- General Matters

Attachment 2
Check items and checkpoints for segregated management of customer assets- General Matters
Check Items
1. Are internal rules, regulations, andCheck Points(i) Whether internal rules, etc. are established in conformity with reality.

procedures for segregated management
clearly provided for?

(ii) Concerning the adjustment of money, securities, and trust, whether administrative guidelines, etc. areestablished and functioning properly at the respective divisions in charge.

2. Are internal audit and inspections clearly
defined and implemented on a regular basis?

3. Is reporting structure to a compliance officer

Obtain guidelines on in-house audit and inspections and inquire about the subject and period of the in-house audit
and inspection actually conducted.

Inquire whether the system for reporting the status of segregated management to the compliance officer for thefor the segregated management (meaning thesegregated management is clearly specified in the internal rules, etc., and examine the records of internal audit andperson in charge at legal complianceinspections.

department; the same shall apply hereinafter)
established?

4. Is there a system in place to take appropriate

Inquire the manager in charge of segregated management about the policy for dealing with any violation of themeasures in the event of any shortage oflaws, regulations, etc. relating to the segregated management. In addition, inquire such manager whether there hascustomer segregated trust fund, improper

been any violation of the laws, regulations, etc. relating to segregated management during the past one year, andredemption, erroneous management ofinquire about any subsequent measures taken in case of any violation.

securities, and so forth?
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- General Matters
Check Items

Check Points

5. When there has been any change in the laws,

Inquire the manager in charge of segregated management how to make everyone in the company fully aware of

regulations, or rules relating to the

any change in the relevant laws and regulations. In addition, inquire such manager how thoroughly they havesegregated management of customer assets,

informed the persons concerned of the actions taken in response to the results in relation to the inspection by thehave the details of such change been

Financial Services Agency and the investigation by the Investment Trust Association.

communicated to the department in charge?
6. Whether appropriate measures are taken for

Inquire the manager in charge of segregated management about whether or not the computer programs and systems

computer programs and systems related torelated to the segregated management have been modified in the past and how to adjust such programs and systems

the segregated management of customerin case of any revision to the laws, regulations, etc. related to the segregated management. Furthermore, inquire

assets as necessary.

such manager about how to ensure the reliability of the computer systems utilized for the segregated management.

7. Whether appropriate internal measures are

Inquire the manager in charge of segregated management about the system to prevent any unauthorized access tobeing taken to protect the customer data

the customer data related to segregated management, password control, and other related matters. Moreover,related to segregated management.

inquire such manager about the backup system in case of any system error.

8. Are appropriate measures taken for theInquire the manager in charge of segregated management about the matters pointed out in the inspection by thematters pointed out in the inspections by the

Financial Services Agency or the investigation by the Investment Trust Association and the company’s responses

Financial Services Agency or thethereto.

investigation by the Investment Trust
Association?

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I. Segregated management of money

I. Segregated management of money
Check Items
A. Has the necessary amount of segregatedcustomer fund (hereinafter in this document
referred to as the “Necessary Amount”) been
accurately calculated?

Check Points
Is the Necessary Amount calculated by deducting the total amount allowable for deduction from the sum of thecredit balance of the customer account [Note] and the deposit related to public offering, etc.?
Note: In case of calculating on a daily trial basis, care should be taken not to perform such calculation of theNecessary Amount by deducting a customer’s outstanding balances from another customer’s deposit balance,such as deducting advance payment to a customer (debit) from deposit from another customer (credit).
Comprehensiveness of records: Whether all account items to be included in the Necessary Amount are subject
to calculation.
When a new account item is created, whether proper consideration is given as to the inclusion of such item inthe calculation of Necessary Amount.
Validity of records: Whether the payment received to be processed on the day is included.
Whether any abnormal value caused by accounting error, etc. is appropriately corrected.
Safekeeping of records: Is the process of calculating Necessary Amounts saved?

B. If money is entrusted in the segregated(i) Whether such money is accounted for in the “Segregated Customer Trust Fund,” one of the “Deposit” items.

customer trust fund, is the accountprocessing handled appropriately?

(ii) Whether the account is processed at the time of establishment or redemption of the segregated customer trustfund.

