Financial Instruments and Exchange Act

The provisions of Article 828, paragraph (1) (limited to the part that involves item (i)) and of Article 828, paragraph (2) (limited to the part that involves item (i)); Article 834 (limited to the part that involves item (i)); Article 835, paragraph (1); Article 836, paragraphs (1) and (3); Articles 837 through 839; and Article 846 of the Companies Act apply mutatis mutandis to an action to invalidate the incorporation of a self-regulatory organization. In this case, in Article 828, paragraph (2), item (i) of that Act, the phrase "a shareholder, etc. (meaning a shareholder, director or liquidator (or, for a company with company auditors, it means a shareholder, director, company auditor or liquidator, and for a company with nominating committee, etc., it means a shareholder, director, executive officer, or liquidator); hereinafter the same applies in this Section) of the incorporated stock company or a partner, etc. (meaning a partner or liquidator; hereinafter the same applies in this paragraph) of the incorporated membership company" is deemed to be replaced with "the members, the president and board members, the auditors, or the liquidators of the incorporated stock company", and any other necessary technical replacement of terms is specified by Cabinet Order.

A self-regulatory organization is established by a registration of its incorporation being recorded in connection with the location of its principal office.

Except in a case prescribed in the preceding paragraph, the particulars that are required to be registered pursuant to the provisions of this Act may not be asserted against a third party until after their registration.

A registration of the incorporation of a self-regulatory organization must be made within two weeks from the day of completion of its organizational meetings.

The following particulars must be stated in the registration referred to in the preceding paragraph:

purpose;

name;

office address;

term of operation and grounds for dissolution, if specified;

funds and amount of contributions paid in;

unit amount of contributions and method of payment;

name, address, and qualifications of the person with the authority of representation;

provisions on the scope and limitation of the authority of representation, if; and

means of public notice.

The provisions of Articles 89-4 to 89-8 apply mutatis mutandis to a self-regulatory organization. In this case, in Article 89-4 and Article 89-5, the phrase "Article 89-2, paragraph (2)" is deemed to be replaced with "Article 102-9, paragraph (2)", and any other necessary technical replacement of terms is specified by Cabinet Order.

The provisions of Articles 2 through 5; Articles 7 through 15; Articles 17 through 19-3; Articles 21 through 23-2; Article 24 (excluding items (xiv) and (xv)); Articles 25 through 27; Article 47, paragraph (1); Articles 51 through 53; Articles 132 through 137; and Articles 139 through 148 of the Commercial Registration Act apply mutatis mutandis to a registration involving a self-regulatory organization. In this case, in Article 17, paragraph (2), item (i) of that Act, the phrase "trade name and the head office" is deemed to be replaced with "name and the principal office"; in Article 25, paragraph (3), Article 51, paragraph (1), and Article 53 of that Act, the term "head office" is deemed to be replaced with "principal office"; in Article 146-2 of that Act, the phrase "Commercial Registration Act (..." is deemed to be replaced with "Commercial Registration Act as applied mutatis mutandis pursuant to Article 102-11 of the Financial Instruments and Exchange Act (Act No. 25 of 1948) (...", and the phrase "Article 145 of the Commercial Registration Act" is deemed to be replaced with "Article 145 of the Commercial Registration Act as applied mutatis mutandis pursuant to Article 102-11 of the Financial Instruments and Exchange Act"; and any other necessary technical replacement of terms is specified by Cabinet Order.

Membership in a self-regulatory organization is limited to financial instruments exchanges, financial instruments exchange holding companies, and parent commodity exchanges, etc.

The provisions of Articles 92 through 96 apply mutatis mutandis to the members of a self-regulatory organization.

A self-regulatory organization must obtain the authorization of the Prime Minister if it seeks to perform self-regulatory services.

A self-regulatory organization seeking the authorization referred to in the preceding Article must submit a written application for authorization to the Prime Minister, in which it states the following particulars:

its name;

the locations of its offices; and

the names of its officers, and the trade names and names of its members.

The articles of incorporation, the operational rules, and the documents specified by Cabinet Office Order must accompany the written application for authorization referred to in the preceding paragraph.

The provisions of Article 81, paragraph (3) apply mutatis mutandis to the written application for authorization referred to in paragraph (1).

When an application for authorization under the provisions of paragraph (1) of the preceding Article is filed, the Prime Minister must examine whether the application conforms to the following criteria:

the provisions of the articles of incorporation and the operational rules conform to laws and regulations, and are sufficient to allow the proper operation of self-regulatory services;

the applicant for authorization has a sufficient personnel structure to administer self-regulatory services in an appropriate manner; and

the applicant for authorization is organized as a self-regulatory organization in a manner that conforms to the provisions of this Act.

