Outline of the Opinion on the Uninvited Solicitation Prohibition
in Commodity Futures Transactions

November 2013
The Consumer Commission

Introduction History of Uninvited Solicitation
Prohibition in Commodity Futures Transactions

Current situations of Uninvited Solicitation
Prohibition

 May 2005: Since many serious consumer damages had occurred
over a long period of time, restriction on the solicitation method wasintroduced (Amendment of the Commodity Exchange Act in 2004)

 Coverage of the current uninvited solicitation prohibition
There is a difference between commodity transactions andfinancial transactions at Exchanges.

• To oblige notification before solicitation and to confirm the customer’sintention• To prohibit re-solicitation (Prohibition of solicitation to the customer
who represented the intention not to make entrustment)• To introduce prohibition of solicitation by annoying methods
 June 2006: Supplementary resolution at the House of Councilors'

Committee on Financial Affairs“If troubles do not decline in the future, we will study the introductionof prohibition of uninvited solicitation.” January 2011: Introduction of uninvited solicitation prohibition (TheCommodity Exchange Act was amended in 2009 and theCommodity Derivatives Act was enacted.)
Considering the actual situations of many reported troubles wheredamage was caused by transactions against the customer’s original
intention made through solicitation like a surprise attack or persistentsolicitation, uninvited solicitation is prohibited to protect occurrence oran increase of damage to customers, because compliance with theprinciple of suitability cannot be expected at all in such solicitations.

* Uninvited solicitation
This is a solicitation where an entrepreneur visits or calls
an individual customer and solicits for contract conclusion
even though that customer has not requested solicitation forcontract conclusion.

Commodity
futurestransactions
Financialderivatives
transactions

Trading at
Exchange

Transactions in theschemes where loss
exceeding initialinvestment amount is
not generated

Other than thefollowingtransactions-Off-Exchange (overthe counter) trading
Trading at
Exchange
Off-Exchange (overthe counter) trading: Prohibited -: Not covered by prohibition• Financial Instruments and Exchange Act was amended(enforced by March 2014) toward realization of generalexchanges to comprehensively handle securities, financialderivatives and commodities. Commodities shall be now
treated as “financial instruments”.
• Under the current regulations, certain transactions at generalexchange among a part of commodity futures trading at
exchange (shaded section in the above table) shall not be
subject to uninvited solicitation prohibition as in the case offinancial derivatives transactions.
• To continue the current uninvited solicitation prohibition forcommodity futures transactions, it is necessary to amend theenforcement order of the Act specifying the scope of prohibition.

Trend of Damage and Necessity to Maintain the Scope ofUninvited Solicitation Prohibition

Relation between Uninvited Solicitation Prohibition andMarket Vitalization

 Since the introduction of uninvited solicitation prohibition (January2011), the number of consultation cases has been declining. The
effect of the prohibition is observed.

It cannot be said that continued prohibition of uninvited solicitation
hampers sound development of the market.
(1) Trading volume of commodity futures transactions had alreadyreached its low point when the uninvited solicitation prohibition wasintroduced (January 2011), and has not largely declined.
(2) In retail foreign exchange trading (FX trading), a type of financial
derivatives transaction, the number of over-the-counter trading
accounts, which are under the uninvited solicitation prohibition, isincreasing even after introduction of the uninvited solicitationprohibition (July 2005). ← Change of business model from sales
activity with solicitation to Internet transactions has occurred.

 Number of consultation cases on commodity futures trading and transition of thesales
Number of consultation cases (unit: case)

Sales (unit: 10,000 units)

 Number of consultation cases on FX trading and change in the number of accounts
Number of consultation cases (unit: case)

2003

2004

2005

Number of consultationcases (total)

2006

2007

2008

[Fiscal Year]

2009

Number of consultation cases(trading at domestic exchanges)

2010

2011

Number of accounts (unit: 1,000 accounts)

2012

Sales
(trading at domestic exchanges)

Prepared by the Commission based on the data from PIO-NET and Japan Commodity Clearing House Co., Ltd.

However, some entrepreneurs are still conducting solicitation whilecircumventing the law. Considering that entrepreneurs have such an
attitude for sale, it is expected that relaxation of regulation would
cause troubles to increase again.
Ex.: Entrepreneur solicits customers for a physical transaction of platinum and thensolicits for futures transaction of platinum on the date when it delivers the actual
goods to them.
Entrepreneur solicits customers for trading with a scheme to prevent a loss
exceeding the initial investment amount (so-called “smart CX”), which is an
exception from uninvited solicitation prohibition, and then solicits the customer
who had such trading for general commodity futures transactions a couple ofdays later.

2003

2004

2005

2006

Number of consultation cases

2007

2008

2009

2010

2011

2012

[Fiscal Year]
Number of accounts (over-the-counter trading)Prepared by the Commission based on the data from PIO-NET and Yano Research Institute Ltd.

Uninvited solicitation prohibition for commodity futures transactions should not be relaxed.