On March 30 2017, Japan's Financial Services Agency
(JFSA) published its principles regarding customer-oriented
business operations, which relate to financial business
operators' fiduciary duties.
There are seven principles which FBOs should follow,
summarised as follows:
(i) An FBO should develop and disclose its policies
regarding customer-oriented business operations.
(ii) An FBO should pursue the best interest of its
(iii) An FBO should manage conflicts of interest
(iv) An FBO should clearly communicate details regarding its
charges for services etc.
(v) An FBO should disclose important information in a
(vi) An FBO should provide services appropriate for its
(vii) An FBO should establish an organisational structure
etc that motivates employees appropriately.
In regard to the principles, there are three important
points to note. Firstly, they explain that FBOs include 'all
finance institutions etc. dealing with distributing, advising
and developing financial products and asset management'.
However, the term financial business operators is not
specifically defined in the principles, even if those
principles state they are to be adopted by all FBOs that engage
in customer-oriented business operations. Therefore, the
principles may apply to business operators that engage in
Secondly, adherence to the principles is not mandatory and
thus FBOs will not be punished (eg subject to administrative
penalties) only for non-compliance with them. Also, in order to
radicate the principles, the JFSA is considering analysing the
actual business operation practices of FBOs, gathering examples
of best practices, and sharing such information and the results
of its analysis with FBOs. To achieve this, the JFSA also plans
to engage in discussions with FBOs and encourage them to fully
adopt the principles set forth.
Thirdly, the JFSA encourages a principles-based approach, by
asking each FBO to consider seriously what is its best practice
in dealing with clients based on the expressed principles
– not to simply to follow the standard industry
practice – and develop competitive financial
instruments and provide competitive financial services. Each
FBO needs to sufficiently understand the idea and spirit of the
principles and individually judge what it needs to do and how
it needs to change in order to adhere to the principles. In
addition, each FBO needs to develop a clear policy to realise
its objective in relation to its customer-oriented business
operations and be prepared to explain to its stakeholders the
reasons why its operations and practices do not adhere to the