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LawFlash

Japan to Establish Financial Market Entry Office and Promote English Filings

November 17, 2020

The Financial Services Agency of Japan (FSA) announced on November 6 that together with the local finance bureaus, it will establish a Financial Market Entry Office (FME Office upgraded from the current Financial Market Entry Consultation Desk, or FME Consultation Desk) in January 2021 to have better communications with foreign asset managers in English in connection with pre-consultation for business registration, business registration applications as well as supervision and inspection after the business registration is granted and promote the entry of foreign asset managers into the Japanese market.

In addition, the FSA published the draft amendments (Amendments) of the relevant regulations under the Financial Instruments and Exchange Act (FIEA), which allow foreign firms to file certain regulatory applications and notifications in English, and to set up a new division in the Kanto Local Finance Bureau (KLFB) in order to promote this new challenge. [1]

Establishment of Financial Market Entry Office

In order to communicate with foreign asset managers in English through the entire process of applying for registration (including preliminary discussions, application for business registration, and supervision and inspection after the business registration), the FSA and the local finance bureaus will jointly establish the FME Office with personnel who are comfortable communicating in English with foreign applicants. According to the FSA’s announcement, online communication (e.g., via video conference) with those residing outside of Japan will also be available.

Separately from the FME Office, the FSA established the FME Consultation Desk in April 1, 2017 where foreign financial business operators (including foreign asset managers) can contact relevant officials with inquiries concerning the entry into the Japanese market. Following the establishment of the FME Office, all the functions of the FME Consultation Desk (including the existing consultations) will be succeeded by the FME Office.

Promotion of English Filings

Regulatory Applications

According to the Amendments, those who fall under any of the following categories (Qualified Applicants) will be eligible to make these applications:

  1. A person or entity licensed as an investment advisor or investment manager under the laws of foreign jurisdictions; or
  2. A parent company, subsidiary, or affiliate of an entity specified in (i) above; or
  3. A person who used to work as an officer or key employee of an entity specified in (i) above will act as an officer or key employee of the relevant applicant.

Following the Amendments, when a Qualified Applicant newly applies for registration as a Financial Instruments Business Operator (FIBO) conducting business that falls under any one (or more) of the following categories, the application documents (including supporting documents) can be filed in English:

  1. Investment Management Business;
  2. Investment Advisory and Agency Business; and
  3. Type 2 Financial Instruments Business[2] (limited to self-offering of certain securities such as investment trusts and interests in a limited partnership which are managed by a Qualified Applicant as an Investment Management Business under the FIEA).

Under the current regulations, when a foreign asset manager applies for a FIBO registration, most of the application documents need to be translated into Japanese for submission to the KLFB, the local office delegated by the FSA to handle these applications. However, following the Amendments, foreign asset managers will be able to file relevant application documents in English without the need to translate them into Japanese as long as the above requirements are satisfied.

Scope of English Filings

In addition to the above FIBO applications, the Amendments also permit most of the regulatory notifications made by registered FIBOs (excluding FIBOs conducting Type 1 Financial Instruments Business[3]) also to be filed in English.

Currently, some regulatory fillings have already been accepted in English. Following the Amendments, the scope of the typical regulatory filings that are relevant to foreign asset managers and can be submitted in English are as set out in the table below.

Name of Filings

English Allowed

Notes

FIBO Application (Type 1 Financial Instruments Business)

×

FIBO Application (Type 2 Financial Instruments Business)

Limited to self-offering of certain securities such as investment trusts and interests in a limited partnership managed by an Qualified Applicant as Investment Management Business under the FIEA

FIBO Application (Investment Advisory and Agency Business)

FIBO Application (Investment Management Business)

Annual Business Report for FIBOs

Excluding FIBOs conducting Type 1 Financial Instruments Business

Financial Instruments Intermediary Application

×

High Speed Trading Application

English filings have been allowed since prior to the Amendments

Annual Business Report for High Speed Traders

English filings have been allowed since prior to the Amendments

Article 63 Filings (including Amendment Filings)

English filings have been allowed since prior to the Amendments

Annual Business Reports for Article 63 Filers

English filings have been allowed since prior to the Amendments

Large Shareholding (5%) Reports and Fluctuation Reports

×

Filings under the Investment Trusts and Investment Corporations Act (including Amendment Filings)

×

Bank of Japan Filings under the Foreign Exchange and Foreign Trade Act

×

EDINET Registration Filings

×

Qualified Institutional Investor Filings (notifications for purposes of being qualified as a “registered” Qualified Institutional Investor)

×

〇 = permitted

× = not permitted

△ = partially permitted

Schedule

According to the FSA’s announcement, the FSA announced that the FME Office will be established in January 2021. In addition, the FSA announced that the Amendments are scheduled to be implemented in January 2021. From the effective date of the Amendments, the FSA and the KLFB will start accepting English applications as well as conduct supervision and inspections in English.

Although English FIBO applications can be accepted only after the effective date of the Amendments in January 2021, the FSA has separately confirmed that preliminary consultation for these English applications have already been available from November 6, 2020 at the FME Consultation Desk.

Practical Considerations

The FSA explained that the Amendments and the establishment of the FME Office are part of the initiatives to promote Japan’s financial market and to attract more foreign financial business operators to Japan. We believe that these changes provide a good opportunity for foreign asset managers wishing to enter the Japanese market as we anticipate that these changes will reduce the time and cost to complete the application process and lower the hurdle for foreign asset managers to enter the asset management market in Japan.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Tokyo
Christopher P. Wells
Tomoko Fuminaga
Narumi Ito



[1] See Promoting the Use of English and Establishing a Single Point of Contact for Foreign Asset Management Firms.

[2] Generally refers to transactions of paragraph 2 securities (e.g., limited partnership form funds)

[3] Generally refers to transactions of paragraph 1 securities (e.g., trust and corporate funds)