JAPAN
Japanese Yen (JPY)
Disclosure Requirements

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 organisations for this market, within the timeframe 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% of a publicly listed stock or any stake of an unlisted stock is deemed to be a direct investment and becomes subject to prior notification/approval requirements of the Ministry of Finance (MOF).

Investors acquiring more than 5% of the issued and outstanding shares of a listed company are required to file a Substantial Shareholding Report within five days of purchasing the stock to theFinancial Services Agency (FSA) via electronic disclosure system called EDINET. The "five-day" is from the trade date and not from the acquisition date. The substantial owner is obliged to also file an amendment with the authority within five days of holding percentage increasing or decreasing by 1% or more, or any material changes in the disclosures made in the Substantial Shareholding Report. There are penalties for failure to report and for reporting of false information.

The following are some of the requirements which must be disclosed by the ultimate shareholder in order to submit the report:

the shares name/ its addresses/ listing Stock Exchange name

the ultimate investor's name/ address/ the detail of the business

transaction details for the past 60 days (including trade date, quantity, price in case of an OTC transaction)

the investment purpose

background of the shares (i.e. collateral, borrowing, repo contracting, etc.)

source of funding for the purchase of shares

There are actually two types of reporting; one is 'General Report', applicable to ordinary investors, which should be submitted within 5 business days of acquiring 5 percent or more of the issued shares as required by FIEA Article 27-23, or any subsequent fluctuation of 1 percent as required by Article 27-25. The other is ‘Special Report', permitted as an exception to certain financial institutions under certain conditions, which could be submitted twice a month within 5 business days of the two reporting base dates, if such base dates are applied in advance to the regulator, as defined in FIEA Article 27-26. Physical paper reporting is no longer acceptable. A copy of the report needs to be sent to the issuer, as required by FIEA Article 27-27, but under certain conditions, as prescribed in FIEA Article 27-30-11, Paragraph 4, it can be sent by e-mail. The requirement to send a copy of the report to the exchange where the stock is listed was abolished when use of EDINET became mandatory, as prescribed in FIEA 27-30-6.

Anti-Money Laundering

In Japan, Anti-Money Laundering is governed under the Act concerning Prevention of Transfer of Criminal Proceeds (the Act), which is enhanced in accordance to the Financial Action Task Force on Money Laundering (FATF) recommendations.

The Act was formed in 2008 when the Anti-Organized Crime Punishment Law and the Client Identification Law were integrated under the control of the NPA, which administers Japan's Financial Intelligence Unit (FIU). By the Article 9 of the Act, suspicious transactions are required to be reported to the National Police Agency (NPA).

According to the Japanese ID verification requirements, presentation of the following is required for investors that are legal entities, such as a firm, partnership and corporate body:

A form of incorporation document which both evidences legal incorporation and is accepted as legal proof in the issuing country. The identification document should contain (1) entity name, (2) address of headquarter or main office. The document must be within its term of validity, or be less 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 such individuals, partners or directors should be:

- a Japanese driver's license (as this contains the full name and address of the holder)

- an original Certificate of Alien Registration card for foreign residents, and/or

- an original passport. (Use of a passport can require supplementary evidence such as an original Ward Office Registration document, as passports do not necessarily show a current address.

Where an individual is a foreign non-resident of Japan, his/her original passport must be supported by an original ID document that contains the holder's current home 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 its prescribed term of validity, or be less than six months old.

In addition to above, amended provisions of the Act effective April 01, 2013 include but are not limited to those below:

To add matters to be confirmed in the identification process by a business operator; namely, i) purpose of the transaction, ii) business nature, and iii) major shareholder information

To require in depth confirmation on the assets and income, in case where fraud is expected from the business operator's view

To request a business operator to keep identification information updated; such as company name and registered address

To strengthen penalties on falsifying identification information, from a fine of no more than JPY 500,000 to imprisonment with labor for no more than one year or fine of no more than JPY 1 million or both

Before starting a new business relationship, a financial institution must be able to demonstrate that the following information has been verified for KYC purposes:

full customer identification evidence;

the reason for the relationship, in sufficient detail to provide a clear understanding of the intention for opening the account and the nature of the customer's business or employment;

an indication of the anticipated volume and type of activity to be conducted in the account; and

a clear understanding of the source of funds passing through the account (for certain types of customers, it will also be deemed appropriate to record the underlying source of wealth).