Financial Instruments and Exchange Act

A person seeking the authorization referred to in paragraph (1) or in the proviso to paragraph (3) of the preceding Article must submit a written application for authorization to the Prime Minister, in which it states the following particulars:

its trade name;

the amount of stated capital;

the names of its directors and company auditors (or, for a company with supervisory committee, its directors; and for a company with nominating committee, etc., its directors and executive officers);

for a company with accounting advisors, the names of its accounting advisors; and

the names and locations of its head office and other business offices.

The articles of incorporation and other documents specified by Cabinet Office Order must accompany the written application for authorization referred to in the preceding paragraph.

The provisions of Article 81, paragraph (3) apply mutatis mutandis to the articles of incorporation referred to in the preceding paragraph.

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

the applicant for authorization or the company that would be incorporated after obtaining authorization (hereinafter collectively referred to as the "applicant for authorization, etc." in this Article) is a person whose sole purpose is to have an incorporated financial instruments exchange, an incorporated financial instruments exchange, or any of the following companies, as its subsidiary company:

a company engaged in business incidental to the operation of a financial instruments exchange market;

a company engaged in business that is linked to the operation of a financial instruments exchange market;

a company engaged in the operation of a commodity market; or

a company engaged in business that is linked to the operation of the necessary market for effecting commodity futures transactions;

the applicant for authorization, etc. and the incorporated financial instruments exchange that would become its subsidiary company have good prospects in terms of income and expenditures;

in light of its personnel structure, the applicant for authorization, etc. has the knowledge and experience to manage the business of the incorporated financial instruments exchange that is to become its subsidiary company, in an appropriate and fair manner; and

the applicant for authorization has sufficient social credibility.

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 authorization, except in a case that falls under any of the following items:

the applicant for authorization, etc. 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.;

the applicant for authorization 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 applicant for authorization 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 disposition similar to the license or registration); for whom five years have not passed since the date of the rescission;

the applicant for authorization, etc. has a person falling under any of the provisions of Article 82, paragraph (2), item (iii), (a) through (f) as an officer; or

the application for authorization, 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.

The provisions of Article 85-4 apply mutatis mutandis to the authorization referred to in Article 106-10, paragraph (1) and in the proviso to paragraph (3) of that Article.

It is prohibited for any person to acquire or hold a number of subject voting rights in a financial instruments exchange holding company which is equal to or greater than the threshold holding ratio of all shareholders' voting rights; provided, however, that this does not apply if an authorized financial instruments firms association, financial instruments exchange, or commodity exchange acquires or holds subject voting rights.

If the number of subject voting rights that the person holds does not increase or in any other case specified by Cabinet Office Order, the provisions of the main clause of the preceding paragraph do not apply to a person acquiring or holding a number of subject voting rights in a financial instruments exchange holding company which is equal to or greater than the threshold holding ratio of all shareholders' voting rights.

In the case referred to in the preceding paragraph, a person that comes to acquire or hold a number of subject voting rights in a financial instruments exchange holding company which is equal to or greater than the threshold holding ratio of all shareholders' voting rights (hereinafter referred to as a "specified holder" in this Article) must notify the Prime Minister without delay that it has become a specified holder and of the matters specified by Cabinet Office Order.

In the case referred to in paragraph (2), a specified holder must take the necessary measures to become the holder of a number of subject voting rights in a financial instruments exchange holding company which is less than the threshold holding ratio, within three months from the day on which that person becomes a specified holder; provided, however, that this does not apply if the specified holder is a local government, etc. and the local government, etc. obtains the authorization of the Prime Minister pursuant to the provisions of Article 106-17, paragraph (1).

Necessary particulars relevant to the application of the provisions of each of the preceding paragraphs are specified by Cabinet Order.

A person that becomes the holder of subject voting rights exceeding five percent of all shareholders' voting rights in a financial instruments exchange holding company (hereinafter referred to as the "holder of subject voting rights" in this Article) must submit a statement of holdings in subject voting rights to the Prime Minister, pursuant to the provisions of Cabinet Office Order and without delay, in which that person states the subject voting rights holding ratio (meaning the ratio arrived at by dividing the number of subject voting rights that the holder of subject voting rights holds by the number that represents all shareholders' voting rights in the financial instruments exchange holding company), the purpose for which they are held, and the matters specified by Cabinet Office Order.

