Main Topics Presented by the Financial Services Agency (FSA) at a
Dialogue with the Industry Association
Held on November 14, 2023, with the Japan Securities Dealers
Association (JSDA)
1. Outcomes of the G20 Finance Track○The G20 Finance Ministers and Central Bank Governors Meeting was held in
Marrakesh, Morocco from October 12 to 13, 2023. We would like to share major
outcomes related to the financial sector in the Communiqué published after the
meeting.
・ On the regulation and supervision of crypto-assets and stablecoins, the G20
adopted the G20 Roadmap on Crypto Assets. Going forward, the G20 called forswift and coordinated implementation of the G20 Roadmap, including (1)implementation of the Financial Stability Board's (FSB's) high-levelrecommendations on the regulatory and supervisory framework for crypto-assets
and stablecoins, which were finalized in July 2023; (2) outreach beyond G20
jurisdictions; (3) global coordination, cooperation and information sharing; and(4) addressing data gaps. It was also shown that G20 members would support theongoing work and global implementation of the Financial Action Task Force(FATF) standards on crypto-assets.
・ On sustainable finance, the G20 called for further efforts to advance the actions
recommended by the G20 Sustainable Finance Roadmap, which was developedin 2021. The actions include the implementation of the Transition Finance
Framework, formulated by the G20 in 2022.
・ On other financial sector issues, the G20 welcomed other initiatives, such as the
FSB’s progress report on cross-border payments and the report on climate-related
disclosure.
○Brazil will assume the G20 Presidency from December 2023. We will continue tocommunicate with financial institutions and contribute to global discussions.

12. Monitoring Policy for Customer-Oriented Business Conduct (FD: Fiduciary
Duty)○In monitoring for FD, as in the 2022 fiscal year, we will select priority monitoringtargets based on the sales trends of risky financial instruments by each type ofbusiness and the sales amount of each company, etc., and will implement risk-based
monitoring on companies that originate and sell financial instruments focusing on the
product governance system and sales/management system of risky financial
instruments based on the "Principles for Customer-Oriented Business Conduct" (the"Principles").
○Specifically, the FSA will check each of the companies that originates and/or sells
foreign currency-denominated bonds, including single-premium foreign currencydenominated insurance and emerging market currency-denominated bonds, whose
sales are currently increasing, regarding the following points:
・Whether it is structuring and selling financial instruments after verifying thevalidity of risks, returns, costs, etc.;
・Whether it has identified the expected customer base when structuring and selling
financial instruments; and・Whether it has established an environment in which it will disclose all costs to beborne by customers and give explanation from the customer's perspective.
○The FSA considers it important to share concerns and have constructive dialogue withfinancial institutions. We believe that these strategic priorities provide a good topic
in that regard. The FSA plans to hold briefing sessions on these strategic priorities inmany parts of the country. If you have any questions, concerns, or suggestions, pleasefeel free to contact us.
○Regarding structured bonds, the FSA will examine whether measures are being taken
based on the Principles, using the "Guidelines for Solicitation of Sales of Structured
Bonds" as the minimum standard.
○In addition, the FSA will work to ascertain and verify the actual situation regarding
Internet transactions, performance evaluation systems, and three-line management
framework.

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○We would like the management of relevant financial institutions to bring back thepoints we have raised and to conduct proactive verification and improvement of theirinitiatives.
○For the financial institutions targeted for priority monitoring, we ask them forcooperation as we would like to share our awareness of pursuing ”the best interestsof customers,” through interactive discussions with them.

3. Strengthening Anti-Phishing Measures, etc.
○Recently, there have been many cases of fraudulent remittances that seem to be madeby phishing attempts. At the time when the FSA and the National Police Agency
issued the alert on August 8, the number of cases of fraudulent deposit transfers
through internet banking, which are believed to be made by phishing attempts, in thefirst half of 2023 was the highest ever at 2,322 cases, and the damage amounted toapproximately 3 billion yen, which is close to the highest amount ever even comparedto the full-year damage amount. In addition, customers of financial institutions otherthan depository institutions are also suffering damage from phishing attacks.
*Threats in Cyberspace in the First Half of FY2023（https://www.npa.go.jp/news/release/2023/20230919001.html）○We would like financial institutions to take countermeasures in advance, rather thantaking countermeasures after damage has occurred. Protecting customer assets isessential for financial institutions to realize customer-oriented management. The
management should be encouraged to take the matter seriously and address it if theirmeasures are found to be insufficient.

