This article was written as of January 2024.

1. Introduction

The bill to amend the Financial Instruments and Exchange Act (the "FIEA"), etc. (the "Bill") was promulgated on November 20, 2023. The purposes of the Bill include (a) ensuring customer-oriented business operations by financial service providers, and (b) abolishing quarterly reports by listed companies, etc. The effective date of the entering into force of the FIEA amendments contained in the Bill (the "Amended Act") has not yet been determined.

2. Customer-oriented business operations by financial service providers

Under the Bill, a duty of candor, which was previously imposed only on certain financial service providers such as securities firms and investment management companies, will be extended to almost all financial service providers and to those involved in the operation of corporate pension plans.

In Japan, a principles-based approach has been promoted, whereby if a financial service provider adopts the Principles for Customer-oriented Business Practice published by the Financial Services Agency (the "FSA"), it must endeavor to comply with said principles. It can be evaluated that the Bill will upgrade a part of these principles to a rule-based approach. Supervisory guidelines by the FSA may give details of the rules, but a draft of said guidelines are not yet published by the FSA.

3. Abolition of quarterly reports of listed companies, etc.

Although listed companies, etc. have until now been required to submit quarterly reports, the Amended Act abolishes the obligation to submit such quarterly reports in order to improve the efficiency of corporate disclosure requirements. Quarterly corporate disclosures will now be consolidated into the quarterly disclosure required by stock exchange rules.

On the other hand, regulations on corporate disclosure will be partially strengthened. Specifically, the publication period for semiannual reports will be extended from three (3) years to five (5) years, and the publication period for extraordinary reports will be extended from one (1) year to five (5) years.

4. Other amendments

In addition to the above, there are several other amendments. The major amendments are as follows:

• ● In reaction to the large number of cases where the FSA has imposed administrative penalties on social lending businesses, social lending businesses will now be required to report on their business to investors.
• ● Until now, investment funds that invest in physical real estate have been regulated under the Act on Specified Joint Real Estate Ventures (the "ASJREV") rather than under the FIEA, but those investment funds in which interests are tokenized will now be uniformly regulated under the FIEA in addition to the ASJREV.