1. Are the credit balances in the customer(i) Whether the Necessary Amount is calculated in a unit of one yen.

ledger accurately calculated?
(a) Deposits from customers;(ii) Whether the base sheet for calculating the Necessary Amount is prepared and checked on a daily basis.

advances for purchase of securities,
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I. Segregated management of money

Check Items
temporary deposit from sale proceeds of
securities, and so forth(b) Deposit related to public offering, etc.;
payment receipt, etc. for public offering

Check Points(iii) Among deposits from customers, whether the calculation of Necessary Amount includes those that are
customers’ money that remains undelivered at the Branch after completing the payment process, sales proceedsof a customer returned as result of remittance error, etc., or customers’ deposit to be returned to them due tocancellation of public offering.

or private placement of securities,(c) Other deposits received;(iv) Whether the time limit for daily deposit processing is clearly specified in the internal rules, etc., and any
deposit confirmed within such time limit is included in the calculation of the Necessary Amount of the day. In
addition, whether the deposit confirmed after such time limit of the day is properly included for the calculationof the Necessary Amount on the following business day.

(v) When any delay occurs in the delivery of the securities for sale from a customer (including a delay in transferof paperless securities), whether the customer’s deposit concerned with such sale proceeds is subject tocalculation of the Necessary Amount.

(vi) In case of accepting check (this branch, other branch, etc.) or any other equivalent to money from a customer,
whether such deposit is subject to calculation of the Necessary Amount.

(vii) Whether interests, dividends, redemption money, etc. are included in the calculation of Necessary Amount.

(viii) In an event of any unidentified receipt detected, whether such receipt is subject to calculation of theNecessary Amount when such receipt is proved to be attributable to a customer as result of prompt investigation
thereof.

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I. Segregated management of money

Check Items

Check Points(ix) In the event that collection of money for customers’ purchase of securities is commissioned to a collection
agency in contracts among customers, financial instruments business operator, and such agency, whether themoney retained at such agency is included in the calculation of the Necessary Amount.

2. Are the deposits related to public offering,(i) Whether the deposits related to public offering, etc. are subject to calculation of the Necessary Amount.

etc. accurately calculated?
(ii) Whether the deduction of subscriptions for public offering etc. is not in excess of the deposit related to public
offering, etc.
3. Is the allowable deduction accurately(i) Whether or not advance payment to a customer is deducted from deposit received from another customer.

calculated?
(a) Advance payments (among advance(ii) Among advance payments for the purchase fund, etc., whether such advance payment is deducted in spite ofpayments for the purchase fund, etc.,

the fact that the securities pertaining to such purchase have not been segregated in accordance with 43-2 of thelimited to those for which securities

Financial Instruments and Exchange Act.

pertaining to such purchase are subject tothe segregated management as set forth in
Article 43-2 of the Financial Instruments
and Exchange Act)

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II. Segregated Customer Trust Fund

II. Segregated Customer Trust Fund
Check Items
1. Whether a trust agreement for a segregated

Check Points(i) Whether the trust agreement has been entered into between the Financial Instruments Business Operator as

customer trust fund has been entered into

settlor with its customer as the beneficiary of the principal and a trust company or a financial institution engaged

with a Financial Instruments Businessin trust business as trustee.

Operator as assignor and its customer as thebeneficiary of the principal.

(ii) Whether the Financial Instruments Business Operator has a beneficiary’s agent.
(iii) Whether the beneficiary’s agent has been appointed from the following persons in order to sufficiently fulfill
the required duties.
(1) In case of internal appointment, a representative director or any other person equivalent thereto who is
responsible for the management of business execution, or(2) In case of external appointment, a person who has suitable qualification to supervise the execution of thefiduciary duties such as lawyer, certified public accountant, and so forth.

(iv) If a Financial Instruments Business Operator concludes trust contracts with multiple trustees, whether the
beneficiary agent for these contracts is the same person.

(v) When any of the events set forth in each item of Article 79-53, Paragraph 1 of the Financial Instruments Act
applies to the relevant Financial Instruments Business Operator, whether the beneficiary agent is the person set
forth in (iii)(2) above.