4. Cyber attacks by BlackTech, a cyber attack group based in China○On September 27, the National Police Agency and the National center of Incident
readiness and Strategy for Cybersecurity (NISC) issued a warning about cyberattacks by BlackTech, a cyber attack group based in China.
○In the warning, specific countermeasures against BlackTech’s attacks arerecommended. These countermeasures are effective not only for BlackTech, but also3for general cases.

5. Enforcement of the Economic Security Promotion Act○The System for Ensuring Stable Provision of Essential Infrastructure Services(Essential Infrastructure System) under the Economic Security Promotion Act isscheduled to begin operation around spring next year. Toward this *1, names ofbusiness operators who are expected to regarded as specified essential infrastructureservice providers were announced on October 4*2.
*1 Effective date (Cabinet decision on October 24, Promulgation on October 27)
November 1

Provision for designation ofspecified essential infrastructure service
providers (Article 1, Item 3 of the Supplementary Provisions of theAct)*There is a transitional period of six months from the date when aspecified essential infrastructure service provider is designated.

November 17 Provisions related to notification when a specified essential
infrastructure service provider installs and entrusts maintenance,
etc. of specified critical facilities (Article 1, Item 4 of the
Supplementary Provisions of the Act)
*2 Business operators who meet the designation criteria as of October 4 (date of announcement) and are
expected to be designated.

○We plan to notify the covered business operators of their designation and to give
public notice of their names.
○In addition, in the coming days, it is planned to promulgate an ordinance of thecompetent ministry that specifies matters to be notified when a specified essential
infrastructure service provider installs and entrusts maintenance, etc. of specified
critical facilities, and to publicize Q&A in the financial field to contribute to thesmooth launch of operation of the Essential Infrastructure System.
○The FSA has set up a Consultation Desk for accepting pre-filing consultations on the
installment of specified critical facilities and other matters for the purpose of keeping
constant communication with specified essential infrastructure service providers and4other operators concerned. In particular, we would like to ask financial institutions
that plan to introduce relevant systems before or after the launch to consult with us assoon as possible.
○The FSA intends to engage in respectful dialogue with financial institutions forsmooth launch of this new framework. So we would appreciate your continued
cooperation.

6. Response to Semi-Annual Follow-Up Questionnaire Regarding Anti-Money
Laundering Measures, etc.
○We understand that each financial institution has made efforts to improve the risk
management system against money laundering, etc., with a deadline of the end of
March 2024.
○With less than six months left until the deadline, we would like request you once
again to properly respond to all items listed in the ''matters that require response'' in
the Anti-Money Laundering Guidelines.
○In addition, with regard to the semi-annual follow-up questionnaire for the purposeof checking the progress of each company as of the end of September, which werecently issued, we would like to ask for your continued cooperation to submit to it
by the deadline that is the end of November.
○In order to ensure that each financial institution can complete the work by the deadline,
the management is encouraged to continue to steadily advance their efforts, such as
ascertaining the future work volume, allocating necessary human resources, andformulating a response schedule.
○In addition, it is important for you to enhance the effectiveness and efficiency of thecontrol system that you developed so far through continuous verification. We would
like each of you to move forward with efforts while keeping an eye on the FATF 5th
review.

