Financial Instruments and Exchange Act

A financial instruments business operator (limited to individuals seeking to engage in type-II financial instruments business and persons seeking to engage in investment advisory and agency business only; hereinafter the same applies in this Article) must deposit a business security deposit with the deposit office nearest to its principal business office or office.

The amount of the business security deposit referred to in the preceding paragraph is specified by Cabinet Order in consideration of the actual condition of a financial instruments business operator's business and the need to protect investors.

If a financial instruments business operator concludes a contract stating that the required business security deposit of the financial instruments business operator will be deposited if ordered by the Prime Minister, and has notified the Prime Minister of this, pursuant to the provisions of Cabinet Order, so long as that contract remains valid, the financial instruments business operator may refrain from depositing all or part of the business security deposit referred to in paragraph (1), in line with the amount of money that will be deposited pursuant to the contract (hereinafter referred to as the "contract amount" in this Article).

If the Prime Minister finds it to be necessary for the protection of investors, the Prime Minister may order a person that has concluded a contract as referred to in the preceding paragraph with a financial instruments business operator, or may order the relevant financial instruments business operator, to deposit all or part of the amount equivalent to the contract amount.

A financial instruments business operator must not begin financial instruments business until it deposits the business security deposit referred to in paragraph (1) (or until it concludes a contract set forth in paragraph (3)) and notifies the Prime Minister of this.

A person that concludes an investment advisory contract with a financial instruments business operator, a person that concludes an investment advisory contract or discretionary investment contract based on a financial instruments business operator's agency or intermediation for that investment advisory contract or a discretionary investment contract, or a person that concludes a purchase and sale contract for securities based on a financial instruments business operator's purchase and sale of securities or its intermediation, brokerage, or agency for such a purchase and sale, has the right to receive payment of a claim arising from such a contract out of the business security deposit furnished by the financial instruments business operator, in preference over other creditors.

The necessary particulars relevant to the exercise of the right referred to in the preceding paragraph are specified by Cabinet Order.

If the amount of a business security deposit (including the contract amount; the same applies in paragraph (10)) comes to fall short of the amount specified by Cabinet Order as prescribed in paragraph (2) due to the exercise of the right referred to in paragraph (6) or for any other reason, the financial instruments business operator must deposit the shortfall (or conclude a contract set forth in paragraph (3)) within three weeks from the day specified by Cabinet Office Order and notify the Prime Minister of this without delay.

National government bonds, municipal bonds, and other securities specified by Cabinet Office Order may serve as a business security deposit that is deposited pursuant to the provisions of paragraph (1) or the preceding paragraph.

If the registration referred to in Article 29 is rescinded pursuant to the provisions of Article 52, paragraph (1) or (4) or Article 54, if the registration referred to in Article 29 loses its effect pursuant to the provisions of Article 50-2, paragraph (2), if a person has had a change registered as referred to in paragraph (4) of the preceding Article in connection with its engagement in the financial instruments business other than in type-II financial instruments business (but only if an individual engages in such business) or investment advisory and agency business, or if the amount of a business security deposit exceeds the amount specified by Cabinet Order as prescribed in paragraph (2), all or part of the business security deposit that is deposited pursuant to the provisions of paragraph (1), (4), or (8) may be refunded pursuant to the provisions of Cabinet Order.

Beyond what is prescribed in the preceding paragraphs, the necessary particulars relevant to a business security deposit are specified by Cabinet Office Order and by Ministry of Justice Order.

A person that is not a financial instruments business operator must not use a trade name or name that refers to it as a financial instruments business operator, and must not use any trade name or name that is confusingly similar to this.

Anyone other than a financial instruments business operator, etc. (meaning a financial instruments business operator, etc. prescribed in Article 34), financial instruments intermediary service provider, or any other person that is allowed to engage in financial instruments business (including the registered financial institution business prescribed in Article 33-3, paragraph (1), item (vi), (a); hereinafter the same applies in this Article) under the provisions of laws and regulations may not conduct any of the following acts:

posting of a sign prescribed in Article 36-2, paragraph (1) or any sign similar thereto, or any other indication that a financial instruments business is being conducted; or

soliciting for conclusion of a financial instruments transaction contract (meaning financial instruments transaction contract prescribed in Article 34) for the purpose of engaging in financial instruments business (excluding those that fall under the acts listed in the items of Article 2, paragraph (8)).

If the director or executive officer of a financial instruments business operator (limited to a person engaged in type-I financial instruments business or investment management business; hereinafter the same applies in this paragraph) assumes the position of director, accounting advisor (or, if the accounting advisor is a corporation, the position of a staff member that performs those duties; hereinafter the same applies in this and the following paragraphs), company auditor, or executive officer of another company (including if a director, accounting advisor, company auditor, or executive officer of another company is to concurrently hold the position of director or executive officer of the financial instruments business operator), or if that person resigns from the position of director, accounting advisor, company auditor, or executive officer of another company, that person must notify the Prime Minister of this without delay, pursuant to the provisions of Cabinet Office Order.

If the director or executive officer of a financial instruments business operator (limited to a person engaged in securities services other than type-I financial instruments business) assumes the position of director, accounting advisor, company auditor, or executive officer of the parent bank, etc. or subsidiary bank, etc. of the relevant financial instruments business operator (including if a director, accounting advisor, company auditor or executive officer of the parent bank, etc. or subsidiary bank, etc. comes to concurrently hold the position of director or executive officer of the financial instruments business operator), or if that person resigns from the position of director, accounting advisor, company auditor, or executive officer of the parent bank, etc. or subsidiary bank, etc., that person must notify the Prime Minister of this without delay, pursuant to the provisions of Cabinet Office Order.

