Financial Instruments and Exchange Act

A financial instruments business operator, etc. must establish an operational control system for the fair and appropriate performance of its financial instruments business or services of a registered financial institution, pursuant to the provisions of Cabinet Office Order.

A specified financial instruments business operator, etc., pursuant to the provisions of Cabinet Office Order, must appropriately manage information connected with financial instruments services (meaning services entailing acts that constitute financial instruments transactions and any other services specified by Cabinet Office Order), and must establish a system for properly supervising the implementation status of financial instruments services and take any other measures as are necessary, in line with the transactions that the specified financial instruments business operator, etc. or its parent financial institution, etc. or subsidiary financial institution, etc. conducts, so that the interests of the customers of the financial instruments services that the specified financial instruments business operator, etc. or its subsidiary financial institution, etc. provides are not unjustly prejudiced.

The term "specified financial instruments business operator, etc." as used in this Article means a financial instruments business operator, etc. that conducts securities services (limited to a person registered as referred to in Article 29 to engage in type-I financial instruments business), or that is specified by Cabinet Order.

The term "parent financial institution, etc." as used in paragraph (1) means, among persons that Cabinet Order specifies as persons that hold the majority of the voting rights held by all the shareholders, etc. in a specified financial instruments business operator, etc. or as persons otherwise closely related to the relevant specified financial instruments business operator, etc., a financial instruments business operator, a bank, a cooperative financial institution, or any other person engaged in a financial business specified by Cabinet Order.

The term "subsidiary financial institution, etc." as used in paragraph (1) means, among persons that Cabinet Order specifies as persons in which a specified financial instruments business operator, etc. holds the majority of the voting rights held by all the shareholders, etc. or as persons otherwise closely related to the relevant specified financial instruments business operator, etc., a financial instruments business operator, a bank, a cooperative financial institution, or any other person engaged in a financial business specified by Cabinet Order.

A financial instruments business operator, etc. must, pursuant to the provisions of Cabinet Office Order, make its trade name, name, or full name and other particulars specified by Cabinet Office Order available for public viewing by means of automatic public transmission conducted by connecting to a telecommunication line (meaning automatically transmitting in response to a request from the public for the purpose of direct reception by the public, excluding that which constitutes broadcasting or wire broadcasting; the same applies in Article 66-8, paragraph (2)); provided, however, that this does not apply in the case where the scale of its business is extremely small or any other case specified by Cabinet Office Order (excluding the case where the person is a type-I small amount electronic public offering service provider prescribed in Article 29-4-2, paragraph (8) or a type-II small amount electronic public offering service provider prescribed in Article 29-4-3, paragraph (2)).

A person other than a financial instruments business operator, etc. (limited to a financial instruments intermediary service provider or any other person that is allowed to engage in financial instruments business under the provisions of laws and regulations) must not post the sign referred to in paragraph (1) or a sign similar thereto.

A financial instruments business operator, etc. must not allow another person to engage in financial instruments business (or, if it is a registered financial institution, to engage in the services of a registered financial institution; hereinafter the same applies in this Subsection) using the name of the relevant financial instruments business operator, etc.

A financial instruments business operator (limited to one that engages in securities services; the same applies in the following paragraph) may not become a bond administrator provided for in Article 702 of the Companies Act, a bond administration assistant provided in Article 714-2 of that Act, or the trustee company under a trust contract as defined in Article 2, paragraph (1) of the Secured Bonds Trust Act.

Notwithstanding the provisions of other Acts, a financial instruments business operator may become an underwriter.

When advertising the contents of its financial instruments business or performing any similar act specified by Cabinet Office Order, a financial instruments business operator, etc. must give the following particulars, pursuant to the provisions of Cabinet Office Order:

the trade name or name of the financial instruments business operator, etc.;

an indication that it is a financial instruments business operator, etc., and its registration number; and

the particulars of the contents of the financial instruments business that the financial instruments business operator, etc. engages in, which is specified by Cabinet Order as material particulars that may have an impact on customers' judgment.

When advertising the contents of its financial instruments business or engaging in any similar act specified by Cabinet Office Order, a financial instruments business operator, etc. must not make a representation that significantly conflicts with the fact of the matter or that could cause a person to have a serious misconception about the prospect of profiting from the performance of an act that constitutes a financial instruments transaction, or about any other matter that is specified by Cabinet Office Order.

