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Significant FIEA amendment

The Act for the Amendment of the Financial Instruments and Exchange Act (FIEA) (Act 58 of 2009) was approved and enacted on June 17 2009 and promulgated on June 24 2009. The Amendment will take effect on a date specified by a subsequently issued cabinet order, within one year of this promulgation.

Secondary Public Offering (uridashi)

Under the FIEA, to conduct a public offering of previously issued securities in Japan (Secondary Public Offering), in principle, an offeror must file a securities registration statement (SRS) prior to the commencement of the solicitation and distribute a statutorily compliant prospectus to prospective investors prior to or at the same time as the sale of the securities. Also, the securities to be offered in the Secondary Public Offering must not be sold prior to the effective date of the filed SRS.

A Secondary Public Offering of Paragraph I securities, which are enumerated in Paragraph 1, Article 2 of the FIEA including shares, stock acquisition rights, corporate bonds, and convertible bonds, is defined in the FIEA as an offer to purchase, or solicitation of offer to sell, issued Paragraph I securities which offer is made to 50 or more prospective investors on the same terms and conditions (the same offer price and payment date(s)). Accordingly, if offers to sell a particular security differ in offer price or payment date, each differing offer is considered to be and treated as a separate offering. In this way, offers to sell a particular security to 50 or more prospective investors will not constitute a Secondary Public Offering as long as variations in such offers do not result in a specific offer being made to 50 or more prospective investors.

Once the Amendment becomes effective, the definition of Secondary Public Offering will be amended to eliminate the requirement that offers of securities must contain the same conditions to qualify as a Secondary Public Offering. As a result, some of the offers to sell a particular security, which were previously structured so as to avoid the securities registration requirements, will be classified as Secondary Public Offerings. Specific details regarding the Amendment will be announced in a cabinet order to be issued prior to the Amendment's effective date.

The Amendment will also introduce a new exemption to the SRS filing requirement. This exemption covers securities issued in countries other than Japan, the seller of which are the Financial Instruments Business Operator (as defined in the FIEA) and market price and other information of which is readily available to Japanese investors. Instead of being required to file an SRS, the Financial Instruments Business Operator that deals in such securities must deliver to prospective investors, or make publicly available, information concerning such securities and the issuer of such securities. Specifics regarding this new exemption will be stated in a cabinet office ordinance to be enacted in the future.

Kai Hoshino and Akira Matsuda

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