The provisions of Article 82, paragraph (2) apply mutatis mutandis to the application for authorization referred to in the preceding paragraph. In this case, in Article 82, paragraph (2), item (ii), the phrase "Article 106-28, paragraph (1)" is deemed to be replaced with "Article 106-28, paragraph (1), or Article 148, or Article 152, paragraph (1) as applied mutatis mutandis pursuant to Article 153-4, paragraph (1)"; in Article 82, paragraph (2), item (iii), (b), the phrase "has had its license rescinded pursuant to the provisions of Article 148 or Article 152, paragraph (1)" is deemed to be replaced with "has had its license rescinded pursuant to the provisions of Article 148 or Article 152, paragraph (1) or has had its authorization rescinded pursuant to the provisions of Article 148 or Article 152, paragraph (1) as applied mutatis mutandis pursuant to the provisions of Article 153-4"; in Article 82, paragraph (2), item (ii), (e), the phrase "Article 150; Article 152, paragraph (1)" is deemed to be replaced with "Article 150 or Article 152, paragraph (1) (including as applied mutatis mutandis pursuant to Article 153-4)"; and any other necessary technical replacement of terms is specified by Cabinet Order.

The provisions of Article 85-4 apply mutatis mutandis to Article 102-14 authorization.

A self-regulatory organization is entrusted by a financial instruments exchange and performs self-regulatory services for that financial instruments exchange.

A self-regulatory organization that has been entrusted with self-regulatory services pursuant to the provisions of the preceding Article may not entrust the self-regulatory services with which it has been entrusted to another person; provided, however, that this does not apply if a self-regulatory organization entrusts another person to perform specified services with the consent of the entrusting financial instruments exchange (meaning the financial instruments exchange that has entrusted a self-regulatory organization with Self-Regulatory Services; hereinafter the same applies in this Chapter).

The provisions of Article 85, paragraph (5) apply mutatis mutandis if a self-regulatory organization entrusts a person with specified services pursuant to the provisions of the proviso to the preceding paragraph. In this case, in paragraph (5) of that Article, the phrase "the preceding paragraph" is deemed to be replaced with "the proviso to Article 102-19, paragraph (1)".

The self-regulatory services with which a financial instrument exchange entrusts a self-regulatory organization and which that self-regulatory organization performs, terminate if the self-regulatory organization dissolves for a reason set forth in any of the items of Article 102-35, paragraph (1). In such a case, the entrusting financial instruments exchange must perform the self-regulatory services that were under entrustment.

A self-regulatory organization must not conduct services for profit.

A self-regulatory organization may not conduct any service other than self-regulatory services and the services incidental to them.

A self-regulatory organization has one president, three or more board members, and two or more inspectors as its officers.

Board members and inspectors are appointed by general meeting resolution.

The majority of board members must be outside board members (meaning board members elected from among persons that are not directors, board members or executive officers, or managers or other employees of an entrusting financial instruments exchange and its subsidiary companies (meaning subsidiary companies as prescribed in Article 87-3, paragraph (3); hereinafter the same applies in this Chapter) and that have at no time in the past served as directors, board members or executive officers, or managers or other employees of the entrusting financial instruments exchange or its subsidiary company; hereinafter the same applies in this Division).

A person that falls under any of the following may not become an officer.

a person specified by Cabinet Office Order as being unable to properly perform their duties due to a mental or physical disorder; or

a person falling under any of Article 29-4, paragraph (1), item (ii), (b) through (i), or Article 331, paragraph (1), item (iii) of the Companies Act.

An officer loses that position if the officer comes to fall under a person prescribed in the preceding paragraph.

The president is appointed from among the outside board members, by a vote among the board members.

A president represents a self-regulatory organization and presides over its affairs.

A board member, pursuant to the provisions of the articles of incorporation, represents a self-regulatory organization, assists the president in administering the affairs of the self-regulatory organization, acts as a proxy in handling the duties of the president if the president is unable to attend to them, and performs the duties of the president if the position is vacant.

An inspector examines the affairs of a self-regulatory organization.

The term of office of a board member continues until the conclusion of the general meeting for the last business year that ends within two years from the time of the appointment.

A board member may be reappointed only twice.

A board member is not dismissed unless it is agreed upon at a general meeting, through a resolution by at least a four-fifths majority of the attending members, at a general meeting where the majority of the members are present.

A board member may attend a meeting of the board of directors or the board meeting of an entrusting financial instruments exchange and state an opinion, if the board member finds this to be necessary.

A self-regulatory organization board (hereinafter referred to as a "board" in this Subsection) must meet at least once every three months.

The president calls the board meetings.

A board member may demand that the president convene a board meeting by specifying the purpose of the board meeting and the reasons for the convocation.