(vi) When a Financial Instruments Business Operator decides to discontinue the business in relation to the Direct
Offering, etc. or comes to fall under any of the events set forth in each item of Article 79-53, Paragraph 1 of the6II. Segregated Customer Trust Fund

Check Items

Check Points
Financial Instruments Act, whether such Financial Instruments Business Operator is to immediately notify thebeneficiary agent (meaning the beneficiary’s agent set forth in (v); the same shall apply hereinafter) to that
effect.
Furthermore, whether the beneficiary agent is to immediately notify the trustee to that effect when suchagent receives notice from the Financial Instruments Business Operator.

(vii) When any of the events set forth in each item of Article 79-53, Paragraph 1 of the Financial Instruments Act
applies to the Financial Instruments Business Operator, whether it is properly provided for that the Financial
Instruments Business Operator is prohibited from giving investment instructions to the trustee except for cases
specifically approved by the beneficiary agent.

(viii) If there is any change in the company name(s) (trade name), its representative, address, registered seal
impression, or the address, name, registered seal impression, etc. of the beneficiary agent, whether theprescribed procedures are taken at the trustee bank, etc.

(ix) If there is a change of the trust bank to which the segregated customer trust fund is entrusted, whether thecancellation of the existing contract and the new contract with the relevant trust bank is concluded in a manner
not to cause any discontinuity in managing the segregated customer trust fund.
2. Concerning the segregated customers’ fund,(i) Concerning the amount of segregated customers fund, whether the regular collation of balances is beingis the balance of the trust bank is properly

performed: For example:

collated against the book balance? If there isReconciliation between the Necessary Amount and the amount in the segregated customer trust fund on

any discrepancy between the balances, are

Adjustment Calculation Record Date (balance on the notice sent from the trust bank at a time of each trust7II. Segregated Customer Trust Fund

Check Items

Check Points

appropriate measures taken?

adjustment (e.g., “Notice on procedures for money trust”));‐

Verification between the deposit book balance and statements delivered regularly by the trust bank inaccordance with the contract; and‐Calculation of appraisal value in case of holding the securities in the securities trust or corporate investment
fund (Tokkin fund), etc.

(ii) Whether any instruction concerned with the establishment or dissolution of the segregated customer trust fundis being verified.

(iii) In case of any discrepancy, whether the cause analysis thereof is performed.

(iv) If the cause of any discrepancy cannot be determined, whether the relevant manager promptly reports thematter to the Internal Audit Division with the compliance officer, etc.

3. If the appraisal value of the principal of the(i) With regard to the adjustment to the Necessary Amount, whether at least one day per week, the standard date fortrust property on the Adjustment Calculation

the adjustment of the Necessary Amount (the Adjustment Calculation Record Date) is established. Then, if theRecord Date is less than the Necessary

appraisal value of the principal of the trust property on such Adjustment Date is less than the Necessary Amount,

Amount, whether such shortfall has been

whether such shortfall is eliminated through adding trust property in the amount equivalent to the shortfall

filled to the trust by the adjustment date.

within three business days from the day following the Adjustment Calculation Record Date.

(ii) Whether the internal rules provide for the relevant treatment when the Adjustment Calculation Record Datepertinent to the segregated customer trust fund is a holiday (whether such Record Date is to be advanced to theprevious business day or postponed to the next business day).
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II. Segregated Customer Trust Fund

Check Items

Check Points(iii) If the Necessary Amount on the adjustment date has changed after the calculation of the fund amount for the
segregated customer trust, whether recalculation is conducted.

(iv) In case of any change to the schedule for the Adjustment Calculation Record Date for the customer segregatedfund, whether such change is reflected in the trust agreement and internal rules. Furthermore, after such change,
whether the first day of new Adjustment Calculation Record Date is not more than one week from the previous
Adjustment Calculation Record Date.

