Japan

Disclosure Requirements
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Share holdings may be required to be disclosed by the beneficial owner, particularly when holdings reach or exceed prescribed disclosure limits. Investors must ensure that they comply in full by reporting such holdings to the appropriate organizations for this market, within the time-frame required. If you have any questions regarding this issue we encourage you to consult your legal counsel.

Failure to comply with reporting requirements may lead to penalties and/or other sanctions.

An acquisition of more than 10% is considered a direct investment and is subject to prior notification and approval from the Ministry of Finance (MOF).

Investors acquiring more than 5% of the issued and outstanding shares of a company are required to file a Substantial Shareholding Report within five days of purchasing the stock to the Ministry of Finance (MOF). Subsequent changes of more than 1% must be reported via an amendment within five days.

Buy-Ins
There is no automatic buy-in process, however, for equities, the buying broker can initiate a buy-in on S+1 if the seller fails to settle the trade. Buy-ins are seldom enforced in any of the stock exchanges.

Members incurring a fail may request a buy-in to the exchanges. If the defaulting member (the party who has failed to deliver the shares) is unable to clear the failed position within three working days of the date of the buy-in, then JASDAQ and the stock exchange will implement the buy-in and charge the defaulting member.

The buying broker charges the selling broker daily interest of JPY 0.04 per JPY 100 of the proceeds.

(Previous trading day’s closing price) x (JPY 0.0004) x (number of shares) x (number of days delay.

Compensation Fund

The Japan Investor Protection Fund was established by domestic securities companies, and the Securities Investor Protection Fund was established by foreign securities companies. All securities companies are required to be a participant of either one of these funds. The two organizations were consolidated in July 2002 into the Japan Investor Protection Fund.

Protection up to JPY 10 million of clients’ assets safe-kept in a securities company against the securities company default

Anti-Money Laundering
Japan undertook a series of reviews of its legal system concerning money laundering between 2001 and 2002 and the Customer Due Diligence Law (commonly referred to as the Japanese ID Law) came into effect from January 2003. This law now provides a legal base for the checking of customer ID’s by banks and financial institutions, thus ensuring the effectiveness.

According to the Japanese ID Law, the following is required for investors that are a legal entity, such as a firm, partnership and corporate body:

* some form of incorporation document which proves, and is accepted as legal proof in the issuing country, of a legal incorporation. The identification document should contain (1) entity name, (2) address of headquarter or main office. The document must be within the term of validity, otherwise, this incorporation identification document must not be more than six months old
* there is also a requirement to fully identify individuals, partners or directors who have been appointed to represent such legal entities.
* Identification documentation for this individual, partner or director should be:

- Japanese driving license. This contains the full name and address of the holder.
- An original Certificate of Alien Registration Card for foreign residents
- An original Passport. However, as a Passport does not contain an address, then an original Ward Office Registration document is required.

Where the individual is a foreign non-resident of Japan, then their original Passport must be supported by an original ID document that contains the holder’s current address. Where such an ID card does not contain an address, then documentation from national taxes, local taxes or social insurance payments, or public utilities (such as electricity) bearing the individual’s name is required. The document must include a receipt date stamp or a printed date of issue. The document should be within the term of validity or the date must be within the previous six months.