Financial Instruments and Exchange Act

If a designated parent company comes to fall under any of the following items, it must notify the Prime Minister of this without delay, pursuant to the provisions of Cabinet Office Order:

it merges with another corporation (unless the designated parent company disappears in the merger);

it files a petition to commence bankruptcy proceedings, rehabilitation proceedings, or reorganization proceedings; or

it falls under any other case specified by Cabinet Office Order.

If a designated parent company comes to fall under any of the following items, the person specified in that item must notify the Prime Minister of this within 30 days from the day in question:

it comes to no longer be the parent company of the subject special financial instruments business operator:the company that used to be the designated parent company;

it disappears in a merger:the officer that represented the designated parent company;

it dissolves as a result of an order to commence bankruptcy proceedings:the bankruptcy trustee; or

it dissolves for reasons other than a merger or an order to commence bankruptcy proceedings:the liquidator.

If a designated parent company comes to fall under any of the items of the preceding paragraph, the designation under the provisions of Article 57-12, paragraph (1) ceases to be effective.

If there has been a notification under the provisions of paragraph (2), the Prime Minister must issue public notice that the designation has lost its validity pursuant to the provisions of the preceding paragraph in the Official Gazette.

If the Prime Minister finds it to be necessary and appropriate in the public interest or for the protection of investors in light of the state of the business of a designated parent company or the state of the assets of a designated parent company and its subsidiary corporations, etc., the Prime Minister may, to the extent necessary, order the designated parent company to take measures that are necessary for improving the state of the business operations or the assets of the subject special financial instruments business operator.

If the Prime Minister issues an order under the provisions of the preceding paragraph to a designated parent company and finds it to be particularly necessary in light of the implementation status of measures under that order, the Prime Minister may order the subject special financial instruments business operator to take measures that are necessary for improving its business operations or the state of its assets.

If a designated parent company falls under any of the following items, the Prime Minister may order the designated parent company to take measures so that it will cease to be the parent company of a subject special financial instruments business operator or to take other necessary measures within a fixed period of no longer than three months:

it has a person falling under any of the provisions of Article 29-4, paragraph (1), item (ii), (a) through (i) as an officer;

its business is found to be contrary to the public interest;

in light of the personnel structure of the designated parent company, the sound and appropriate operation of the business of the subject special financial instruments business operator is likely to be impaired; or

it is a domestic company, but is not a stock company (meaning a stock company that has in place the following organs):

a board of directors; and

a company auditor, supervisory committee, or nominating committee, etc.;

If a designated parent company falls under any of the following items, the Prime Minister may order the designated parent company to take measures so that it will cease to be the parent company of a subject special financial instruments business operator or to take other necessary measures within a fixed period of no longer than three months, or may order the subject special financial instruments business operator to suspend all or part of the business during a fixed period of no longer than six months:

it violates a law or regulation or a disposition by the Prime Minister based on a law or regulation; or

in light of the state of its business or assets, it is likely to become insolvent.

If the officer of a designated parent company (for a foreign company, this is limited to an officer stationed at its domestic offices; hereinafter the same applies in this paragraph) comes to fall under any of the categories in Article 29-4, paragraph (1), item (ii); (a) through (i), or comes to fall under item (i) of the preceding paragraph, the Prime Minister may order the designated parent company to dismiss that officer.

If the Prime Minister finds it to be necessary and appropriate in the public interest or for the protection of investors in light of the soundness of management of a highest designated parent company and its subsidiary corporations, etc., the Prime Minister may, to the extent necessary, issue orders to the highest designated parent company with regard to particulars that are necessary from a supervisor perspective.

If the Prime Minister issues an order under the provisions of the preceding paragraph to a highest designated parent company, and the integrity of management of the highest designated parent company and its subsidiary corporation, etc. does not improve and is found to have no prospect of improving as of the day on which three months have elapsed since the day of the order, the Prime Minister may order the highest designated parent company to take measures so that it will cease to be the parent company of the subject special financial instruments business operator or to take other necessary measures, within a fixed period of no longer than three months.

