Japanese Securities Regulator to Allow
More English Language Filings

As part of a broad reform initiative, the Japanese Financial Services Agency will significantly expand the use of English language filings permitted for the Japanese markets. Currently, disclosure in English is allowed only for foreign exchange-traded funds. But, according to Commissioner Takafumi Sato, the FSA will soon permit English disclosure for all types of securities issued by foreign issuers, including foreign governments and foreign funds. In remarks at a recent CFO roundtable in Tokyo, he said that this action is expected to greatly reduce the administrative burden on foreign issuers raising funds in Japanese markets. At the same time, the FSA will accelerate its efforts in translate into English financial laws and rules and relevant policy documents. The FSA expects to complete the translation of major laws by June.

In an effort to create a more vibrant market for alternative investment vehicles, the FSA will expand private offerings to sophisticated investors. Noting the growing success of SEC Rule 144A offerings, the FSA is contemplating a highly flexible market designed for professional investors based on the principle of self-responsibility. Commissioner Sato believes that alternative investments will broaden opportunities for both Japanese and non-Japanese issuers to raise funds in Japan’s markets, and will also promote financial innovation through competition among professional players.

Under current securities regulations, private offerings limited to qualified institutional investors are exempt from public disclosure requirements. Taking advantage of this existing exemption, noted the commissioner, the FSA plans to put in place a framework for transactions among professionals by the end of this year. Simultaneously, the agency is working on a new framework for an exchange market, whose participants will be expanded to include specified investors with better competence than ordinary retail investors.

As part of the reforms, the FSA also plans to lift the ban on interlocking officers and employees among banking, securities, and insurance businesses in a financial group. In addition, restrictions on the sharing of undisclosed corporate customer information between banking and securities businesses will be relaxed. According to Commissioner Sato, these steps should enable financial groups to better serve their customers by allowing them to propose a wide range of alternatives; and also facilitate integrated risk management within a financial group. But he cautioned that, concomitant with this relief, the FSA will require financial firms to implement internal systems for controlling conflicts of interest.