, and of the basis for its calculation within two weeks from the day on which that value is exceeded; provided, however, that if the total asset value comes to be equal to or lower than the total asset value threshold after the financial instruments business operator has made the notification under the main clause of this paragraph, but the total asset value of the financial instruments business operator again comes to exceed the total asset value threshold by the time that two years have elapsed counting from the day on which the total asset value came to be equal to or lower than the total asset value threshold, the financial instruments business operator is not required to submit notification of this or of the total asset value and the basis for its calculation.

A special financial instruments business operator (meaning a financial instruments business operator that has made the notification under the provisions of the preceding paragraph, excluding one that comes to fall under paragraph (6), item (ii) after making that notification; hereinafter the same applies in this Section) must submit the following documents within the period specified by Cabinet Order counting from the day on which it makes the notification under the provisions of the preceding paragraph (hereinafter referred to as the "notification date" in this Subsection) if that special financial instruments business operator has a parent company as of the notification date:

a document in which it states the trade name or name of the parent company of the special financial instruments business operator and other particulars specified by Cabinet Office Order;

a document in which it describes the state of the business and assets of the parent company of the special financial instruments business operator and its subsidiary corporations, etc. pursuant to the provisions of Cabinet Office Order;

if the group consisting of the parent company of the special financial instruments business operator and its subsidiary corporations, etc. is under the supervision of an administrative organization based on other laws and regulations (including if the group is under the supervision of an administrative organization in a foreign country or any other equivalent organization based on foreign laws and regulations) with respect to the state of its business operations and assets, a document explaining this; and

if the parent company of the special financial instruments business operator manages business of the special financial instruments business operator or if the parent company of the special financial instruments business operator or its subsidiary corporation, etc. provides assistance related to fund procurement to the special financial instruments business operator, a document in which it states the content and method of the business management or assistance, pursuant to the provisions of Cabinet Office Order.

If a special financial instruments business operator comes to have a parent company on or after the notification date, the special financial instruments business operator must submit the documents set forth in the items of the preceding paragraph to the Prime Minister within the period specified by Cabinet Order, as calculated beginning from the day on which it came to have that parent company.

If a particular stated in a document set forth in paragraph (2), item (i), (iii) or (iv) changes (excluding a document specified by Cabinet Office Order which concerns a designated parent company as prescribed in Article 57-12, paragraph (3) or its subsidiary corporation, etc.), the special financial instruments business operator (limited to one with a parent company) that has submitted the document set forth in the relevant item of paragraph (2) pursuant to the provisions of the preceding two paragraphs must notify the Prime Minister of this without delay, pursuant to the provisions of Cabinet Office Order.

For each quarter, a special financial instruments business operator (limited to one with a parent company) that has submitted the documents set forth in the items of paragraph (2) pursuant to the provisions of paragraph (2) or (3), must submit documents in which it describes the state of the business and assets of the parent company of the special financial instruments business operator and its subsidiary corporations, etc. pursuant to the provisions of Cabinet Office Order (excluding documents specified by Cabinet Office Order which concern the highest designated parent company provided for in Article 57-12, paragraph (3) or its subsidiary corporations, etc.), to the Prime Minister within the period specified by Cabinet Order after the end of the quarter.

If a special financial instruments business operator comes to fall under any of the following items, it must notify the Prime Minister of this without delay:

it comes to no longer have a parent company; or

two years have elapsed counting from the day on which the total asset value came to be equal to or lower than the total asset value threshold, without the total asset value exceeding the total asset value threshold.

If the Prime Minister accepts a notification under paragraph (1), the Prime Minister must note that the financial instruments business operator that has made such notification is a special financial instruments business operator in that financial instruments business operator's registration.

The term "parent company" as used in paragraphs (2) through (6) means a first company that has a second company as its subsidiary company (meaning a subsidiary company as prescribed in Article 29-4, paragraph (4); hereinafter the same applies in the following paragraph).

The term "subsidiary corporation, etc." as used in paragraphs (1), (2), (4), and (5) means the subsidiary company of another company or any other person that falls under the requirements specified by Cabinet Order as a corporation or other organization that is closely related to that other company.

In and after the business year that includes the day on which the period specified by Cabinet Order elapses counting from the notification date, pursuant to the provisions of Cabinet Office Order, a special financial instruments business operator (limited to a special financial instruments business operator with a subsidiary corporation, etc. (meaning a subsidiary corporation, etc. as prescribed in paragraph (9) of the preceding Article; hereinafter the same applies in this Subsection)) must prepare a business report on a consolidated basis describing the state of the business and assets of the special financial instruments business operator and its subsidiary corporation, etc., and submit that business report to the Prime Minister within three months after the end of each business year.

