Cabinet recently submitted a bill to the 198th session of the Diet to amend, among other acts, the Financial Instruments and Exchange Act and the Payment Services Act. Among other things, the amendments introduce new regulations for security-type digital tokens (ie, initial coin offerings and security token offerings) and clarify that digital tokens issued in consideration for crypto assets will be regarded as deemed securities.
If a securities registration statement contains a material misstatement, investors that acquire securities through the relevant offering can hold the issuing company liable for related damages. However, it is unclear what level of damages is recoverable if the issuing company successfully proves that the loss incurred by the investor is at least partly attributable to an unrelated factor or circumstance. A recent Supreme Court judgment has provided some clarity in this regard.
The Kyoto District Court recently ruled in favour of a shareholder's petition that a listed issuer cease an offering of its new shares by third-party allotment on the grounds that the offering had been conducted through an 'extremely unfair method', despite having been approved by a resolution at the issuer's shareholders' meeting. The court adopted the main purpose rule in accordance with prior court rulings and concluded that the share offering's main purpose had been to reduce the petitioning shareholder's shareholding.
Foreign private issuers' bonds that are listed on a Japanese securities exchange, such as the Tokyo Pro-Bond Market (TPBM), are subject to both the insider trading rules and the fair disclosure rules under Japanese law, while non-listed bonds (so-called 'Samurai bonds') are not. This article provides a brief explanation of the rules that apply to offerings of Samurai bonds and bonds listed on the TPBM under Japanese securities law.
The newly introduced fair disclosure rule enacted under Japan's securities laws and regulation regime is most often considered to apply to issuers of listed shares. However, based on the clear wording of the rule, it is also applicable to issuers whose only listed securities are bonds. Although the majority of bonds issued in the Japanese market are unlisted, there is a market dedicated to listed bonds in Japan: the Tokyo Pro-Bond Market.
The recent amendments to the Financial Instruments and Exchange Act introduced the fair disclosure rule, preventing listed issuers from making selective disclosure of their material information in order to ensure market fairness and transparency. This rule differs to the insider trading rule, which was introduced in 1989 with a similar aim of ensuring fairness and transparency by prohibiting parties with knowledge of undisclosed material facts regarding listed issuers from trading the securities of such issuers.
A recent Tokyo District Court decision was reported to be the first to hold an underwriter liable to investors that purchased shares in a company based on material misstatements in the financial information contained in the statutory disclosure document for a public offering in Japan. However, the Tokyo High Court overturned the district court decision in this regard and concluded that the lead manager was not liable to investors.
In June 2017 the Financial Instruments and Exchange Act was amended to introduce the fair disclosure rule in Japan. Subsequently, in October 2017 the Financial Services Agency (FSA) published draft legislation (comprising an implementing order and an ordinance) and guidelines for public comment, followed by final legislation in December 2017. The FSA has now published new guidelines and opinions on the public comments that it received.
In June 2017 the Financial Instruments and Exchange Act was amended to introduce the so-called 'fair disclosure' rule in Japan. The amendments address recent cases of selective disclosure of material information by issuers to sell-side analysts and investors' requests to introduce similar fair disclosure rules to those of other jurisdictions. The Financial Services Agency recently published a draft implementing order, ordinance and guidelines for public comment.