This content is from: Local Insights

Japan

Japan has recently revised its disclosure rules so that any material fact (juyou jijitsu) related to the affairs of a listed company will now be considered public information once it is posted on the online disclosure system hosted by the relevant Japanese stock exchange.

Ever since insider trading regulations were introduced in Japan, there has been a so-called 12-hour rule that provides that any material fact will be considered public information, following the period of 12 hours from the time that the company has disclosed such fact to at least two qualified media sources. An amended cabinet order regarding the Securities and Exchange Law of Japan changed the rule, but did not abolish it. The theory behind the existing rule is that it takes about half a day for a new piece of information to be adequately disseminated to the general investing public and reflected in the company's share price. To comply with Japanese insider trading regulations, companies generally refrained from publishing information containing any material facts until they had complied with the rule's waiting 12-hour period.

In April 1998 the Tokyo Stock Exchange (TSE) introduced an online disclosure system called the Timely Disclosure network (TDnet), which is directly connected to numerous media sources in Japan. All listed TSE companies must disclose through TDnet any information required by the TSE's Timely Disclosure Rules. Generally, companies must disclose any information that could have a significant effect on the investment judgment of investors. Pursuant to the new rule, upon a material fact being posted on TDnet, it will be considered public information and listed companies can freely disclose and distribute such information without having to wait for 12 hours. Notwithstanding companies disclosing information on TDnet, the TSE strongly encourages listed companies to adequately disclose material facts on their websites too.

All Japanese stock exchanges and Jasdaq participate in the TDnet system, except for the Osaka Securities Exchange (OSE). The OSE operates another online disclosure system similar to TDnet, which is called the Electronic Disclosure Network (ED-NET). Companies listed both on the TSE and the OSE must disclose through TDnet and ED-NET to use the new rule.

If TDnet or ED-NET is suspended for a technical reason or otherwise, the 12-hour rule will be applicable during the suspension.

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