Investment Management Business for Qualified Investors
The Investment Management Business, which provides fund management services, investment trust management services, investment corporation asset management services, and discretionary investment management services, requires a high level of internal systems due to strict registration requirements.
On the other hand, the Investment Management Business also has special systems called the “Investment Management Business for Qualified Investors”.
This is a type of registration whose registration requirements are relaxed compared to the normal (full spec) Investment Management Business by restricting clients to professional or semi-professional (Qualified Investors) and limiting the total amount of assets under management to less than ¥20 billion in Investment Management Business and Specially Permitted Businesses for Qualified Institutional Investors, etc.
The requirements for Qualified Investors are quoted as follows:
This is in line with the concept of Qualified Investors, etc. in Specially Permitted Businesses for Qualified Institutional Investor, etc. (a fund for small numbers of professionals), which is an existing system for professional funds. Customers who can be customers in Specially Permitted Businesses for Qualified Institutional Investor, etc. can basically be customers in the Investment Management Business for Qualified Investor as well.
Incidentally, if you are registered as an “Investment Management Business,” you can solicit and contract with institutional investors and other investors that fall under the category of qualified investors without limitation on the upper limit or attributes. Therefore, the Investment Management Business for Qualified Investors is not a top concept of the Investment Management Business.
Within the Investment Management Business, the system is so-called “relaxed regulations,” which relax the restrictions on only operations for specific professionals.
What is a Qualified Investor?
The term “Qualified Investor” as used in paragraph (1), item (i) and the preceding paragraph shall mean a Professional Investor or any other person specified by a Cabinet Office Ordinance as being equivalent to a Professional Investor in light of the status of his/her knowledge, experience, and property, or a person specified by a Cabinet Order as having a close relationship with a Financial Instruments Business Operator (including a person who intends to obtain the registration under Article 29).
(Persons Having a Close Relationship with a Financial Instruments Business Operator)
Article 15-10-7 Persons specified by a Cabinet Order as having a close relationship with a Financial Instruments Business Operator (including a person who intends to obtain registration under Article 29 of the Act) as prescribed in Article 29-5, paragraph (3) of the Act shall be the following persons:
1 An officer of the Financial Instruments Business Operator (meaning an officer prescribed in Article 29-2(1)(iii) of the Act)
2 Employees of the Financial Instruments Business Operator
3 The Parent Company, etc. (meaning the Parent Company, etc. prescribed in Article 15-16, paragraph (3)) of said Financial Instruments Business Operator;
4 Persons specified by Cabinet Office Ordinance as equivalent to the persons set forth in the preceding three items.
Order for Enforcement of the Financial Instruments and Exchange Act
(Persons Having a Close Relationship with a Financial Instruments Business Operator)
“Article 16-5-2 The persons specified by Cabinet Office Ordinance, referred to in Article 15-10-7, item (iv) of the Order, are the following persons:”
1 A subsidiary company, etc. (meaning a subsidiary company, etc. prescribed in Article 15-16, paragraph (3) of the Order; hereinafter the same shall apply in this item, Article 33, paragraph (2), Article 34, Article 123, paragraph (1), item (xxx), paragraph (12), item (iii) and paragraph (13), Article 125-7, paragraph (2), item (ii), and Section 6 of the Order) of the Financial Instruments Business Operator or a subsidiary company, etc. of the parent company, etc. (meaning a parent company, etc. prescribed in Article 15-16, paragraph (3) of the Order; the same shall apply in Article 123, paragraph (12), item (iii) and paragraph (13), Article 125-7, paragraph (2), item (ii), and Section 6 of the Financial Instruments Business Operator)
2 A person who has been entrusted with all or part of the authority pertaining to the investment of a single investment property conducted by said Financial Instruments Business Operator
3 Excluding those which are issued for the purpose of selling to many and unspecified persons orally, in newspapers, magazines, books, and other documents, concerning the value, etc. (meaning the value of the subject matter of the transaction, the amount of consideration for the option, or the trend of the index pertaining to the subject matter of the transaction; hereinafter the same shall apply in this item) of the transactions to be carried out by the Financial Instruments Business Operator as investment assets, or the type, number, and price of the subject matter of the investment, and the determination on the method and time of the transaction to be carried out, and which can be purchased from time to time by many and unspecified persons a person who has promised to give advice by any other means and has concluded a contract with said Financial Instruments Business Operator or has promised to give advice by such means; A person who has concluded a contract with such person promising that such person shall pay remuneration therefor
4 Officers or employees of persons listed in item (iii) of Article 15-10-7 and the preceding three items of the Order
(Persons equivalent to Professional Investors)
Article 16-6 The person to be specified by Cabinet Office Ordinance as prescribed in Article 29-5(3) of the Act shall be the following:
1 A person listed in items (iii) to (v), (viii), (ix), (xii), (xiv) or (xv) of paragraph (1) of Article 17-12 of the Order
2 A person who is the other party to the handling of private placement or private placement pertaining to the Equity in Invested Business that he/she acquires (meaning the rights listed in Article 2(2)(v) or (vi) of the Act; the same shall apply hereinafter), and who is listed in the items of Article 233-3
Cabinet Office Ordinance on Financial Instruments Business, etc.
Difference from Specially Permitted Businesses for Qualified Institutional Investors, etc.
Under a system similar to an investment management business for professionals, there are Specially Permitted Businesses for Qualified Institutional Investor, etc. (commonly referred to as “funds for small numbers of professionals”) and special operations for overseas investors, etc.
