Japan's FSA launched a review of existing regulation and government supervision of Japan's asset management sector, following the recent AIJ Investment Advisors Co. scandal, in which AIJ's President was indicted for fraud after it was revealed that AIJ hid pension fund losses of up to $1.4 billion over a nine-year period. After formally inviting public comments on the issue, the FSA has recently published draft amendments to both the existing legislation and to its internal guidelines for supervising FSA officials, aimed at reducing the likelihood of similar cover-ups happening in the future.
Broadly speaking, the FSA's proposed amendments are aimed at introducing systems to help domestic trust banks and pension funds verify financial information provided by discretionary investment management companies, as well as increasing the volume of information which discretionary investment management companies are required to provide. In addition, the FSA proposes implementing heavier penalties for false statements made by discretionary investment management companies and introducing a more rigorous system of regulatory supervision and inspection.
Following the proposals, the FSA has also imposed administrative punishments (including suspension of certain business operations) on three investment advisors who managed investments for the fund which AIJ is suspected of defrauding.