7. Promoting Japan as a Leading Asset Management Center5

○On October 4, a subcommittee for promoting Japan as a leading asset management
center was established under the Council of New Form of Capitalism Realization,with Minister for Financial Services Suzuki as the subcommittee chairman. The
policy plan for promoting Japan as a leading asset management center will be
developed by the end of this year.
○In order to realize a “virtuous cycle of growth and distribution”, it is necessary toreform Japan’s asset management sector and asset ownership, to enhance theirinvestment management capabilities, to improve governance, and to promote newentry of domestic and overseas firms into the asset management sector as well ascompetition.
○For this, specifically, the government of Japan will consider the following matters:(1) As a reform of the asset management sector and the asset ownership,・calling for major financial group to develop and publish their plans to enhance theirinvestment management capabilities and improve governance; and・ development of an environment for effective implementation of stewardship
activities and diversifying investment opportunities(2) As promotion of new entry into the asset management sector as well ascompetition,
・rectification of Japan's unique business practices and barriers to entry;
・deregulation to make it easier to outsource back-office operations;・development of a program to support emerging asset managers in obtaining funds
for investment which is a challenge for them (Japanese EMP (emerging manager
program)); and・promotion of Financial Start-Up Support Program business and establishment ofspecial zones for financial and asset management businesses,
etc.
○We would like to ask for your cooperation in the development of the policy plan, as
we intend to deepen the discussion by listening to various opinions.

8. Comprehensive Economic Measures to Completely Break Free from Deflation:
Toward a New Stage of the Japanese Economy

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○On November 2, 2023, the Comprehensive Economic Measures to Completely BreakFree from Deflation: Toward a New Stage of the Japanese Economy was formulatedwith a view to taking all possible measures to protect people's lives and businessactivities from the current price hikes and to put the Japanese economy on a higher
growth path by enhancing supply capacity, such as by improving productivity.
○In this comprehensive economic package, the government has compiled various
measures based on the following five pillars: (1) to protect the people’s lives fromthe current surging commodity prices (2) to achieve sustainable wage increases,
including those in regional areas and at small and medium-sized enterprises, while
also achieving income increases and regional growth; (3) to promote domestic
investment that contributes to the strengthening and sophistication of growth
capacity; (4) to initiate and promote social reform that helps overcome the declining
population and turn change into strength, and (5) to ensure security and safety of thepeople through building national resilience and disaster prevention/mitigation.
Measures related to the FSA will include the following:・Promotion of appropriate support according to the actual situation of business
operators, such as management improvement support and business revitalization
support that goes beyond financing support;
・ Promotion of initiatives to establish Japan as an asset-management nation,
including reform of asset management business and asset ownership, and promotionof new entry of Japanese and overseas emerging managers and competition in theasset management business;
・Promotion of the Doubling Asset-based Income Plan, including publicizing andpromoting the use of the new NISA (Nippon Individual Saving Account) andpromoting efforts to establish the Organization for the Promotion of Financial andEconomic Education;
・Development of an environment for startup funding and establishment of the
Impact Consortium to promote impact investing;・Promotion of the public's understanding of continuous customer management
necessary for financial institutions to take measures against money laundering;and other measures.
○All of the measures included in the economic package are important and urgent toaddress in the current economic and financial situation, and the FSA intends to focus
on making sure that finance can support the real economy and people's lives. Based7

on this understanding, we would like to ask for your understanding and cooperationin the future.

9. Signing the PRI (Principles for Responsible Investment)○From the end of September to the beginning of October, Japan Weeks was held, inwhich we invited overseas financial business operators to our country anddisseminated information on establishing Japan as an asset-management nation. As
part of this, PRI in Person, an event inviting global investors, including signatories to
PRI, to discuss the issue, was held. At that time, Prime Minister Kishida expressed
his expectation that (1) the number of signatories to the PRI, which will lead efforts
for responsible investment, will increase, and he stated that (2) the government will
improve the necessary environment, and at least seven representative public pension
funds (worth 90 trillion yen) will work toward the signing of the PRI.
○The importance of signing the PRI and implementing sustainable finance in line with
it applies not only to public pensions but also to corporate pensions. We would liketo ask the pension funds under your company to positively consider signing the PRI.

