Financial Instruments and Exchange Act

With the exception of an authorized financial instruments firms Association, a person must not operate a financial instruments market unless it is licensed by the Prime Minister.

The provisions of the preceding paragraph do not apply if a financial instruments business operator, etc. or a financial instruments intermediary service provider, or a financial service intermediary conducts a purchase and sale of securities or a market derivatives transaction (other than a transaction conducted outside a financial instruments exchange market), or intermediation, brokerage, or agency for the transactions pursuant to the provisions of this Act or the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto.

A person seeking to obtain the license referred to in paragraph (1) of the preceding Article must submit a written license application stating the following particulars to the Prime Minister:

its name or trade name;

the location of its office, head office, branch office, or any other business office; and

the names of its officers, and the trade names or names of members or trading participants (hereinafter each such member or trading participant is referred to as a "member, etc.").

The articles of incorporation, the operational rules, the brokerage contract rules, and other documents specified by Cabinet Office Order must be attached to the written license application referred to in the preceding paragraph.

In a case referred to in the preceding paragraph, if the articles of incorporation have been prepared as electronic or magnetic records, the electronic or magnetic records (limited to those specified by Cabinet Office Order) may be attached to the written license application in lieu of written documents.

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 provisions of the articles of incorporation, the operational rules, and the brokerage contract rules conform to laws and regulations, and are sufficient for ensuring fair and smooth purchase and sales of securities and market derivatives transactions on a financial instruments exchange market, as well as for protecting investors;

the license applicant has a personnel structure sufficient to operate a financial instruments exchange market in an appropriate manner; or

the license applicant will be organized as a financial instruments exchange in a manner that conforms to the provisions of this Act.

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 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 their license rescinded pursuant to the provisions of Article 148, Article 152, paragraph (1), Article 156-17, paragraph (1) or (2), Article 148 as applied mutatis mutandis pursuant to Article 156-26, or Article 156-32, paragraph (1); 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 authorization rescinded pursuant to the provisions of Article 106-7, paragraph (1), Article 106-21, paragraph (1), Article 106-28, paragraph (1) or Article 156-5-9, paragraph (1); a person that has had their 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 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 dispositions 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 the following sub-items (a) through (f) as an officer:

a person set forth in any of Article 29-4, paragraph (1), item (ii), (b) through (i);

a person that, during the 30 days prior to the date of rescission, was the officer (for a foreign financial instruments exchange or a foreign financial instruments clearing organization, this includes the domestic representative; hereinafter the same applies in (e)) of a financial instruments exchange that has had its license rescinded pursuant to the provisions of Article 148 or Article 152, paragraph (1); the officer of a financial instruments clearing organization that has had its license rescinded pursuant to the provisions of Article 156-17, paragraph (1) or (2); the officer of a securities finance company that has had its license rescinded pursuant to the provisions of Article 156-32, paragraph (1); the officer of a foreign financial instruments exchange that has had its authorization rescinded pursuant to the provisions of Article 155-6 or Article 155-10, paragraph (1); the officer a foreign financial instruments clearing organization that has had its license rescinded pursuant to the provisions of Article 156-20-14, paragraph (1) or (2); or the officer of a person that had a license or authorization 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 (including permission or any other administrative disposition similar to such a license or authorization); for whom five years have not passed since the date of the rescission;

a person that, during the 30 days prior to the date of rescission, was a Major shareholder (meaning a major shareholder as prescribed in Article 106-6, paragraph (1); Article 106-20, paragraph (1); or Article 156-5-8; hereinafter the same applies in this item) that has had its authorization rescinded pursuant to the provisions of Article 106-7, paragraph (1); Article 106-21, paragraph (1); or Article 156-5-9, paragraph (1); or was the officer of a financial instruments exchange holding company that has had its authorization rescinded pursuant to the provisions of Article 106-28, paragraph (1); for whom five years have not passed since the date of rescission;

a person whose major shareholder has had its authorization rescinded pursuant to the provisions of Article 106-7, paragraph (1); Article 106-21, paragraph (1); or Article 156-5-9, paragraph (1), and for whom five years have not passed since the date of the rescission;

an officer whose dismissal has been ordered pursuant to the provisions of Article 150; Article 152, paragraph (1); Article 155-10, paragraph (2); Article 156-14, paragraph (3); Article 156-17, paragraph (2); Article 156-20-14, paragraph (2); or Article 156-31, paragraph (3), for whom five years have not passed since the day of that disposition; or

an officer whose dismissal has been ordered pursuant to the provisions of Article 106-28, paragraph (2), for whom five years have not passed since the day of that disposition;

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 81, paragraph (1) is filed and the Prime Minister finds it inappropriate to grant that license, the Prime Minister must notify the license applicant to that effect and have the relevant official conduct a hearing.

Upon deciding to grant or not to grant the license under the provisions of Article 80, paragraph (1), the Prime Minister must notify the license applicant of this in writing without delay.

A financial instruments exchange must be a financial instruments membership corporation or a stock company with a stated capital of not less than the amount specified by Cabinet Order, and have in place the following organs:

a board of directors;

a board of company auditors, a supervisory committee, or a nominating committee, etc.; and

an accounting auditor.