Financial Instruments and Exchange Act

The provisions of Article 50-2, paragraph (8) apply mutatis mutandis to a person that was a special financial instruments business operator if the special financial instruments business operator has had the registration referred to in Article 29 rescinded pursuant to the provisions of Article 57-6, paragraph (3). In such a case, the person that was the special financial instruments business operator is deemed to still be a financial instruments business operator inasmuch as the task of completing customer transactions or returning or transferring customer property to customers is concerned.

When 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 the subsidiary company, etc. of a special financial instruments business operator to submit reports or materials that should serve as a reference in connection with the assets of the special financial instruments business operator, and may have the relevant officials inspect the state of the business or assets, or the books, documents, and any other articles, of such a subsidiary company, etc. (but only as is necessary in connection with the property of the special financial instruments business operator).

The term "subsidiary company, etc." as used in the preceding paragraph means a second company, etc. with a parent company, etc. (meaning a company, etc. (meaning a company, partnership, or other equivalent business entity, including anything that is equivalent to these in a foreign country; hereinafter the same applies in this paragraph) specified by Cabinet Office Order as a first company, etc. that controls the mechanism that decides the financial and operational or business policies of a second company, etc. (meaning the shareholders or other equivalent body; hereinafter referred to as the "decision-making body" in this paragraph)) that controls its decision-making body. In such a case, a second company, etc. whose decision-making body is controlled by a parent company, etc. and its subsidiary company, etc. or whose decision-making body is controlled by the subsidiary company, etc. of such a parent company, etc. is deemed to be a subsidiary company, etc. of that parent company, etc.

Irrespective of the category of proceeding for hearing statements of opinion under Article 13, paragraph (1) of the Administrative Procedure Act, before seeking to issue a disposition based on the provisions of Article 57-6, paragraph (1) or (3), the Prime Minister must conduct a hearing.

If the Prime Minister decides to issue a disposition based on the provisions of Article 57-6, paragraph (1) or (3), the Prime Minister must notify the special financial instruments business operator of this in writing.

If the parent company (meaning a parent company as prescribed in Article 57-2, paragraph (8); hereinafter the same applies in this Section) of a special financial instruments business operator or its subsidiary corporation, etc. satisfies any of the following requirements, and the Prime Minister finds that ensuring the sound and appropriate operation of the business of the parent company and its subsidiary corporations, etc. is particularly necessary in the public interest or for the protection of investors, the Prime Minister is to designate the parent company as a person that is subject to the application of the provisions of this Subsection:

the parent company conducts business management of the special financial instruments business operator as business; or

the parent company or its subsidiary corporation, etc. lends funds to, guarantees obligations for, or provides other similar assistance with fund procurement to the special financial instruments business operator for the purpose of its business operations, and it is found that the suspension of such assistance would be likely to substantially compromise the sound and appropriate operation of the business of the special financial instruments business operator.

If the group consisting of the parent company of a special financial instruments business operator and its subsidiary corporations, etc. is found to be under appropriate supervision by an administrative organization based on other laws and regulations (including if the group is found to be under appropriate supervision by a foreign administrative organization or any other equivalent organization based on foreign laws and regulations) with respect to the state of its business operations and assets, the Prime Minister may choose not to make the designation under the provisions of the preceding paragraph.

Upon effecting a designation under the provisions of paragraph (1), the Prime Minister must notify the person subject to the designation (hereinafter referred to as "designated parent company") in writing of this, as well as notifying it of the trade name of the special financial instruments business operator connected with that designation (hereinafter referred to as "subject special financial instruments business operator"), and whether or not it, as the designated parent company, is the highest designated parent company (meaning a designated parent company that does not have a parent company which is the designated parent company of the same subject special financial instruments business operator as itself; hereinafter the same applies in this Subsection). The same applies if these matters change.

Upon making a designation under the provisions of paragraph (1), the Prime Minister must make public notice of the trade name or name and the location of the head office or principal office of the designated parent company (for a foreign company that has an office in Japan, this includes the location of its principal office in Japan; hereinafter the same applies in paragraph (1), item (iv) of the following Article), and the trade name of the subject special financial instruments business operator in the Official Gazette. The same applies if any of these particulars changes.

If the Prime Minister finds that the grounds for a designated parent company becoming subject to a designation under the provisions of paragraph (1) have ceased to exist, the Prime Minister, in addition to cancelling that designation, must give written notice of this to the designated parent company whose designation is being cancelled.

