Special brokerage business for unlisted securities
Posted: May 2025, 4
With the amendment of the Financial Instruments and Exchange Act that came into effect on May 7, 5,"Special brokerage business for unlisted securities"will be newly established.
Issued by startups etc. for specified investorsEstablished to promote the circulation of unlisted securitiesThe system has the same aim."Relaxation of entry requirements for private trading systems (PTS) for unlisted securities"Revision of the law is also planned.
The details of the legal reforms have now been decided, public comments have been made available, and revisions to the self-regulatory rules of the Japan Securities Dealers Association and other organizations have been decided, so we are finally beginning to see what issues need to be addressed.
This time, we will explain what the "Special Brokerage Business for Unlisted Securities" is specifically, and what kind of system it is.
Special brokerage business for unlisted securities (unlisted securities brokerage business)
"Special brokerage business for unlisted securities" is a system in which the registration requirements for Type I Financial Instruments Business are relaxed for businesses that specialize in brokerage business for unlisted securities targeted at professional investors (specialized investors) and do not, in principle, accept deposits of securities or money.
Specifically, the revised Financial Instruments and Exchange Act provides as follows:
(Amended Financial Instruments and Exchange Act, Article 29-4-4, Paragraph 8)
"Special brokerage business, etc. for unlisted securities" refers to the business of engaging in any of the following activities among Type I Financial Instruments Business:
(i) The following acts related to securities (limited to those not listed on a financial instruments exchange, excluding those specified by Cabinet Order):
(a) intermediation for sales or the acts set forth in Article 2, Paragraph 8, Item 9 (excluding those conducted with General Investors (meaning persons other than Specified Investors, etc., the issuer of the Securities in question and any other persons specified by Cabinet Office Ordinance; the same applies hereinafter in this Item) as the counterparty and those conducted on behalf of General Investors based on solicitation made to General Investors);
(b) Intermediation of purchases (excluding those conducted for general investors and those conducted with general investors as the counterparty based on solicitation to such investors)
(ii) Receiving a deposit of money from a customer in connection with the act set forth in the preceding paragraph (limited to that which is necessary for the settlement of a transaction through the act set forth in the preceding paragraph and the period of such deposit does not exceed the period specified by Cabinet Order).
[Target "securities"]
The securities subject to the Special Brokerage Business for Unlisted Securities are as follows:"① Not listed on a financial instruments exchange"で"② Securities other than those traded over the counter"These are securities.
A "financial instruments exchange" is defined as a financial instruments membership corporation or joint stock company that operates a financial instruments market with a license from the Prime Minister pursuant to Article 80, Paragraph 1 of the Financial Instruments and Exchange Act, and securities that are not listed on this "financial instruments exchange" (other than over-the-counter traded securities) are subject to the Act.
In other words, the scope of the offer covers not only "unlisted stocks of startup companies," but also "publicly offered securities that are not listed on a financial instruments exchange" and "securities that are listed only overseas."
(reference:Public comment No.37)
[Targeted acts]
The activities recognized as Special Brokerage, etc. Business for Unlisted Securities are the following activities regarding unlisted securities:
① Sales intermediation
②An act set forth in Article 2, Paragraph 8, Item 9 of the Law
(= handling of public offering or secondary offering, or handling of private placement or solicitation of sales to specified investors, etc.)
③ Purchasing intermediation
*The above ① and ② exclude "those conducted with general investors (meaning persons other than specified investors, the issuer of the securities in question, and other persons specified by Cabinet Office Ordinance) as the counterparty and those conducted on behalf of such general investors based on a solicitation to general investors," while the above ③ excludes "those conducted on behalf of general investors and those conducted with general investors as the counterparty based on a solicitation to general investors."
Furthermore, regarding the above acts"Accepting a deposit of money from a customer"is also recognized.
However, regarding the act of depositing money,"Items necessary for the settlement of transactions through the above acts"And,"Within one week from the day following the day on which the money is deposited by the customer"is limited to.
