This content is from: Local Insights

Japan

The Financial Services Agency of Japan (FSA) plans to establish a new law to regulate financial products and services. Although the details of the law are not yet decided, it is expected to regulate investment services in similar fashion to the UK's Financial Services and Markets Act 2000.

Financial products are currently regulated by different laws depending on the type of product. One of the most important laws is the Securities and Exchange Law (SEL) that regulates securities, which include government bonds, corporate bonds, stock certificates and certain legal interests specified as deemed securities. The types of financial products included in the term securities have increased over the years (the most recent example is the addition of interests in partnerships, which came into effect on December 1 2004), but it does not cover all investment products and services.

Apart from the SEL, investment trusts are regulated by the Law Concerning Investment Trusts and Investment Corporations. The Law for Financial Futures (despite its name) generally regulates financial derivatives such as options, but was amended only recently to include foreign exchange margin transactions as of July 1 2005. Before the amendment, investors were not protected from margin transaction dealers because the scope of the derivatives law was limited to transactions on derivatives exchanges.

Reportedly, the new law is intended to replace the existing regulatory laws mentioned above. It will also regulate various investment services in a comprehensive and harmonized manner. The FSA aims to establish the new law in 2006.

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