10. Warning about Fake Advertisements Deceiving Consumers by Pretending to
be Securities Companies○We have talked about strengthening anti-phishing measures, etc., and on a similarnote, we would like to mention that recently there have been fake advertisements
pretending to represent securities companies or your association that intend to deceive
consumers.
These fake advertisements, etc. typically employ the following methods:(1) Use the names of existing companies and organizations, etc.;(2) Approach consumers by saying “We will provide you with information on stocks
that will soar in the future," or "we will give you books and materials on investing";(3) Request consumers to access to the link or to add their LINE account, etc.; and(4) Solicit investment or induce payment.
In this way, we understand that cases similar to a money transfer scam have occurred.
○Under this situation, your association recently asked the FSA if we could work
together to raise awareness. On November 13, we published a warning against such8

fake advertisements on the FSA website, and posted a reciprocal link with yourassociation to respond simultaneously.
*"Be careful of fake advertisements on social media pretending to be securities companies or the Japan
Securities Dealers Association!"（https://www.fsa.go.jp/ordinary/chuui/nisekoukoku.html）○The FSA will continue to work with your association and related organizations toprevent fraud attempted by fake advertisements.

11． Current Situation Surrounding Securities Companies○The results of securities companies for the first half of fiscal 2023 (April to
September) announced by them were generally good owing to favorable market
conditions following the first quarter.
○Through the dialogue with each company, we have heard that each of the security
companies is working to secure customer-oriented business operations and ensure
long-term business stability (sustainable business model), rather than aiming to seek
short-term profits, as a player in promoting stable asset formation for households inthe face of a severely competitive environment.
The FSA hopes that these efforts will continue.
○On the other hand, although sales of fund wraps and investment trusts have been
increasing recently, customers often ask for advice from sales offices and sales
representatives, especially in times of major changes in the market environment, evenif sales are strictly conducted with customers' best interests in mind.
We would ask you for a sincere response to these concerns from consumers and, if
there is a significant impact on customer assets, your appropriate follow-up would bevery much appreciated, including prompt and thorough explanation of the situation.
○In order to ensure customer-oriented business operations and establish a sustainablebusiness model, it is essential for the management to take the lead in listening
sincerely to the voices of customers and sales professionals, and paying close
attention to every aspect of the company.

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○We would like to continue to have in-depth dialogues with each company on its efforts
to establish customer-oriented business operations and business models.

12. Advancing the Human Resource Mediation Functions of Regional Financial
Institutions○On November 2, the Cabinet approved the Comprehensive Economic Measures toCompletely Break Free from Deflation, which includes the Project to Promote
Matching of Local Business Management Talents as a measure to expand theeconomic recovery trend to local areas and expand economic exchanges.
○REVICareer's recent results show that the number of registered employees of large
companies has exceeded 2,000, and the number of matches has been steadily
increasing while eight new contracts were agreed in October, bringing the total to 43.
○The FSA will continue to promote the matching of the human resources in large
companies in a variety of ways, such as by transfer of jobs, part-time jobs, andsecondments, mediated by regional financial institutions, and we would like to ask
for your continued cooperation.

13. Preparations for the Transition from the LIBOR○ Regarding LIBOR, all settings of panel-based LIBOR have ceased to be published,with the cessation of some USD LIBOR tenors at end-June 2023. The FSA, together
with the BOJ, conducted the Fifth Survey on the Use of LIBOR (at end-June 2023)
and published the results on September 29, 2023.
○ The survey showed that the transition arrangements of contracts referencing panelbased USD LIBOR are almost completed. With regard to contracts that did notincorporate fallback provisions as of end-June 2023, transition policies had alreadybeen decided at most financial institutions. It was also confirmed that the use ofsynthetic USD LIBOR is limited, including its temporary use until contracting
parties reach agreement on transition plans.
○ Through the past five surveys on the use of LIBOR, including this survey, it has
been confirmed that the transition away from LIBOR is almost completed.

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○ Based on the results of this survey, considering that some financial institutions haveexisting contracts for which transition plans are not decided, as well as contracts
referencing synthetic USD LIBOR for which the publication will be ceased at endSeptember 2024, the FSA and the BOJ will continue to monitor and require financial
institutions to take necessary actions in light of the situation. We would like theapplicable financial institutions to continue progressing necessary actions for thetransition, with the timeframe in mind.
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