JAPAN Law and Practice Contributed by: Hiroaki Takahashi, Kaoru Sato, Kenji Miyagawa and Koji Kawamura, Anderson Mori & Tomotsune
tekikaku kikan toshika tou tokutei gyomu , which exempts the registration requirement for certain private placements and/or certain acts of invest - ing money, the submission of business reports for every business year is required. The Ministry of Justice is the regulator for the disclosure of financial statements under the Companies Act, while requirements under the SPC Act and the FIEA are governed by the FSA. The penalties for non-compliance vary depend - ing on the requirement. For example, a failure to disclose financial statements under the Compa - nies Act or SPC Act will be subject to a minor administrative fine, but a failure to submit busi - ness reports under the SPC Act or the FIEA is subject to a criminal sanction. In connection with a breach of the FIEA or SPC Act, an administra - tive sanction is also applicable. 4.5 Activities of Rating Agencies There is no regulation prohibiting securitisation activity by a rating agency (RA). However, the FIEA has provided for: • the registration of an RA; • certain requirements for registered RAs to comply with, including a fiduciary duty, no conflict-of-interest rule and reporting require - ments; • monitoring registered RAs by requesting reports, on-site inspection and ordering busi - ness improvements; and • certain disclosure requirements if credit rat - ings of unregistered RAs are used. 4.6 Treatment of Securitisation in Financial Entities Under the Banking Act and other acts regulat - ing financial institutions, the Japanese govern - ment may set the criteria to be used by banks
and other financial institutions to determine the soundness in their management. In this connec - tion, the FSA has issued official announcements regarding the criteria for maintaining certain capital adequacy ratios and liquidity coverage ratios. The official announcements implemented from 31 March 2019 correspond to the revisions to the securitisation framework published by the Basel Committee for Banking Supervision in December 2014. 4.7 Use of Derivatives Certain types of derivatives are defined in the FIEA, and dealing, brokering or other certain types of businesses on those derivatives cannot be done unless duly registered under the FIEA. However, there are no specific laws or regula - tions on the use of derivatives in the context of securitisation or SPEs. 4.8 Investor Protection The FIEA provides various obligations of a finan - cial instruments business operator for the pur - pose of investor protection. Such rules are not securitisation-specific. The basic obligations of a financial instruments business operator under the FIEA include a pro - hibition against conflicts of interest, a duty of due care of prudent management ( zenkan chui gimu ), a duty of loyalty ( chujitsu gimu ), a duty of self-execution and a duty of separate manage - ment of assets. The FSA regulates these matters. Criminal and administrative sanctions will apply to any breach of obligations under the FIEA. 4.9 Banks Securitising Financial Assets As part of the obligations under the Basel III regime, banks are obliged to disclose their
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