If a financial instruments business operator, etc. seeks to conclude a financial instruments transaction contract, it must provide the customer in advance, pursuant to the provisions of Cabinet Office Order, with information on the following particulars; provided, however, that this does not apply in cases specified by Cabinet Office Order as those in which its not doing so does not compromise the protection of investors:

the trade name or name and address of the financial instruments business operator, etc.;

an indication that it is a financial instruments business operator, etc., and its registration number;

an outline of the relevant financial instruments transaction contract;

the particulars specified by Cabinet Office Order with regard to any fees, remuneration, or other consideration payable by the customer in connection with the financial instruments transaction contract;

an indication of any risk that a loss will be incurred due to fluctuations in the money rate, the value of currencies, quotations on the financial instruments market, and other indicators, in connection with an act that constitutes a financial instruments transaction carried out by the customer;

an indication of any risk that the amount of the loss set forth in the preceding item will exceed the amount of customer margin or any other security deposit, or anything specified by Cabinet Office Order that is payable by the customer; and

the particulars of the contents of the relevant financial instruments business other than what is set forth in the preceding items, which are specified by Cabinet Office Order as material particulars that may have an impact on customers' judgment.

When a financial instruments business operator, etc. provides information pursuant to the provisions of the preceding paragraph, it must explain to the customer the particulars set forth in the items of that paragraph (excluding the particulars set forth in items (v) and (vi) of that paragraph and other particulars specified by Cabinet Office Order), by the method and to the extent necessary for the customer to understand them, in light of customer knowledge, customer experience, the state of customer assets, and the purpose for which the financial instruments transaction contract is to be concluded (hereinafter referred to as "customer attributes" in this paragraph); provided, however, that this does not apply in cases specified by Cabinet Office Order, such as the case where, in light of customer attributes, it has been confirmed by an appropriate method that the customer has understood the contents of those particulars through the provision of that information alone.

Before soliciting (limited to a public offering or secondary distribution, or dealings in a public offering or secondary distribution specified by Cabinet Order) the conclusion of a financial instruments transaction contract for any of the rights set forth in the items of Article 2, paragraph (2) that are deemed to be securities under that paragraph, a financial instruments business operator, etc. must notify the Prime Minister, pursuant to the provisions of Cabinet Office Order, of the contents of the information provided pursuant to the provisions of paragraph (1) regarding the relevant financial instruments transaction contract; provided, however, that this does not apply in cases specified by Cabinet Office Order as those in which its not doing so does not compromise the protection of investors.

When a financial instruments business operator, etc. effects a financial instruments transaction contract or when otherwise specified by Cabinet Office Order, the financial instruments business operator, etc. must, pursuant to the provisions of Cabinet Office Order and without delay, provide the customer with information on the particulars concerning the relevant financial instruments transaction contract and other particulars specified by Cabinet Office Order; provided, however, that this does not apply in the cases that are specified by Cabinet Office Order as those in which, in consideration of the contents of the financial instruments transaction contract and other circumstances, it is found that even if the information is not provided to the customer, this does not compromise the public interest or the protection of investors.

Except as otherwise specified by Cabinet Office Order, a customer that has concluded a financial instruments transaction contract (limited to one that is specified by Cabinet Order in consideration of the content of such a financial instruments transaction contract and other circumstances) with a financial instruments business operator, etc. may cancel the relevant financial instruments transaction contract in writing or in the form of electronic or magnetic record, until the number of days specified by Cabinet Order has elapsed starting from the day specified by Cabinet Order as the day on which the customer received the provision of information pursuant to the provisions of Article 37-4 regarding the conclusion of the relevant financial instruments transaction contract.

The cancellation of a financial instruments transaction contract under the preceding paragraph that is made by either of the means set forth in the following items takes effect at the time specified in each of those items:

a written document:when the document is issued; and

electronic or magnetic records contained in a recording medium:when the recording medium is sent.

If a financial instruments transaction contract becomes subject to a cancelation under paragraph (1), the financial instruments business operator, etc. may not request the customer to pay damages or a penalty for the cancellation of that financial instruments transaction contract beyond the amount specified by Cabinet Office Order as the amount of fees, remuneration, or other consideration payable by the customer with regard to that financial instruments transaction contract (referred to as a "consideration" in the following paragraph) for the period until the cancellation of that financial instruments transaction contract.

If a financial instruments transaction contract becomes subject to a cancellation under paragraph (1), the financial instruments business operator, etc. must refund any consideration paid in advance for the relevant financial instruments transaction contract to the customer that paid it; provided, however, that this does not apply to the amount specified by Cabinet Office Order as prescribed in the preceding paragraph.

Any special provision that is contrary to the provisions of the preceding paragraphs and disadvantageous to a customer is void.