In the Specially Permitted Businesses for Qualified Institutional Investors, etc. and Specially Permitted Business for Foreign Investors, etc., compared to the business types that can be performed are only the self-recruitment and self-management operations of collective investment schemes, the Investment Management Business for professionals differs greatly in that they can conduct all types of Investment Management Business (in addition to Discretionary Investment Management Business, Investment Trust Management Business, Investment Corporation Asset Management Business, etc.).
For this reason, if you register as a Investment Management Business Operator for Qualified Investors, you can provide clients with asset management using investment trusts that cannot be conducted through special operations for qualified institutional investors, etc. and special operations for overseas investors, etc., making it possible to design products that are more easily approached to institutional investors.
There is no limitation on the amount of offerings in special operations for qualified institutional investors, etc. and special operations for overseas investors, etc. However, in the professional investment management business, there is a limitation on the total amount of assets under management of 20 billion yen or less. Therefore, the maximum amount is a problem for businesses that are considering offering a reasonable amount of offerings to institutional investors.
Deemed Type II Financial Instruments Business
Public offerings or private placements of investment trust beneficiary certificates by investment trust management companies are classified as Type II Financial Instruments Business. However, in the event that an investment management company managing a discretionary investment contract in connection with investment solicitation of investment trusts and investment corporations intends to engage in such public offerings or private placements, registration of Type I Financial Instruments Business is essentially required.
However, if an investor is registered as an Investment Management Business for Qualified Investors, it is permitted to register as a Type II Financial Instruments Business if the investor handles private placement only to accredited investors, such as investment trusts and beneficiary certificates and investment securities related to investment corporations that he or she manages under the entrustment of the entire management authority pursuant to a discretionary investment contract.
This is generally referred to as the “Deemed Type II Financial Instruments Business” (Article 29-5, Paragraph 2 of the Financial Instruments and Exchange Act; website of the Financial Services Agency).
The Company may not simultaneously obtain registration as a regular investment management business and an Investment Management Business for Qualified Investors.
Therefore, in cases where a business operator registered as an Investment Management Business for Qualified Investors makes change registrations in the ordinary investment management business, special exemptions for the deemed Type II Financial Instruments Business, etc. will no longer apply.
Registration of changes to the general Investment Management Business
It is possible to receive a change registration from an Investment Management Business for Qualified Investors to a general investment management business (an investment management business that does not fall under the category of an Investment Management Business for Qualified Investors).
As an Investment Management Business for Qualified Investors company, it is generally expected that the supervisory stance of the authorities will also be favorable for businesses that have accumulated a track record of operations to the point where it is actually possible for assets under management to exceed ¥20 billion.
When we apply for change registration from an Investment Management Business for Qualified Investors to a formal investment management business, it is expected that the procedures will proceed smoothly to a reasonable extent. Our office also has a track record of supporting such change registration applications, so there is no need for excessive concerns.
Important point in the difference from the Investment Management Business in general
The key differences between the Investment Management Business for Qualified Investors and the general investment management business in the practice of registration and managing business operations are primarily the following:
- The minimum amount of capital and net assets is 50 million yen or more in the investment management business, and has been relaxed to 10 million yen or more in the Investment Management Business for Qualified Investors.
- In the Investment Management Business for Qualified Investors , the total amount of investment assets is limited to 20 billion yen or less.
- In the case of the general investment management business, it is necessary to be a director, a corporate auditor, or a company with committees. In the case of the Investment Management Business for Qualified Investors, it is possible to be a corporate auditor or a joint-stock company with committees.
The human requirements are basically the same for both the investment management business in general and the Investment Management Business for Qualified Investors .
However, in the Investment Management Business for Qualified Investors , there is room to be allowed even if the person in charge is not separated with respect to the judgment and order execution related to investment assets, which in principle requires separation.
In addition, supervisory guidelines have check items specific to the Investment Management Business for Qualified Investors .
It is able to outsource compliance departments (law firms, etc.)
It is possible for our office to introduce specialists who can handle such outsourced operations, but at any rate it takes a budget to build a system, and it is not too sweet for us to pass through to an advisory attorney for several tens of thousands of yen per month.
It is necessary to establish an internal control system with actual conditions.
In that respect, careful consideration is required.
Personnel Structure required
In terms of the personnel structure required for registration, as in the general investment management business, the supervisory guidelines specify not only “management requirements,” “sufficient knowledge and experience requirements for compliance and risk management of managing officers,” and “knowledge and experience requirements for compliance officers,” but also “ensuring that people with knowledge and experience regarding assets to be managed on behalf of rights holders have been secured.”
Therefore, person who have actually been involved in asset management are required.
With regard to the personnel structure, it is somewhat different from the investment management business that does not fall under the category of qualified investment management business in that the supervisory guidelines require the assignment of “persons who have been engaged in the business of advising or managing assets to be invested for at least one year or persons equivalent thereto” and “persons who have been engaged in the business of giving guidance to ensure compliance with laws and regulations, etc. for at least one year or persons equivalent thereto” as the items peculiar to the Investment Management Business for Qualified Investors .
These requirements are, in effect, also required by normal investment managers, and there is no impression of the weighting requirements imposed solely on the qualified investor investment management business.
Rather, it can be viewed as effectively relaxing requirements by specifying the number of years of experience required directly involved in the business as “one year.”
In the past, this office has a track record of supporting the registration of investment management businesses for multiple accredited investors, and its business formats span investment trust management, fund management, and discretionary investment businesses, so it is possible to support a wide range of business development.
If you are considering registering an Investment Management Business for Qualified Investors, please consult with us with ease.