Beyond submitting a business report pursuant to the provisions of the preceding paragraph, a special financial instruments business operator must report the state of the business and assets of the special financial instruments business operator and its subsidiary corporations, etc. to the Prime Minister pursuant to the provisions of Cabinet Office Order.

If the Prime Minister finds it to be necessary and appropriate in the public interest or for the protection of investors, the Prime Minister may order a special financial instruments business operator to make public notice of all or part of the business report referred to in paragraph (1), pursuant to the provisions of Cabinet Order.

In and after the business year that includes the day on which the period specified by Cabinet Order elapses counting from the notification date, a special financial instruments business operator must prepare explanatory documents on a consolidated basis for the special financial instruments business operator and its subsidiary corporations, etc., stating the particulars specified by Cabinet Office Order as pertinent to the state of the business and assets of the special financial instruments business operator and its subsidiary corporations, etc., and must keep those explanatory documents at all of its business offices and offices and make them available for public inspection, or disclose them using the internet or through other means pursuant to the provisions of Cabinet Office Order, during the one-year period beginning from the day on which the period specified by Cabinet Order elapses following the end of each business year.

In order to contribute to the sound and appropriate operation of the business of a special financial instruments business operator, the Prime Minister must establish criteria for whether the capital adequacy of the special financial instruments business operator and its subsidiary corporations, etc. is appropriate in light of the assets, etc. held by the special financial instruments business operator and its subsidiary corporations, etc. and other criteria that indicate soundness in the management of the special financial instruments business operator and its subsidiary corporation, etc., as criteria by which the special financial instruments business operator is to judge the soundness of its management.

For each quarter in and after the quarter that includes the day on which the period specified by Cabinet Order elapses counting from the notification date, a special financial instruments business operator must submit a document to the Prime Minister in which it describes the soundness of its management as of the last day of the quarter, as indicated by the criteria prescribed in the preceding paragraph (hereinafter simply referred to as the "integrity of management" in the following paragraph and the following Article), pursuant to the provisions of Cabinet Office Order.

For each quarter in and after the quarter that includes the day on which the period specified by Cabinet Order elapses counting from the notification date and pursuant to the provisions of Cabinet Office Order, a special financial instruments business operator must keep a document in which it describes the integrity of management at all of its business offices and offices and make this document available for public inspection during the three-month period beginning from the day on which the period specified by Cabinet Order elapses counting from the end of the quarter.

If the Prime Minister finds it to be necessary and appropriate in the public interest or for the protection of investors in light of the integrity of management of a special financial instruments business operator and its subsidiary corporations, etc., the Prime Minister may, to the extent necessary, order a special financial instruments business operator to suspend all or part of the business during a fixed period of no longer than three months, order it to change business methods or to deposit assets, and issue orders in respect of other particulars that are necessary from a supervisory perspective.

An order under the provisions of the preceding paragraph is to be given so as to correspond with the classification of the integrity of management of a special financial instruments business operator and its subsidiary corporations, etc., and the Prime Minister must determine such classifications and the nature of the corresponding orders in advance and issue public notice of the same.

If the Prime Minister orders a special financial instruments business operator to suspend all or part of the business pursuant to the provisions of paragraph (1), and the integrity of management of the special financial instruments business operator and its subsidiary corporation, etc. does not improve and is found to have no prospect of improving as of the day on which three months have elapsed since the day of the order, the Prime Minister may rescind the Article 29 registration of the special financial instruments business operator.

In the following cases, the Prime Minister must make a public notice indicating as follows, pursuant to the provisions of Cabinet Office Order:

the Prime Minister orders the suspension of all or part of the business pursuant to the provisions of paragraph (1) of the preceding Article; or

the Prime Minister rescinds an Article 29 registration pursuant to the provisions of paragraph (3) of the preceding Article.

If the Prime Minister rescinds an Article 29 registration pursuant to the provisions of Article 57-6, paragraph (3), the Prime Minister must delete that registration.

If the Prime Minister accepts a notification under the provisions of Article 57-2, paragraph (6), item (ii), the Prime Minister must delete the supplementary note indicating that the person is a special financial instruments business operator as prescribed in paragraph (7) of that Article.