[Target investors]
The Special Brokerage Business for Unlisted Securities is a system designed for professional investors, known as "special investors.""Specified investors, etc., the issuer of the securities in question, and other persons specified by Cabinet Office Ordinance"will be covered.
According to the revised Financial Instruments and Exchange Act, the following is subject to the law. (Financial Instruments and Exchange Act Article 2, Paragraph 3, Item 2, (2))
1) Specified investors
②Non-resident
(This refers to non-residents as defined in Article 6, Paragraph 1, Item 6 of the Foreign Exchange and Foreign Trade Act, and is limited to those specified by government ordinance.)
③ Issuer of the securities
④Other persons specified by Cabinet Office Ordinance (Excerpt from Article 16-3 of the revised Cabinet Office Ordinance)
(i) a director, auditor, executive officer, trustee, or auditor of the issuer of the securities, or a person equivalent thereto or an employee (hereinafter referred to as a "Specified Officer, etc.") or a corporation, etc. controlled by such Specified Officer, etc.
(ii) a company that holds, in its own name or in the name of another person, more than fifty percent of the voting rights of all shareholders, etc. of the issuer of the relevant securities (hereinafter referred to as the "subject voting rights");
*If a specified officer/director and his/her controlled corporation, etc. hold, in their own name or in the name of another person, voting rights that exceed 100/50 of the total voting rights of shareholders, etc. of another corporation, etc., the other corporation, etc. will be deemed to be a controlled corporation, etc. of the specified officer/director/director.
* "Controlled Corporation, etc." refers to another corporation, etc. when a specified officer, etc. holds, in his/her own name or in the name of another person, the subject voting rights that exceed 100/50 of the total voting rights of shareholders, etc. of that other corporation, etc.
Overview of relaxation of requirements
Compared to ordinary Type I Financial Instruments Business, the main relaxed requirements are as follows:
| In the case of regular first-class gold business | Unlisted Securities In the case of special intermediation business, etc. | |
| Capital | In principle, 5,000 million yen | 1,000 million yen |
| Net assets | In principle, 5,000 million yen | 1,000 million yen |
| Capital Adequacy Ratio | Applicable (120%) | Not applicable |
| Financial instruments transaction liability reserve | There is a contribution obligation | No contribution obligation |
| Japan Investor Protection Fund | Membership is mandatory | No obligation to join |
| Japan Securities Dealers Association | Member | Specific business membership |
| Restrictions on concurrent employment | Applies | relief |
In addition to the above, the following relaxations will be included in the "System Review Items" of the Supervision Guidelines:
(Supervision Guidelines "IV-4-1 Registration" > (2) System review items)
[In the case of ordinary Type I financial instruments business]
Among the full-time officers and employees,Secure multiple people with three or more years of experienceWhat is being done
[In the case of special brokerage business for unlisted securities]
In the case where an Unlisted Securities Special Intermediary Business Operator only conducts business related to the acts set forth in Article 29-10-29, Paragraph XNUMX, Item XNUMX of the FIEA (limited to those conducted with specified investors as counterparties and excluding those set forth in Article XNUMX, Paragraph XNUMX, Item XNUMX of the FIEA) among its Unlisted Securities Special Intermediary Businesses, it must appoint among its full-time officers and employees persons who are capable of conducting the Type I Financial Instruments Business (including the business set forth in Article XNUMX-XNUMX, Paragraph XNUMX of the FIEA) that it intends to conduct.Secure at least one person with at least one year of experienceIt is assumed that this has been done.
Main issues
As a result of being classified as a Special Intermediary Business for Unlisted Securities, some of the registration requirements are relaxed. However, in order to be registered as a Special Intermediary Business for Unlisted Securities, various measures must be taken to ensure that the entity does not engage in Type I Financial Instruments Business beyond the scope of the relevant business (revised Cabinet Office Ordinance and Supervision Guidelines, etc.).