An order under the provisions of the preceding two paragraphs is to be given so as to correspond with the classification of the integrity of management of the highest designated parent company and its subsidiary corporations, etc., and the Prime Minister must determine the relevant classifications and the nature of the corresponding orders in advance and make public notice of the same.

If the Prime Minister issues an order under the provisions of paragraph (1) to a highest designated parent company and finds it to be particularly necessary in light of the execution status of measures under that order, the Prime Minister may order the subject special financial instruments business operator to take any measures that are necessary from a supervisory perspective.

In the cases set forth as follows, the Prime Minister must make a public notice indicating as follows, pursuant to the provisions of Cabinet Office Order:

the Prime Minister orders measures to be taken pursuant to the provisions of Article 57-20, paragraph (1);

the Prime Minister orders measures to be taken pursuant to the provisions of Article 57-20, paragraph (2), or orders the suspension of all or part of the business; or

the Prime Minister orders measures to be taken pursuant to the provisions of paragraph (2) of the preceding Article.

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 a designated parent company, a person that conducts transactions with a designated parent company, the subsidiary company, etc. of a designated parent company (meaning a subsidiary company, etc. provided for in Article 57-10, paragraph (2); hereinafter the same applies in this Article), or the person that a designated parent company has entrusted with its business (including a person that has received entrustment from the person (including entrustment at two or more degrees of separation from the original entrustment); hereinafter the same applies in this Article), to submit reports or materials that should serve as a reference with regard to the business or assets of the subject special financial instruments business operator or the designated parent company (but may only order a subsidiary company, etc. to submit reports or materials that should serve as a reference in connection with the assets of the subject special financial instruments business operator or the designated parent company), and may have the relevant officials inspect the state of the business or assets, books, documents, and any other articles of a designated parent company, a subsidiary company, etc., or the person that a designated parent company has entrusted with its business (but may only have the relevant officials inspect a subsidiary company, etc. as is necessary in connection with the assets of the subject special financial instruments business operator or the designated parent company, and may only have the relevant officials inspect the person that a designated parent company has entrusted with its business as is necessary in connection with the business or assets of the subject special financial instruments business operator or the designated parent company).

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 57-19, Article 57-20, paragraph (1) or (2) or Article 57-21, paragraph (1), (2) or (4), the Prime Minister must conduct a hearing.

If the Prime Minister decides to issue a disposition based on the provisions of Article 57-19; Article 57-20; or Article 57-21, paragraph (1), (2), or (4), the Prime Minister must notify the designated parent company or the subject special financial instruments business operator of this in writing.

The provisions of Articles 57-3 through 57-7; Article 57-8, paragraph (1); Article 57-9; and Article 57-11 do not apply to a subject special financial instruments business operator.

The provisions of Article 32, paragraphs (1) and (2); Article 32-2, paragraph (1); and Article 32-3, paragraph (1) apply mutatis mutandis to the shareholders and equity holders of a designated parent company.

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 major shareholder of a designated parent company (meaning a major shareholder as prescribed in Article 29-4, paragraph (2); hereinafter the same applies in this paragraph) to submit reports or materials that should serve as reference with regard to a notification or measures under Article 32, paragraph (1) or (2); Article 32-2, paragraph (1); or Article 32-3, paragraph (1) as applied mutatis mutandis pursuant to the provisions of the preceding paragraph, or with regard to the business or assets of the subject special financial instruments business operator or the designated parent company, or may have the relevant officials inspect documents or other articles of such a major shareholder (but only as is necessary in connection with the notification or measures under Article 32, paragraph (1) or (2); Article 32-2, paragraph (1); or Article 32-3, paragraph (1) as applied mutatis mutandis pursuant to the provisions of the preceding paragraph or in connection with the business or assets of the subject special financial instruments business operator or the designated parent company).

The technical replacement of the terms for the application of the provisions of this Act to the parent company of a special financial instruments business operator that is a foreign company and necessary particulars otherwise relevant to the application of the provisions of this Act to such a foreign company are specified by Cabinet Order.