JAPAN Law and Practice Contributed by: Kunihiko Morishita, Masayuki Hashimoto and Koichi Miyamoto, Anderson Mori & Tomotsune
However, a Registered Financial Instruments Business Operator has to comply with the gen - eral principle of suitability in the marketing and selling of financial instruments to investors under the FIEA. Pursuant to this, it must determine whether it is acceptable to market and sell a particular financial instrument to targeted inves - tors, considering their knowledge and experi - ence of investing in financial instruments, their asset situation and their purpose of investment, and provide an explanation to the investors in a manner and to the extent necessary for them to understand it. Prior to entering into a contract with an inves - tor, a Registered Financial Instruments Business Operator must, in general, deliver a document to the investor containing an outline of such con - tract, charges and fees, and major risk factors associated with the contract. Upon concluding a contract, a Registered Finan - cial Instruments Business Operator must, in gen - eral, deliver a document containing an outline of such contract, charges and fees, and provide a method for allowing communications between the operator and the investor. 2.3.11 Approach of the Regulator The Financial Services Agency of Japan (FSA) has authority over the administration of the FIEA, and responsibility for regulating the finan - cial markets and financial institutions. The FSA delegates certain authorities to a local finance bureau of the Ministry of Finance, such as that of regulating Registered Financial Instruments Business Operators and disclosure obligations in respect of financial instruments. There is no general limitation on access to the regulator, but it may take time to obtain its conclusions on matters that are innovative or
unprecedented. In some cases, the regulator prefers to hold preliminary consultations prior
to an official filing or application. 2.4 Operational Requirements
A Registered Investment Manager owes a gen - eral duty of sincerity and fairness to its clients and must work faithfully on behalf of its investors and carry out its investment management busi - ness with the due care of a prudent manager under the FIEA. As part of this, the FIEA specifically prohibits a Registered Investment Manager from: • conducting a transaction with itself or its offices; • conducting a transaction between investment funds both of which are managed by it; • conducting a transaction with the aim of ben - efitting itself or a third party; • conducting a transaction that is detrimental to investors; • purchasing or selling securities on its own account using information about a transaction that it has conducted as an investment; • providing, or promising to provide, loss com - pensation or additional benefits to investors; or • taking any other act deemed to be insufficient as a form of investor protection, harming the fairness of transactions, or causing a loss of confidence in the financial instruments busi - ness. In addition, a Registered Investment Manager of collective investment schemes must manage invested assets separately from its own assets and other invested assets in the manner pre - scribed by the FIEA.
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