For example, in addition to "establishing a system for prior verification of the attributes of the parties to a transaction and for managing the period of monetary deposit," the following measures are necessary:
(From Article 70-2, Paragraphs 1 and 10 of the revised Cabinet Office Ordinance）
The business management system that unlisted securities special intermediary businesses must have in place is...
(i) The business management system that financial instruments business operators, etc. must establish pursuant to Article 35-3 of the Act is to establish internal rules, etc. (meaning internal rules and other equivalent rules) for the proper execution of financial instruments business, etc., and to provide training to employees and take other measures to ensure compliance with said internal rules, etc.
(ii) Necessary and appropriate measures have been taken to prevent the conduct of acts listed in Article 2, Paragraph 8, Item 9 of the Act, including acts of intermediation in sales to general investors and for general investors based on solicitations to such investors.
③ Necessary and appropriate measures have been taken to prevent the solicitation of general investors and general investors from acting as an intermediary in purchases based on such solicitation.
④ When receiving a deposit of money from a customer, measures are taken to properly manage the money as a deposit of money under Article 29-4-4, Paragraph 8, Item 2 of the Law.
(From the Supervision Guidelines "IV-3-6 Appropriateness of Special Brokerage Business for Unlisted Securities")
(i) Necessary and appropriate measures to prevent the conduct of acts listed in Article 2, Paragraph 8, Item 9 of the FIEA with respect to general investors or for the benefit of such general investors based on solicitation to such investors
② Necessary and appropriate measures to prevent the conduct of purchase intermediation for general investors and with general investors as the counterparty based on solicitations to such investors
③ When receiving a deposit of money from a customer, measures to properly manage the money as a deposit of money under Article 29-XNUMX-XNUMX, Paragraph XNUMX, Item XNUMX of the Financial Instruments and Exchange Act shall be taken.
*When an Unlisted Securities Special Intermediary Business operates Type II Financial Instruments Business, it should be noted that it does not conduct Type I Financial Instruments Business that goes beyond the scope of Unlisted Securities Special Intermediary Business for customers who are general investors related to Type II Financial Instruments Business.
In particular, when a person in charge of Special Intermediary Business for Unlisted Securities also serves as a person in charge of Type II Financial Instruments Business, it is necessary to confirm whether the customers of the Type II Financial Instruments Business include general investors, and if so, whether prior confirmation of customer attributes is conducted before carrying out Special Intermediary Business for Unlisted Securities, etc., so as to prevent Type I Financial Instruments Business that goes beyond the scope of Special Intermediary Business for Unlisted Securities, etc., from being carried out against general investors of the Type II Financial Instruments Business.
Summary
What did you think.
Normally, many of the hurdles and burdens that arise when aiming to register as a Type 1 financial business operator have been relaxed or exempted from application, so we expect this system to be used widely in the future.
In fact, although the effective date has not yet arrived, we have already received several inquiries from people who are interested in or want to engage in special brokerage services for unlisted securities.
At Support Administrative Scriveners Corporation, we are also proactively providing support regarding new systems that have just been amended, such as "Special Brokerage Services for Unlisted Securities."
There are still many elements that we won't know until the law is actually revised and examples emerge, but that's what makes it interesting.
Let's create a precedent together!
(reference)
-Publication of Draft Cabinet Orders and Cabinet Office Ordinances Pertaining to the Amendments to the Financial Instruments and Exchange Act, etc. of 2024(Financial Services Agency)
-Bill to amend the Financial Instruments and Exchange Act and the Investment Trust and Investment Corporation Act (Explanatory Material)(Financial Services Agency)
-Public comment(Financial Services Agency)
-Partial amendments to the self-regulatory rules for special brokerage business for unlisted securities(Japan Securities Dealers Association)
Special brokerage business for unlisted securitiesIf you are interested, please contact us below.
Initial consultation is currently available free of charge.
Editor of this article
Sachiko Masuno
