Takeshi Nishida



On 14 February 2017, amendments to the securities disclosure regulations on continuous disclosure requirements for listed companies in Japan were published and came into immediate effect. Under the Japanese disclosure framework, companies listed on a securities exchange in Japan are required to comply with disclosure obligations under two separate rules. The first is under the Financial Instruments and Exchange Act of Japan (FIEA) and the second is under the listing regulation of the Tokyo Stock Exchange (TSE). Each set of rules requires listed companies in Japan to prepare and disclose similar information but in different formats, and this incurs significant time and cost. The amendments seek to streamline and rationalize these rules.


On March 1, 2016, amendments to the regulations on certain partnership-type funds in Japan, known as Special Exempted Business for Qualified Institutional Investors, etc. (“SEB” or Tekikaku Kikan Toushika Tou Tokurei Gyoumu), became effective. The amendments apply the Japanese suitability doctrine to previously exempt SEBs, limit target investors to sophisticated investors only and contain more onerous continuous disclosure and filing obligations, including an annual report.

Before the amendments, the SEB was a convenient option to target Japanese investors without requiring a securities business license to conduct business in Japan. Following the amendments the procedure to register the SEB is now similar to the more burdensome procedure for obtaining a financial instruments and exchange business license in Japan. The amendments also require existing SEBs to submit a new notification and attachment documents to the Japanese Financial Services Agency. As a result, existing SEBs must decide whether to abolish their business in Japan (i.e., stop marketing activities to Japanese investors and providing with investment management service to Japanese investors) or re-register under the new regulations. Many foreign fund managers previously relying on the SEB structure have chosen to abolish their business set up under the previous regulations.

New restricted stock

On April 28, 2016, Japan’s Ministry of Economy, Trade and Industry (METI) published a Guidebook for Introducing New Stock Compensation (restricted stock) as Board Members’ Compensation to Encourage Companies to Promote Proactive Business Management.

Restricted stock is a type of incentive compensation to executives in the form of stock, which they are prohibited from disposing of for a certain period of time.

Amendments to Japanese tax laws effective April 1, 2016 made the issuance of restricted stock to executives permissible where:

  1. The issuing corporation can claim the compensation as a deductible expense; and
  2. It is a taxable event to executives when they are able to dispose the shares of the stock.


On January 29, 2016, the amendments to the new regulations in relation to certain partnership-type funds in Japan, known as Special Exempted Business for Qualified Institutional Investors, etc. (SEB or Tekikaku Kikan Toushika Tou Tokurei Gyoumu) were approved at a cabinet meeting of the Japanese government.

The new rule for the SEB will be stringent. The amendments include transitional measures, under which entities utilizing the SEB before the effective date of the amendments will be required to submit certain documents and comply with certain disclosure and reporting obligations. The amendments will come into effect on March 1, 2016.

New Rule

Under the amendments, certain obligations and business conduct restrictions (such as the suitability doctrine) applicable to a registered financial instruments exchange business operator will also be applicable to entities under the SEB. Target investors will be limited to certain sophisticated investors. However, certain obligations and business conduct restrictions will not be applicable to activities in relation to professional investors (tokutei toushika), including qualified institutional investors.