Waseda University Institute of Comparative Law

     On May 17, 2011, the Act for the Amendment to Parts of the Financial Instruments and Exchange Act, etc., for Strengthening the Base of the Capital Market and Financial Industry (Act No. 49 of 2011) was enacted. The amendment expands the scope of information that issuers of securities may disclose in English pursuant to the Financial Instruments and Exchange Act.

     In Japan, foreign issuers of securities had been obligated to prepare and file disclose documents in Japanese. However, if foreign issuers could offer and sell their securities using English-language disclosure documents, there would be more opportunities for Japanese investors to invest in foreign securities and those investors would achieve efficient asset management since securities were globally traded. Accordingly, for foreign ETFs, the Act first authorized the disclosure of annual and semiannual reports in English effective as of December 1, 2005. Next, for all securities issued by foreign issuers, the Act permitted the release of continuous disclosure documents, including annual and quarterly reports, in English effective as of June 1, 2008. The amendment to the Act was based on the grounds that there were many evaluations of issuers preparing and filing continuous disclosure documents, and their securities were priced in markets based on these evaluations.

     As stated above, only continuous disclosure documents as stipulated under the Financial Instruments and Exchange Act had been subject to English-language disclosure. Disclosure documents for public offerings were beyond the scope of the English-language disclosure requirements. The reason for this was that the disclosure documents for securities offerings included critical information that had a direct effect on investors�f investment decisions. However, the preparation of Japanese-language registration statements and prospectuses caused foreign issuers to avoid issuing or offering securities in Japanese capital markets because of the huge costs involved in the preparation of all documents. Consequently, the amendment to the Act authorized English-language disclosure not only for continuous disclosure documents but also for disclosure documents related to public offerings. The revision is expected to lead to an increase in the issuance and listing of securities in Japan.

     However, �gsecurities information�h with a direct effect on investors�f investment decisions must still be prepared in Japanese (Article 5, paragraph 6, item 1). The amendment to the Act is balanced between foreign issuers�f costs and investor protection. On the other hand, �gissuer information�h, which is subject to English-language disclosure, is being reviewed as to whether there are any unlawful statements in light of the standards for the preparation and disclosure under the Financial Instruments and Exchange Act in Japan and whether there had been adequate disclosure overseas (Article 5, paragraph 6, item 2).

     
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