On June 3, 2015, the Japanese government promulgated an amendment to the Financial Instruments and Exchange Act (FIEA). One of the main impacts of this amendment is the enhancement of restrictions on activities in relation to partnership-type funds in Japan.

In principle, it is necessary to obtain a license under the FIEA to conduct marketing and investment management activities for investment funds. However, the license is not required for activities in relation to investment funds in the form of certain partnerships, for example, if one or more Qualified Institutional Investors invests in the fund and certain other requirements are met, as well as if the filing of a simple notification known as Form 20 is made (Form 20 Exemption). Entities under this exemption are not treated as financial instruments business firms and more than 3,000 Japanese and non-Japanese entities have been utilizing this exemption.

However, there have been many cases of abuse under this exemption, targeting unsophisticated individual investors. In order to deal with these, the Japanese government amended the relevant requirements to be more stringent.

Under the amendment, certain business conduct restrictions such as the suitability doctrine will be applicable to entities under the Form 20 Exemption. Target investors will be limited to certain sophisticated investors. Moreover, certain continuous disclosure and filing obligations such as the filing of an annual report with the Japanese government will be introduced.

The amendment will become effective within one year from June 3, 2015. It will apply to applicants that filed Form 20 prior to the effective date. Details of the requirements and obligations under the amendment will be set forth in an official document, such as an executive order, which will be promulgated before the effective date of the amendment.


Takeshi Nishida is a member of the Capital Markets group in the Firm’s Tokyo office. He regularly handles securities matters and has over ten years of professional legal experience in Japan.

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