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Process for Registration or Notification of Financial Instruments Business

The process for registration of financial instruments business (Type I & Type II Financial Instruments Business, Investment Management Business, and Investment Advisory and Agency Business) and the notification process for the specially permitted businesses for qualified institutional investors, etc., and foreign investors, etc., is explained below.

Registration of Financial Instruments Business

The registration of financial instruments business requires a pre-screening process based on a document of Summary Registration Applicant (hereinafter referred to as summary document) before the formal registration application. This pre-screening process can take several months to over a year, depending on the type and nature of the business activities.

The most challenging part of the registration process for financial instruments business is the review of the summary document. Applicants are required to prepare extensive documents such as business plans, HR information, resumes of executives and employees, income and expense projections, internal regulations, and more.

It is also necessary to have a thorough understanding of the Financial Instruments and Exchange Act and other domestic regulations to create the summary document. After submitting the summary document, there will be multiple rounds of additional questions and correction instructions.

In particular, for those wishing to register as a Type I Financial Instruments Business, it is necessary not only to undergo review by the Financial Services Agency and the Local Finance Bureau but also to undergo the membership review of self-regulatory organizations such as the Japan Securities Dealers Association etc.

The Financial Services Agency explicitly outlines the registration requirements as follows.

“Generally speaking, in order to establish an office in Japan, the company must employ at a minimum one full-time director who lives in Japan and has both understanding of the Financial Instruments and Exchange Act and experience as a registered Financial Instruments Business Operator in Japan. (This excludes experience as a Notifier for a Specially Permitted Business for Qualified Institutional Investors, etc.)
In principle, the representative of the company must reside in Japan. However, the representative may be permitted to work overseas if the authorities deem them to be carrying out work properly based on the personnel structure, nature of the business, etc. (In such a circumstance, the overseas address from where the representative will work must be provided in the written application for registration.)

Conversely, if the application is being made on the premise that the representative residing overseas will perform the work in Japan, said representative, in principle, must come to Japan by the time the application is submitted.”

1. Determination of Scheme and Preparation of Application Documents
Determine the business scheme and begin preparing the summary and application documents accordingly.

2. Submission of Summary Document
The prepared summary document, consisting of several hundred pages, is submitted to the local Financial Bureau. The examination process is mainly conducted through email communication. In some cases, the order of steps 2 and 3 may be reversed.

3. Hearing with the Examiner at the Local Financial Office of the Head Office Location
There will be inquiries regarding the content of the business scheme and the backgrounds of the personnel. In recent years, there has been a tendency for the pre-screening process, including this hearing, to be prolonged.

4. Submission of Registration Application Documents
Once the preliminary review, which takes several months to over a year, is completed, the examiner instructs the applicant to formally submit the registration application. At this stage, the registration license fee of JPY 150,000 should be paid.

5. Registration
The period from “Submission of Registration Application” to “Registration Completed” is generally about 1.5 months (the official standard processing period is 2 months). However, including the pre-screening period, the total duration can range from 6 months to approximately 2 years, depending on the nature of the business.

6. Deposit and Notification of Operational Security Deposit
For investment advisory and agency businesses, it is necessary to promptly deposit JPY 5,000,000 as an operational security deposit after registration is completed.

7. Commencement of Operations
Prior to commencing operations, there is an obligation to take measures for resolution of complaints, disputes, etc. Therefore, it is necessary to join a self-regulatory organization, or register with FIMAC (Financial Instruments Mediation Assistance Center) or the Bar Association Dispute Resolution Center. Joining a self-regulatory organization for Type I Financial Instruments Business is mandatory, so that, it takes about 2 more months for business operations to commence after registration.

Duration for Registration

The examination of the summary document typically takes the shortest time of about 2 months (for investment advisory and agency business). Therefore, considering the pre-screening period, theoretically, it takes about 4 months at the fastest to complete the registration. Additionally, after registration, it is necessary to join the Japan Investment Advisers Association or enter into a contract with the Bar Association Dispute Resolution Center for complaint and dispute resolution procedures. Consequently, it takes a minimum of approximately 6 months until the commencement of business operations.

Type I and Type II Financial Instruments Operators require a longer duration for the registration process. And for investment management businesses, the time required varies significantly depending on the cases, ranging from approximately 6 months to nearly 2 years.

In any case, the examination process is becoming longer each year, and there are cases where the preliminary examination period is extended. When dealing schemes with issues or points of contention, it is not uncommon for the pre-screening alone to take longer than expected. Our firm will leverage our experience-based expertise, aiming to achieve registration as quickly as possible with the given circumstances.

Generally, business models targeting institutional investors take less time compared to those targeting consumers, and business models utilizing the internet tend to take longer than face-to-face sales.

Regarding the support services for registration applications, our firm is generally capable of preparing the required documents based on the details provided. Therefore, the drafting of the summary document, internal regulations, registration application form, etc., is mainly handled by our firm.

On the other hand, information related to “business matters,” such as income and expenditure projections, service details, and the work history of employees, needs to be summarized by the client.

Our firm can serve as the primary contact point for inquiries and responses with the authorities, and we usually attend face-to-face meetings. We mainly handle regarding questions and correction instructions from the authorities, however, we request the applicant cooperation in considering responses related to their business matters.

In particular, for complex businesses such as Type I Financial Instruments Business or investment management businesses, relying an application approach solely on an agency can be problematic. Regulatory authorities tend to avoid applications who does an entirely hands-off approach.

Therefore, for Type I Financial Instruments Business or investment management businesses, it is common for the applicant to assign an internal representative for negotiations with the authorities, while our firm provides support in document preparation and administrative tasks.

Our team is comprised of professionals with backgrounds in foreign investment banks and foreign strategic consulting firms. We also have a license for a fee-based personnel placement business. When undertaking a project, we can provide comprehensive support, including not only license applications but also business plan development, personnel placement, and implementation of trading systems if necessary.

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