Section 3 Accounting

The business year of a financial instruments business operator (limited to one that is engaged in type-I financial instruments business; hereinafter the same applies in this Subsection) is from the first day of a month selected by the financial instruments business operator, to the day on which one year has elapsed since that day; provided, however, that this does not apply to the first business year after changing the last day of the business year.

A financial instruments business operator must prepare and preserve books and documents concerning its business pursuant to the provisions of Cabinet Office Order.

①Each business year, pursuant to the provisions of Cabinet Office Order, a financial instruments business operator must prepare a business report and submit it to the Prime Minister within three months after the end of the business year.

②Beyond submitting a business report pursuant to the provisions of the preceding paragraph, a financial instruments business operator must report the state of its business and assets to the Prime Minister pursuant to the provisions of Cabinet Office Order.

③If 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 a financial instruments business operator to issue public notice of all or part of the business report referred to in paragraph (1).

Each business year, a financial instruments business operator must prepare explanatory documents stating the particulars specified by Cabinet Office Order as pertinent to the state of its business and assets, and must keep those explanatory documents at all of its business offices and offices and make them available for public inspection, or disclose them using the internet or through other means pursuant to the provisions of Cabinet Office Order, 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.

①A financial instruments business operator must lay aside financial instruments transaction liability reserves, pursuant to the provisions of Cabinet Office Order, in proportion to the transaction volume of the purchases and sales and other transactions of securities and derivatives transactions, etc.

②The financial instruments transaction liability reserves referred to in the preceding paragraph must not be used other than when allocated to cover a loss that arises due to problematic conduct in connection with a purchase and sale or other transaction of securities or a derivatives transaction, etc., or in cases otherwise specified by Cabinet Office Order.

①A financial instruments business operator must calculate the ratio of the sum of the amounts of its stated capital, reserve funds, and any other things specified by Cabinet Office Order less the sum total of the amounts of its fixed assets and any other things specified by Cabinet Office Order, to the sum of the amounts specified by Cabinet Office Order as the amount for covering possible risks which may arise due to fluctuations in the prices of the securities held or due to other reasons (hereinafter referred to as the "capital adequacy ratio"), and notify the Prime Minister of this ratio at the end of each month and in the cases specified by Cabinet Office Order.

②A financial instruments business operator must not allow its capital adequacy ratio to fall below 120 percent.

③A financial instruments business operator must prepare documents stating its capital adequacy ratio as of the last day of a quarter (meaning each three-month period of the business year (for the first business year after changing the last day of the business year, each period specified by Cabinet Office Order); the same applies in Article 57-2, paragraph (5) and Article 57-5, paragraphs (2) and (3)), keep them at all of its business offices and offices, and make them available for public inspection for the three-month period starting from the day on which one month has elapsed since the last day of the relevant month.

A financial instruments business operator (other than one that is engaged in type-I financial instruments business; hereinafter the same applies in this Subsection) must prepare and preserve books and documents concerning its business pursuant to the provisions of Cabinet Office Order.

Each business year, pursuant to the provisions of Cabinet Office Order, a financial instruments business operator must prepare a business report and submit it to the Prime Minister within three months after the end of the business year.

Each business year, pursuant to the provisions of Cabinet Office Order, a financial instruments business operator must prepare explanatory documents stating those of the particulars stated in the business report referred to in the preceding Article which are specified by Cabinet Office Order as particulars that are found to be necessary in terms of investor protection, and must keep them at all of its business offices and offices and make them available for public inspection, or disclose them using the internet or through other means pursuant to the provisions of Cabinet Office Order, 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.

A registered financial institution must prepare and archive its business books and documents pursuant to the provisions of Cabinet Office Order.

①Each business year, pursuant to the provisions of Cabinet Office Order, a registered financial institution must prepare a business report and submit it to the Prime Minister within three months after the end of the business year.

②Beyond submitting a business report pursuant to the provisions of the preceding paragraph, a registered financial institution must report the state of its business and assets to the Prime Minister pursuant to the provisions of Cabinet Office Order.

③If 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 a registered financial institution to give public notice of all or part of the business report under paragraph (1).

①A registered financial institution must lay aside financial instruments transaction liability reserves, pursuant to the provisions of Cabinet Office Order, in proportion to the transaction volume of the purchases and sales and other transactions of securities and derivatives transactions, etc.

②The financial instruments transaction liability reserves referred to in the preceding paragraph must not be used other than when allocated to cover a loss that arises due to problematic conduct involving a purchase and sale or other transaction of securities or a derivatives transaction, etc., or in cases otherwise specified by Cabinet Office Order.

①With regard to the application of Article 46-3, paragraph (1) if a financial instruments business operator is a foreign corporation, in that paragraph, the phrase "within three months" is deemed to be replaced with "within the period specified by Cabinet Order".

②With regard to the application of Article 46-6, paragraph (1) if a financial instruments business operator is a foreign corporation, in that paragraph, the term "stated capital" is deemed to be replaced with "brought-in capital", the term "reserve funds" is deemed to be replaced with "reserve funds laid aside in its business offices and offices in Japan", and the term "fixed assets" is deemed to be replaced with "fixed assets of its business offices and offices in Japan".

③With regard to the application of Article 47-2 if a financial instruments business operator is a foreign corporation or an individual domiciled in a foreign country, and with regard to the application of Article 48-2, paragraph (1) if a registered financial institution is a foreign corporation, in those provisions, the phrase "within three months" is deemed to be replaced with "within the period specified by Cabinet Order".

①Each business year, pursuant to the provisions of Cabinet Office Order, a financial instruments business operator (but only a foreign corporation engaged in type-I financial instruments business; hereinafter the same applies in this Subsection) must submit a balance sheet, profit and loss statement, and other financial accounting documents prepared in connection with all of its business, as well as documents summarizing business in the relevant business year, to the Prime Minister within the period specified by Cabinet Order after the end of that business year.

②Beyond submitting documents pursuant to the provisions of the preceding paragraph, a financial instruments business operator must report the state of its business and assets to the Prime Minister pursuant to the provisions of Cabinet Office Order.

①Until the amount of money specified by Cabinet Order as referred to in Article 29-4, paragraph (1), item (iv), (a) is reached, a financial instruments business operator must lay aside reserves for loss at its principal business office or office in Japan, pursuant to the provisions of Cabinet Office Order, in at least the amount arrived at by multiplying the amount of profit from the business conducted at all business offices and offices in Japan that it has established for the purpose of engaging in the financial instruments business (hereinafter referred to as "all business offices and offices" in the following paragraph and following Article), by the rate of no more than ten percent that is specified by Cabinet Office Order.

②The reserves for loss referred to in the preceding paragraph must not be used other than when allocated to cover a net loss linked to the business of all business offices and offices of the financial instruments business operator, with the approval of the Prime Minister.

Pursuant to the provisions of Cabinet Office Order, a financial instruments business operator must retain assets equivalent to the sum total of the amounts of its financial instruments transaction liability reserves, reserves for loss, and the amount of liability on the accounts of all business offices and offices as specified by Cabinet Order, in Japan.