If the Prime Minister cancels a designation pursuant to the provisions of the preceding paragraph, the Prime Minister must issue public notice of this in the Official Gazette.

A designated parent company must submit a document to the Prime Minister in which it states the following particulars, by the day on which the period specified by Cabinet Order has elapsed since the day it became subject to the designation under the provisions of paragraph (1) of the preceding Article; provided, however, that this does not apply if the designated parent company is no longer the parent company of the subject special financial instruments business operator by such day:

its trade name or name;

the amount of stated capital or the total amount of contributions;

the names of its officers;

the name and location of its head office or principal office;

if applicable, an indication that the group consisting of the designated parent company 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 a foreign administrative organization or any other equivalent organization based on foreign laws and regulations) with respect to the state of its business operations and assets;

the particulars specified by Cabinet Office Order as the business outline and business method of the management of the subject special financial instruments business operator's business by the designated parent company or assistance with fund procurement for the subject special financial instruments business operator by the designated parent company or its subsidiary corporation, etc.; and

other particulars specified by Cabinet Office Order.

The following documents must accompany the document referred to in the preceding paragraph:

a document pledging that the designated parent company does not fall under the purview of Article 57-20, paragraph (1), item (i) or (iv) (in the case of a foreign company, item (i) of that paragraph); and

its articles of incorporation, its certificate of registered information, and other documents specified by Cabinet Office Order.

As concerns the documents set forth in item (ii) of the preceding paragraph accompanying the document under paragraph (1), if the articles of incorporation have been prepared as electronic or magnetic records, such electronic or magnetic records (limited to those specified by Cabinet Office Order) may accompany that document in lieu of written documents.

If the particulars set forth in the items of paragraph (1) of the preceding Article changes, the designated parent company must notify the Prime Minister of this within two weeks from the day of the change, pursuant to the provisions of Cabinet Office Order.

In and after the business year that includes the day on which the period specified by Cabinet Order elapses counting from the day on which a company becomes the highest designated parent company and pursuant to the provisions of Cabinet Office Order, the highest designated parent company must prepare a business report on a consolidated basis, in which it describes the state of the business and assets of the highest designated parent company and its subsidiary corporations, etc., and submit this 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, the highest designated parent company must report the state of the business and assets of the highest designated parent company 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, pursuant to the provisions of Cabinet Order, may order the highest designated parent company to make public notice of all or part of the business report referred to in paragraph (1).

In and after the business year that includes the day on which the period specified by Cabinet Order elapses counting from the day on which a company becomes the highest designated parent company, the highest designated parent company must prepare explanatory documents on a consolidated basis for the highest designated parent company 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 highest designated parent company and its subsidiary corporations, etc., and must, pursuant to the provisions of Cabinet Office Order, keep these explanatory documents at all of the business offices and offices of the subject special financial instruments business operator and make them available for public inspection, or disclose them using the internet or through other means, 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 subject special financial instruments business operator, the Prime Minister must establish criteria for whether the capital adequacy of the highest designated parent company and its subsidiary corporations, etc. is appropriate in light of the assets, etc. held by the highest designated parent company and its subsidiary corporations, etc. and other criteria that indicate soundness in the management of the highest designated parent company and its subsidiary corporations, etc., as criteria by which the highest designated parent company is to judge the soundness in the management of the highest designated parent company and its subsidiary corporations, etc.

For each highest designated parent company quarter (meaning each of the periods categorized into January to March, April to June, July to September, and October to December; hereinafter the same applies in this Article) in and after the highest designated parent company quarter that includes the day on which the period specified by Cabinet Order elapses counting from the day on which a company becomes the highest designated parent company, the highest designated parent company must submit a document to the Prime Minister in which it describes the soundness of its management as of the last day of the highest designated parent company quarter, as indicated by the criteria prescribed in the preceding paragraph (hereinafter simply referred to as "integrity of management" in the following paragraph and Article 57-21, paragraphs (1) through (3)), pursuant to the provisions of Cabinet Office Order.

For each highest designated parent company quarter in and after the highest designated parent company quarter that includes the day on which the period specified by Cabinet Order elapses counting from the day on which a company becomes the highest designated parent company, the highest designated parent company must keep a document in which it describes the integrity of management at all of the business offices or offices of the subject special financial instruments business operator and make this document available for public inspection, or make it public by using the Internet or by other means, during the three-month period beginning from the day on which the period specified by Cabinet Order elapses counting from the end of the highest designated parent company quarter, pursuant to the provisions of Cabinet Office Order.