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Types and description of the financial instruments business

The license and registration of the Financial Instruments Business, or a notification of Specially Permitted Services for Qualified Institutional Investors, etc. is required to carry out any business that falls under "Financial Instruments Business" as defined in the Financial Instruments and Exchange Act.
There are various kinds of Financial Instruments Business, which are divided into the four categories below. Here, we illustrate the types of businesses and the kind of license and registration that will be required for each.

Explanation on types and description of the financial instruments business
1. Type I Financial Instruments Business

There are mainly three types of Type I Financial Instruments Business: (i) "Purchase and Sale / Solicitation of Securities" such as shares, bonds, etc. with high liquidity, (ii) "Underwriting," and (iii) holding in trust / management of securities.
A typical example of a financial instruments business operator engaged in Type I Financial Instruments Business is a securities company. The number of registered financial instruments business operators engaged in Type I Financial Instruments Business is 288 as of May 31st, 2017.
*The number of registered financial instruments businesses operators is 1,940 in total. This is not equal to the total number of registered financial instruments business operators engaged in the businesses set forth in each of the following sections, because it may be the case that one company is registered in several categories.

2. Type II Financial Instruments Business

In this kind of business, they sell and solicit securities that have a much lower liquidity, such as "Beneficial Interest in a Trust," and "Interests in Collective Investment Schemes."
Solicitation of investment in hedge funds is also known as solicitation of "Interests in Collective Investment Schemes," and a license and registration of Type II Financial Instruments Business is required.
The number of registered financial instruments business operators engaged in Type II Financial Instruments Business is 1,163 as of May 31st, 2017.

3. Investment Advisory and Agency Business

There are chiefly two types of Investment Advisory and Agency Business: (i) "Investment Advisory Business" and (ii) "Agency/Brokerage Services." A typical example of both is an investment adviser.
An "Investment Advisory Business" is a business whereby advice is provided regarding investments in securities, for example, in return for a fee. Providing information on general economic affairs, such as economic outlooks, is not the type of investment advisory defined in the Financial Instruments and Exchange Act. Registration as an "Investment Advisory Business" will be required when it is specified what is being invested in and when it is to be bought or sold, etc. and whereby specific advice is provided regarding investments.
When Financial Instruments or financial services are handled and fall under "Discretionary Investment Business," which is offered by settlor companies of an investment trust or investment advisers, or the "Investment Advisory Business," the investors (the customers) who purchase those Financial Instruments or services will write a contract with the settlor companies of the investment trust or the investment advisers that offer the Financial Instruments or services regarding management, purchase, and so forth. The actions of a securities company, etc. in this instance are referred to as an intermediary "Agency/Brokerage Services."
The number of registered financial instruments business operators engaged in the investment advisory and agency business is 984 as of May 31st, 2017.

4. Investment Management Business

There are namely two types of Investment Management Business: (i) "Discretionary Investment Business," which is carried out by a settlor company of an investment trust, J-REIT and so forth; and (ii) a "Fund Management Business," which is run by a hedge fund, venture capital, and so forth.
The number of registered financial instruments business operators engaged in the investment management business is 353 as of May 31st, 2017.

Specially permitted business, etc. for qualified institutional investors, etc.

Funds can be managed without the need to register as a financial instruments business by notifying the authorities concerned in advance, when more than one qualified institutional investor (professional investors defined by laws and regulations) is admitted and 49 or less general investors acquire fund interests, while at the same time meeting other requirements specified by laws and regulations.

The procedure: from the acquisition of a license registration to starting business

STEP1

Prior consultation

Prior consultation

STEP2

Submit application form

Submit application form

STEP3

Screening

Screening

STEP4

Registration

Registration

STEP5

Be an association/ADR member

Be an association/ADR member

STEP6

Deposit a business security deposit and receive notice of it

Deposit a business security deposit
and receive notice of it

STEP7

Start running the business

Start running the business

4 to 6 months on average* (Excluding Type I Financial Instruments Business) *when prior consultation with the Local Finance Bureau and Local Finance Office and consultation regarding the joining of the Financial Instruments Firms Association have been processed at the same time. This will vary depending on the type of business and status of the prospective applicant.
For details, please see the "English Guidebook on Financial License Registration Procedures."

English Guidebook on Financial License Registration Procedures

This guidebook was compiled by the Tokyo Metropolitan Government under the supervision of the Financial Services Agency to help overseas asset management companies launch in Japan owing to ease of market entry. It explains, in simple terms, Japanese Financial Laws and Regulations and how to apply for registration procedures as a financial instruments business operator, etc.
Click here to find out more.

Consultation services

Financial One-Stop Support Service

For overseas financial organizations (such as asset management and FinTech companies) supported by the Tokyo Metropolitan Government and thinking about establishing their bases in Tokyo, FinCity provides, at no cost, both comprehensive consultancy service and support regarding necessary government procedures, in cooperation with the Financial Services Agency. In addition, a finance-savvy consultant will visit overseas financial organizations for free and introduce them to financial experts depending the company's needs.
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Financial Services Agency (The Financial Market Entry Consultation Desk)

Overseas financial organizations requiring consultation regarding procedures of financial law related to starting up a Japan base.
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