Introduction
Covered businesses and eligible applicants
Registration procedures
Comment
In January 2021, the Financial Services Agency and local finance bureaus (the "Japanese regulators") established the Financial Market Entry Office to assist foreign financial business operators seeking to register as a financial instruments business in Japan. Before the establishment of the Financial Market Entry Office, foreign financial business operators were required to prepare and file application documents in Japanese to obtain the registration to carry on a financial instruments business. However, a partial amendment to the Cabinet Office Ordinance on Financial Instruments Business, etc was promulgated and entered into force on 12 January 2021. This amendment enables foreign financial business operators that meet certain requirements to prepare and file application documents in English for registration as a financial instruments business in Japan.
Covered businesses and eligible applicants
An application for registration in English will be accepted only if the application is filed for one of the following covered businesses and the applicant is an eligible applicant as set out below.
Covered businesses:
- investment advisory and agency businesses, as defined in article 28(3) of the Financial Instruments and Exchange Act (FIEA);
- investment management businesses, as defined in article 28(4) of the FIEA; or
- type II financial instruments businesses, as defined in article 28(2) of the FIEA related to investment management businesses where:
- a manager conducts self-solicitation of units of a unit trust or interests in a fund it established; or
- an investment manager for qualified investors or an asset management company for an investment corporation conducts a deemed type II financial instruments business.
Eligible applicants:
- a person or a corporation who conducts business in a foreign country that is the same type of business as an investment advisory and agency business or an investment management business, and complies with all relevant laws and regulations in that jurisdiction (the "relevant foreign financial business operator");
- a certain affiliated entity of a relevant foreign financial business operator;
- a corporation whose officer or important employee was an officer or employee of a relevant foreign financial business operator; or
- a person who was or whose important employee was an officer or employee of a relevant foreign financial business operator.
Overview
The Financial Market Entry Office serves as a centralised consultation service provided by the Japanese regulators for foreign financial business operators that are considering establishing a subsidiary or a branch to carry on a financial instruments business in Japan. A foreign financial business operator is able to schedule a prior consultation with the Financial Market Entry Office to determine whether it is eligible to apply in English for the registration to carry on a financial instruments business pursuant to the FIEA.
Prior consultation and registration application
At a prior consultation with the Financial Market Entry Office for an application for the registration of a financial instruments business, an applicant is typically asked to explain its business model in Japan. The Financial Market Entry Office will review the business model and determine whether all of the legal requirements have been met. To assist with the review, the applicant is required to complete an information sheet in advance that includes a detailed outline of its business in Japan. If the Financial Market Entry Office informs the applicant that it is eligible to submit an application for registration in English, the applicant will also be permitted to prepare and submit all other necessary accompanying documents in English, including the information sheet, consultation materials, the business rules for the financial instruments business in Japan and other internal rules that are referred to therein.
In order to apply to be registered as a financial instruments business in Japan, it is necessary to demonstrate compliance with various regulations required under the FIEA by establishing an internal system that takes into account the applicable matters under Japanese laws, regulations and the Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc. To establish such a system, a foreign financial business operator will be expected to appoint a compliance officer who has sufficient knowledge and experience in compliance with the FIEA and the supervisory guidelines. Furthermore, even if an applicant is permitted to submit its internal rules in English as part of the registration process as described above, it is often the case that the internal rules of a foreign financial business operator that have been used outside Japan require significant revisions to be aligned with Japanese laws and regulations.
Supervision and notification after registration
For foreign financial business operators who successfully complete the registration procedures in English, post-registration supervisory activities and inspections by the Japanese regulators will be conducted in English.
In addition, foreign financial business operators who have completed the registration procedures in English are permitted to make certain required notifications to the Japanese regulators in English. On the other hand, financial instruments business operators who complete the registration procedures in Japanese are not permitted to submit notifications in English and must submit all notifications in Japanese.
With the recent revision of the relevant laws and regulations and the establishment of the Financial Market Entry Office, subject to certain requirements, it is now possible to prepare and submit the application for registration as a financial instruments business in English, which can have lasting benefits in relation to post-registration interactions with the Japanese regulators. However, foreign financial business operators seeking to register as a financial instruments business in Japan will still need to give careful thought to how it establishes an internal system that demonstrates compliance with Japanese laws and regulations. It is expected that this new system and the Financial Market Entry Office will be a useful pathway going forward for foreign financial business operators when establishing a subsidiary or branch in Japan.
For further information on this topic please contact Shu Sasaki at Nagashima Ohno & Tsunematsu by telephone (+81 3 6889 7000) or email ([email protected]). The Nagashima Ohno & Tsunematsu website can be accessed at www.noandt.com.