The term "parent bank, etc." as used in the preceding paragraph means a bank or cooperative financial institution, or a person that falls under any other category of financial institution specified by Cabinet Order, which Cabinet Order specifies as satisfying the requirement of being a corporation or other organization that holds the majority of the voting rights held by all the shareholders, etc. in a financial instruments business operator, or of being a corporation or other organization which is otherwise closely related to such a financial instruments business operator (such a corporation or other organization is referred to as a "parent corporation, etc." in Article 33-3, paragraph (2), item (iii) and Article 44-3).

The term "subsidiary bank, etc." as used in paragraph (2) means a bank or cooperative financial institution, or an entity that falls under a financial institution specified by Cabinet Order, which Cabinet Order specifies as satisfying the requirement of being a corporation or other organization in which a financial instruments business operator holds the majority of the voting rights held by all the shareholders, etc., or other corporations or organizations which are closely related to the financial instruments business operator (the corporation or other organization is referred to as a "subsidiary corporation, etc." in Article 33-3, paragraph (2), item (iii) and Article 44-3).

The necessary particulars for the determination of whether the majority of the voting rights are held by all the shareholders, etc. as prescribed in paragraph (3) are specified by Cabinet Office Order in consideration of the manner in which they are held and other circumstances.

The provisions of the proviso to Article 331, paragraph (2) (including as applied mutatis mutandis pursuant to Article 335, paragraph (1) of the Companies Act); Article 332, paragraph (2) (including as applied mutatis mutandis pursuant to Article 334, paragraph (1) of that Act); Article 336, paragraph (2); and the proviso to Article 402, paragraph (5) of that Act do not apply to financial instruments business operators (limited to those engaged in type-I financial instruments business or investment management business).

A person that has become the major shareholder (meaning a major shareholder as prescribed in Article 29-4, paragraph (2); hereinafter the same applies in this Section) of a financial instruments business operator (limited to one engaged in type-I financial instruments business or investment management business and excluding foreign corporations; hereinafter the same applies in this Subsection) must submit a statement of holdings in subject voting rights which states the subject voting right holding rate (meaning the rate arrived at when the number of subject voting rights held by the holder of those subject voting rights is divided by the number of voting rights held by all the shareholders, etc. in the relevant Financial instruments business operator), the purpose for which they are held, and other particulars specified by Cabinet Office Order to the Prime Minister, without delay, pursuant to the provisions of Cabinet Office Order.

A document pledging that the relevant person does not fall under the purview of Article 29-4, paragraph (1), item (v), (d), 1. or 2., or (e), 1. through 3., and other documents specified by Cabinet Office Order must accompany the statement of holdings in subject voting rights referred to in the preceding paragraph.

If a major shareholder other than the specified major shareholder of a financial instruments business operator becomes the specified major shareholder of the relevant financial instruments business operator, it must notify the Prime Minister of this without delay, pursuant to the provisions of Cabinet Office Order.

The term "specified major shareholder" as used in the preceding paragraph means a person that holds subject voting rights exceeding 50 percent of voting rights held by all the shareholders, etc. in a company.

The provisions of Article 29-4, paragraph (5) apply mutatis mutandis if the provisions of the preceding paragraph are applicable.

If the major shareholder of a financial instruments business operator falls under any of the categories in Article 29-4, paragraph (1), item (v), (d), 1. or 2. or (e), 1. through 3., the Prime Minister may order the relevant major shareholder to take measures so that it will cease to be the major shareholder of the relevant financial instruments business operator or to take any other necessary measures within a fixed period of no longer than three months.

If the Prime Minister finds it to be particularly necessary in the public interest or for the protection of investors in light of state of the business or assets of the specified major shareholder (meaning a specified major shareholder as provided for in paragraph (4) of the preceding Article; the same applies hereinafter) of a financial instruments business operator (if such a specified major shareholder is a corporation, this includes the state of the assets of a subsidiary corporation, etc. of such specified major shareholder (meaning a person falling under the category of a corporation or other organization in which the specified major shareholder holds the majority of the voting rights held by all the shareholders, etc., or that otherwise satisfies the requirements specified by Cabinet Order as a corporation or other organization that is closely related to the specified major shareholder)), the Prime Minister may, to the extent necessary, order the specified major shareholder to take measures that are necessary for improving the financial instruments business operator's business operations or the state of its assets.

If the specified major shareholder of a financial instruments business operator violates an order under the preceding paragraph, the Prime Minister may order the specified major shareholder to take measures so that it will cease to be the major shareholder of the financial instruments business operator or to take other necessary measures within a fixed period of no longer than three months.

If the major shareholder of a financial instruments business operator ceases to be the major shareholder of that financial instruments business operator, it must notify the Prime Minister of this without delay.

If the specified major shareholder of a financial instruments business operator becomes a major shareholder other than the specified major shareholder of that financial instruments business operator, it must notify the Prime Minister of this without delay, pursuant to the provisions of Cabinet Office Order.

The provisions of Article 32, paragraphs (1) and (2), Article 32-2, paragraph (1) and paragraph (1) of the preceding Article apply mutatis mutandis to the shareholders or equity holders of a holding company (meaning a holding company as prescribed in Article 29-4, paragraph (3); the same applies hereinafter) that has a financial instruments business operator as its subsidiary company (meaning a subsidiary company as prescribed in Article 29-4, paragraph (4)).