4. When trust contract pertinent to thesegregated customer trust fund (excluding(i) In the event of termination or partial termination of the segregated customer trust fund, whether any of thefollowing conditions is satisfied;

the segregated customer trust fund pertaining
to over-the-counter derivatives transactions,etc. of subject securities; the same shallapply in this paragraph) is terminated inwhole or in part pursuant to the following
items, whether such termination is madewithin the scope of the amount set forth
therein.
(a) Where the principal of the trust property
exceeds the Necessary Amount;in the event that the appraisal value of(a) In the event that the appraisal value of the principal of the trust property on the Adjustment Calculation
Record Date exceeds the Necessary Amount, termination or partial termination of the trust contract shall bemade within the amount equivalent to such excess amount;the principal of the trust property on the9II. Segregated Customer Trust Fund

Check Items

Check Points

Adjustment Calculation Record Dateexceeds the Necessary Amount, an amountequivalent to such excess amount,(b) Where paying the deposit related to
public offering, etc.;
amount of segregated customer fund(b) Termination or partial termination of the trust contract shall be made within the amount equivalent to theamount of the segregated customer fund pertaining to the deposit related to public offering, etc. on thepayment date thereof; orequivalent to the deposit related to public
offering, etc. on the payment date thereof,or(c) Where transferring the administration ofsegregated customer fund to another trust;(c) Cancellation or partial cancellation of a trust contract shall be made in order to transfer the administration of
the segregated customer fund to another trust contract.

amount of trust property to be transferred,(ii) Whether or not there is any shortage in trust or improper cancellation concerned with the customer segregatedfund. If any, whether necessary and appropriate measures have been taken.

(iii) If payment of the deposit related to public offering, etc. is scheduled after the adjustment date, whether the
Necessary Amount is calculated by deducting such large payment for subscription from the Necessary Amount,
and addition of trust property or termination is made based on such calculation.

5. Is the segregated customer trust fund(i) Which form the segregated customer trust fund adopts; money trust, securities trust, or comprehensive trust.

appropriately managed pursuant to the10II. Segregated Customer Trust Fund

Check Items
Financial Services Agency notifications?

Check Points(ii) In case of managing as a money trust, whether such trust is investing in appropriate assets (excluding an
instance where a principal guarantee contract is concluded).

(iii) In case of managing as a money trust, whether the appraisal value of securities under custody is based on themarket price on the Adjustment Calculation Record Date.
(iv) In case of managing as a jointly operated money trust with a principal guarantee contract, whether the
principal amount of the trust is deemed as the appraisal value as it is.

(v) In case of managing as a securities trust or a comprehensive trust of money and securities, whether the
securities to be entrusted are of the type of securities specified in the Public Notice of the Financial Services
Agency.

(vi) In case of managing as a securities trust or a comprehensive trust of money and securities, whether theappraisal value of the securities in trust has been calculated applying the ratio as provided for in the Public
Notice of the Financial Services Agency.

(vii) With regard to a securities trust or a comprehensive trust of money and securities, whether or not the entrusted
securities are invested.

(viii) With regard to a securities trust or a comprehensive trust of money and securities, whether the location of the
securities entrusted thereto is clearly defined in the account books.

11III. Segregated Management of Securities

III. Segregated Management of Securities
Check Items

Check Points

1. Whether an appropriate contract is concluded(i) Whether contracts between a Financial Instruments Business Operator and their customer (e.g., Custodyto deposit the securities entrusted byContract, Transfer Account Contract, etc.) are concluded as appropriate.

customers in relation to transactions withsuch customers (hereinafter in this document(ii) Whether each contract provides for the method of administration (book-entry transfer settlement (method ofreferred to as the “Customer Securities”)?

custody to enter into or record in transfer account book; the same shall apply hereinafter), simple custody,
commingled custody, or joint custody) and place of custody (account management, third-party custody).

(iii) In the event that the securities are under custody of a third-party custody agency regardless of their location;
domestic or foreign, whether the customers’ consents for such redeposit are obtained. (However, such consent
for redeposit may not be required in some cases such as outsourcing to a stock transfer agency according to asafe-deposit contract).
<<Reference>> Depositary agency and control method(a) Account Management:
Book-Entry Transfer Settlement: Investment trust beneficiary certificates, etc. handled through the central
depositary system pursuant to the Act on Book-Entry Transfer of Bonds, Shares, etc.
(b) Third-party custody
Simple custody: Stock certificates, etc. of unlisted companies whose handling is being outsourced to a stocktransfer agency
Commingled custody: Stock certificates of unlisted companies, bonds (stock transfer agency), foreign
securities, etc.
Joint custody: cumulative investment products, etc.

