Financial Instruments and Exchange Act

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

the license applicant has obtained the same kind of license as that referred to in Article 156-2 or permission or any other administrative disposition similar to such a license in the state where its head office or principal office is located;

the provisions of the articles of incorporation and business rules conform to laws and regulations and are sufficient to allow financial instruments obligation assumption services to be performed properly and reliably;

the applicant has a sufficient financial basis to soundly perform financial instruments obligation assumption services, and has good prospects in terms of expected income and expenditures in connection with financial instruments obligation assumption services;

in light of its personnel structure, the applicant has sufficient knowledge and experience to perform financial instruments obligation assumption service properly and reliably, and has sufficient social credibility; and

the applicant has an adequately developed structure and system for properly securing collateral to allocate for settling outstanding obligations, for managing highly reliable facilities in order to facilitate such settlement, and for otherwise executing such settlement properly and reliably.

If, as a result of having conducted an examination pursuant to the provisions of the preceding paragraph, the Prime Minister finds that an application conforms to the criteria in that paragraph, the Prime Minister must grant the license, except in a case that falls under any of the following items:

the license applicant is a person for whom the period specified by Cabinet Order pass since it commenced the same kind of business as financial instruments obligation assumption services in a foreign country based on foreign laws and regulations (unless this falls under a case specified by Cabinet Order);

the license applicant is a person that has been sentenced to a fine (including an equivalent sentence under foreign laws and regulations) for violating the provisions of this Act or the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto or for violating the provisions of a foreign law or regulation that is equivalent to one of these Acts, and five years have not passed since the day on which the person finished serving the sentence or ceased to be subject to its enforcement;

the license applicant is a person that has had its license rescinded pursuant to the provisions of Article 156-20-14, paragraph (1) or (2); a person that has had their registration rescinded pursuant to the provisions of Article 52, paragraph (1), Article 53, paragraph (3), Article 57-6, paragraph (3), Article 66-20, paragraph (1), Article 66-42, paragraph (1), Article 66-63, paragraph (1), or Article 66-85, paragraph (1); a person that has had their permission rescinded pursuant to the provisions of Article 60-8, paragraph (1) (including as applied mutatis mutandis pursuant to Article 60-14, paragraph (2)); a person that has had their authorization rescinded pursuant to the provisions of Article 106-7, paragraph (1), Article 106-21, paragraph (1), Article 106-28, paragraph (1), Article 155-6, Article 155-10, paragraph (1), or Article 156-5-9, paragraph (1); a person that has had its registration referred to in Article 12 of the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto (limited to the registration related to the type of securities, etc. intermediary business operations) rescinded pursuant to the provisions of Article 38, paragraph (1) of that Act (excluding items (ii), (iii), and (v)); or is a person that had a license or registration of the same kind obtained in a foreign country rescinded pursuant to the provisions of a foreign law or regulation that is equivalent to this Act or the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto (including permission or any other administrative disposition similar to the license or registration); for whom five years have not passed since the date of the rescission;

the license applicant has a person falling under any of the provisions of Article 82, paragraph (2), item (iii), (a) through (f) as an officer or domestic representative;

the authority responsible for the enforcement of the foreign law or regulation that is equivalent to this Act in the state where the head office or principal office of the license applicant is located has not given the assurance prescribed in Article 189, paragraph (2), item (i) or done anything else that is found to be equivalent to such assurance; or

the license application or a document or electronic or magnetic record that is required to be attached to it contains a false statement or false record regarding a material particular.

If a license application under the provisions of Article 156-20-3, paragraph (1) is filed and the Prime Minister finds it inappropriate to grant that license, the Prime Minister must notify the license applicant and have the relevant officials conduct a hearing.

Upon deciding to grant or not to grant the license referred to in Article 156-20-2, the Prime Minister must notify the license applicant of this in writing without delay.

A foreign financial instruments clearing organization must perform financial instruments obligation assumption services pursuant to the provisions of its business rules.

The following matters must be specified in the business rules:

the transactions giving rise to obligations that are subject to financial instruments obligation assumption services;

the particulars of the requirements for a clearing member;

the particulars of the taking over, novating, or other methods of assuming obligations that the clearing organization performs as financial instruments obligation assumption services, and the particulars of performance of such obligations;

the particulars involved in ensuring the performance of the obligations of a clearing member;

the particulars of brokerage for clearing of securities, etc.; and

other matters specified by Cabinet Office Order.

It is prohibited for the officer (or, if an officer is a corporation, the person that is to perform its duties) or employee of a foreign financial instruments clearing organization, or for a person that has held any of these positions, to divulge or misappropriate any secret learned in connection with financial instruments obligation assumption services.

It is prohibited for the officer (or, if an officer is a corporation, the person that performs those duties) or employee of a foreign financial instruments clearing organization, or for a person that has held any of these positions, to utilize information learned in connection with the operation of financial instruments obligation assumption services, for a purpose other than the use in financial instruments obligation assumption services.

A foreign financial instruments clearing organization must not subject any particular clearing member to unfair and discriminatory treatment.

If a foreign financial instruments clearing organization establishes provisions in its business rules for the method of netting off outstanding obligations (meaning obligations which have arisen from the subject transactions that a clearing member has conducted, and which the clearing organization has taken over from the other parties to those subject transactions or has novated or in any other way borne as financial instruments obligation assumption services; claims (limited to claims with the same contents as those obligations) that the clearing organization has acquired against a clearing member as the consideration for the obligations which have arisen out of subject transactions and which the clearing organization has borne for the clearing member; and collateral; hereinafter the same applies in this paragraph), the method of allocating collateral to cover outstanding obligations, or other means of settling outstanding obligations, and special liquidation proceedings, bankruptcy proceedings, rehabilitation proceedings, or reorganization proceedings have been commenced for a clearing member, the calculation of the amount of the claim that the foreign financial instruments clearing organization or the clearing member has in terms of the outstanding obligations and other means of settlement in relation to these proceedings, are to be in accordance with the provisions of the business rules.

In bankruptcy proceedings, rehabilitation proceedings, or reorganization proceedings, the claims provided for in the preceding paragraph which a foreign financial instruments clearing organization has are bankruptcy claims, rehabilitation claims, or reorganization claims, and the claims provided for in that paragraph which a clearing member has are the property that is part of the bankruptcy estate, rehabilitation debtor's assets, the property of the corporation in need of reorganization, or the property of the cooperative financial institution in need of reorganization.

A foreign financial instruments clearing organization must obtain the authorization of the Prime Minister if it seeks to change its articles of incorporation (limited to the part related to financial instruments obligation assumption services) or business rules.

If a particular set forth in Article 156-20-3, paragraph (1), items (ii) through (vii) changes, the foreign financial instruments clearing organization must notify the Prime Minister of this, pursuant to the provisions of Cabinet Office Order, supplying the document set forth in paragraph (2), item (i) of that Article.