If the Prime Minister suspects that a statement of holdings in subject voting rights as referred to in the preceding Article contains a false statement or omits a statement as to a particular that is required to be stated, the Prime Minister may order the person submitting the statement of holdings in subject voting rights to submit reports or materials that should serve as a reference, or may have the relevant officials inspect the documents and other articles of that person (but only as is necessary in connection with what is stated in the statement of holdings in subject voting rights).

Notwithstanding the provisions of Article 106-14, paragraph (1), with the authorization of the Prime Minister, a local government, etc. may acquire or hold a number of subject voting rights that is equal to or greater than the threshold holding ratio, but no greater than 50 percent, of all shareholders' voting rights in a financial instruments exchange holding company, pursuant to the provisions of Cabinet Office Order.

Notwithstanding the provisions of the preceding paragraph and Article 106-14, paragraph (1), if the number of subject voting rights that it holds does not increase or in any other case specified by Cabinet Office Order, a local government, etc. that has obtained the authorization under the preceding paragraph may acquire or hold subject voting rights exceeding 50 percent of all shareholders' voting rights in a financial instruments exchange holding company.

In the case referred to in the preceding paragraph, a local government, etc. that comes to acquire or hold subject voting rights exceeding 50 percent of all shareholders' voting rights in a financial instruments exchange holding company (hereinafter referred to as a "specified holding entity, etc." in this Article) must take the necessary measures for it to become the holder of a number of subject voting rights which constitutes 50 percent or less of all shareholders' voting rights in the financial instruments exchange holding company, within three months from the day on which it becomes a specified holding entity, etc.

The provisions of Article 106-3, paragraphs (3) and (5) apply mutatis mutandis to a specified holding entity, etc. In this case, in paragraph (3) of that Article, the phrase "the preceding paragraph" is deemed to be replaced with "Article 106-17, paragraph (2)", and in Article 106-3, paragraph (5), the phrase "the preceding paragraph" is deemed to be replaced with "Article 106-17, paragraph (3)".

The provisions of Article 30-2 apply mutatis mutandis to the authorization referred to in paragraph (1).

When an application is filed for the authorization referred to in paragraph (1) of the preceding Article, the Prime Minister must examine whether the application conforms to the following criteria:

the applicant for authorization's exercise of the subject voting rights is not likely to impair the sound and appropriate operation of the business of an incorporated financial instruments exchange that is the subsidiary company of the financial instruments exchange holding company; and

the applicant for authorization has a sufficient understanding of the public nature of the business of a financial instruments exchange.

The provisions of Article 82, paragraph (2) apply mutatis mutandis to the authorization referred to in paragraph (1) of the preceding Article. In this case, in Article 82, paragraph (2), the phrase "the preceding paragraph" is deemed to be replaced with "Article 106-18, paragraph (1)", the phrase ", Article 156-17, paragraph (1) or (2)" is deemed to be replaced with ", Article 156-17, paragraph (1) or (2); Article 156-20-14, paragraph (1) or (2)", and the phrase ", Article 106-28, paragraph (1)" is deemed to be replaced with ", Article 106-28, paragraph (1); Article 155-6; Article 155-10, paragraph (1)"; and any other necessary technical replacement of terms is specified by Cabinet Order.

The provisions of Article 85-4 apply mutatis mutandis to the authorization referred to in Article 106-17, paragraph (1).

If 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 financial instruments exchange holding company (meaning a person that has obtained the authorization referred to in Article 106-17, paragraph (1); hereinafter the same applies in this Division) to submit reports or materials of reference in connection with the business or assets of the financial instruments exchange holding company or an incorporated financial instruments exchange that is its subsidiary company, or may have the relevant officials inspect the documents and other articles of such a major shareholder (but only as is necessary in connection with the business or assets of the financial instruments exchange holding company or an incorporated financial instruments exchange that is its subsidiary company).

The provisions of the preceding paragraph apply mutatis mutandis to a commodity exchange that holds a number of subject voting rights in an incorporated financial instruments exchange which is equal to or greater than the threshold holding ratio.