Article 31-2Security Deposits for Operations

①A financial instruments business operator (limited to individuals seeking to engage in type-II financial instruments business and persons seeking to engage in investment advisory and agency business only; hereinafter the same applies in this Article) must deposit a business security deposit with the deposit office nearest to its principal business office or office.

②The amount of the business security deposit referred to in the preceding paragraph is specified by Cabinet Order in consideration of the actual condition of a financial instruments business operator's business and the need to protect investors.

③If a financial instruments business operator concludes a contract stating that the required business security deposit of the financial instruments business operator will be deposited if ordered by the Prime Minister, and has notified the Prime Minister of this, pursuant to the provisions of Cabinet Order, so long as that contract remains valid, the financial instruments business operator may refrain from depositing all or part of the business security deposit referred to in paragraph (1), in line with the amount of money that will be deposited pursuant to the contract (hereinafter referred to as the "contract amount" in this Article).

④If the Prime Minister finds it to be necessary for the protection of investors, the Prime Minister may order a person that has concluded a contract as referred to in the preceding paragraph with a financial instruments business operator, or may order the relevant financial instruments business operator, to deposit all or part of the amount equivalent to the contract amount.

⑤A financial instruments business operator must not begin financial instruments business until it deposits the business security deposit referred to in paragraph (1) (or until it concludes a contract set forth in paragraph (3)) and notifies the Prime Minister of this.

⑥A person that concludes an investment advisory contract with a financial instruments business operator, a person that concludes an investment advisory contract or discretionary investment contract based on a financial instruments business operator's agency or intermediation for that investment advisory contract or a discretionary investment contract, or a person that concludes a purchase and sale contract for securities based on a financial instruments business operator's purchase and sale of securities or its intermediation, brokerage, or agency for such a purchase and sale, has the right to receive payment of a claim arising from such a contract out of the business security deposit furnished by the financial instruments business operator, in preference over other creditors.

⑦The necessary particulars relevant to the exercise of the right referred to in the preceding paragraph are specified by Cabinet Order.

⑧If the amount of a business security deposit (including the contract amount; the same applies in paragraph (10)) comes to fall short of the amount specified by Cabinet Order as prescribed in paragraph (2) due to the exercise of the right referred to in paragraph (6) or for any other reason, the financial instruments business operator must deposit the shortfall (or conclude a contract set forth in paragraph (3)) within three weeks from the day specified by Cabinet Office Order and notify the Prime Minister of this without delay.

⑨National government bonds, municipal bonds, and other securities specified by Cabinet Office Order may serve as a business security deposit that is deposited pursuant to the provisions of paragraph (1) or the preceding paragraph.

⑩If the registration referred to in Article 29 is rescinded pursuant to the provisions of Article 52, paragraph (1) or (4) or Article 54, if the registration referred to in Article 29 loses its effect pursuant to the provisions of Article 50-2, paragraph (2), if a person has had a change registered as referred to in paragraph (4) of the preceding Article in connection with its engagement in the financial instruments business other than in type-II financial instruments business (but only if an individual engages in such business) or investment advisory and agency business, or if the amount of a business security deposit exceeds the amount specified by Cabinet Order as prescribed in paragraph (2), all or part of the business security deposit that is deposited pursuant to the provisions of paragraph (1), (4), or (8) may be refunded pursuant to the provisions of Cabinet Order.

⑪Beyond what is prescribed in the preceding paragraphs, the necessary particulars relevant to a business security deposit are specified by Cabinet Office Order and by Ministry of Justice Order.