JAPAN Law and Practice Contributed by: Kunihiko Morishita, Masayuki Hashimoto and Koichi Miyamoto, Anderson Mori & Tomotsune
3.2 Fund Investment 3.2.1 Types of Investors in Retail Funds There is no restriction on types of investors in respect of public offered investment funds. Gen - eral investors may apply for subscription, includ - ing a wide range of individual investors and insti - tutional investors. 3.2.2 Legal Structures Used by Fund Managers Please see 3.1.1 Fund Structures . 3.2.3 Restrictions on Investors Please see 3.2.1 Types of Investors in Retail Funds . 3.3 Regulatory Environment 3.3.1 Regulatory Regime In general, a publicly offered securities invest - ment trust must comply with the following requirements provided by the rules of the ITAJ. • It may invest only in shares listed on a stock exchange and registered on an over-the- counter market established in a foreign country, and in unlisted shares or unregis - tered shares subject to disclosure obligations in accordance with the FIEA, the Companies Act of Japan or similar laws, or those issued in foreign countries that are deemed similar to these. • It may invest in an aggregate amount of units/ shares of investment funds up to 5% of its net assets. This limitation does not apply to fund-of-funds type securities investment trusts, but they must invest in multiple invest - ment funds and comply with the credit risk limitations stated below. • The amount of risk arising from derivative transactions calculated in a reasonable man - ner may not exceed its net asset value (the “derivative transaction limitation”).
• Ratios of the exposure to a single entity to the total amount of net assets may not exceed 10% for each of the following categories, or 20% in total (the “credit risk limitation”): (a) shares and units/shares of investment trusts/corporations; (b) other securities and liabilities; and (c) derivative transactions. A publicly offered foreign investment trust/cor - poration must comply with the following require - ments provided by the rules of the JSDA: • the total value of securities sold short shall not at any time exceed its net asset value; • no more than 15% of the net assets may be invested in illiquid assets such as privately placed equity securities or unlisted securities, unless appropriate measures have been taken to ensure price transparency; • any transactions that are contrary to the protection of unitholders or prejudicial to the proper management of assets, such as trans - actions made for the benefit of a manager or any third party, shall be prohibited; • a manager shall not acquire shares of any one company if doing so would result in the total number of shares of such company held by all funds managed by a manager exceeding 50% of the total number of all issued and out - standing shares of such company; • derivative transaction limitations; and • credit risk limitations. In addition, if an issuer of an investment trust/ corporation intends to list their units/shares on a stock exchange (eg, ETF or J-REIT), they must apply for a listing examination from the relevant stock exchange. To be qualified as listed units/ shares, they have to meet criteria for the listing examination provided by the securities listing
302 CHAMBERS.COM
Powered by FlippingBook