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III. Segregated Management of Securities

Check Items

Check Points

2. Upon identifying the securities subject to the(i) Customer Securities to be segregatedsegregated management under the relevant(a) Securities entered into or recorded in, the transfer account book;laws and regulations, whether a member(b) Securities temporarily deposited by a customer for sale (in case of an engagement contract);

company specifically segregates such(c) Securities under custody (simple deposit contract or comingled deposit contract); or

securities according to the actual situation of(d) Newly purchased securities of a customer where purchase price for such securities has not been received andeach, and appropriately manages themamount equivalent to the advance payment pertaining to such purchase is deducted from the customer’s

separately.

segregated fund for calculation purpose:

3. Is the appropriate segregated management ispracticed in accordance with the respective(i) In the case of book-entry transfer settlement, whether the share of each customer pertaining to the Customer
Securities is immediately identifiable based on the member’s own accounting books, etc.

method of control (book-entry transfer
settlement, simple custody, commingled(ii) In case of simple custody, whether ownership concerned with each certificate of the Customer Securities undercustody, or joint custody) as provided for incustody is identifiable by filing them according to each customer, managing them according to securities

the relevant laws and regulations?

number, or other means.

(iii) In case of commingled custody, whether the share of each customer pertaining to the Customer Securities isimmediately identifiable based on the member’s own accounting books, etc.

(iv) With regard to the securities owned jointly with customers, whether such securities are identified and the shareof each customer is readily identifiable based on the member’s own accounting books, etc.

4. Are appropriate internal measures taken for(i) Whether storage facilities and management methods are specifically provided for in internal rules, etc.

storage facilities, etc.?
13III. Segregated Management of Securities

Check Items

Check Points(ii) Whether the member has taken specific internal measures to confirm whether the third-party organization is
performing the custody business safely and reliably. For example;‐

Whether the credit status of such third-party organization is checked by examining their credit ratings,‐

Whether it has been verified that the custody business is properly conducted through external audits, etc.,
and the verification results or proof thereof have been obtained in order to understand the details of suchverification to a certain extent,‐

Whether the member has taken any specific measures internally, such as examining the classification
method of the Customer Securities for each storage location, and‐With regard to a third-party organization, whether standards for identifying organizations subject toinvestigation and those not subject to such investigation are established in internal rules, etc., and internal
responses are in compliance with such rules.

5. Is appropriate response being taken for any
transfer of the Customer Securities?

(i) With regard to any transfer of the Customer Securities that have been entrusted to the third-party organization,
whether the balance after such transfer or such securities transferred are verified against the data (transfer
statement data, etc.) at each transfer.

6. In case of a third-party custody (book-entry(i) Whether the statement balance of deposited securities prepared and delivered by a third-party organization istransfer settlement, simple, or commingled

collated periodically against the balance of the accounting books, etc. of the Customer Securities. Examples of acustody), whether the custody balance

third-party organization subject to such collation (output slip, certificate, etc.);statements of such third-party institution are(a) Japan Securities Depository Center

appropriately collated against the balance of(b) Securities Transfer Agency

the company’s own accounting books, etc.?

(c) Others(i) Regular reconciliation
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III. Segregated Management of Securities

Check Items(ii) Cause and resolution of any discrepancy

Check Points(ii) When any discrepancy is identified between the balance of the accounting books, etc. and the statement

identified

balance given by the third-party organization concerned with the Customer Securities as a result of verification,(iii) Countermeasures against discrepancy

whether the reason for such discrepancy is confirmed to be reasonable. The main examples of discrepancy;

identified(a) Failure(b) Period from the time of withdrawing the actual securities to the time of delivery thereof according to thecustomer request(c) Input error(d) Others(iii) If any discrepancy is confirmed in the balances of the Customer Securities after checking the cause of suchdiscrepancy, whether such discrepancy is reported promptly to the manager in charge of custody business.

(iv) Whether any shortage of the Customer Securities is promptly eliminated in addition to investigating the cause,
etc. of any discrepancy in the balances if such shortage is detected.
(v) If the cause of discrepancy, etc. cannot be clarified through the investigation by the manager in charge ofcustody business, whether such incidence is reported in a timely manner to the compliance officer, the internal
audit division, etc.

End.

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