CorporateGovernanceOur basic policy on corporate governance
JASDEC fully recognizes its social obligation as the central

sure that our activities promote corporate transparency andbody for the provision of the infrastructure for securities

that our business operates with fairness and accountability, inclearing and settlement, which is an important base of theline with the public needs of our function. Our commitment

capital markets. Accordingly, JASDEC has determined

to corporate governance is to earn and maintain a solida basic management policy of providing a highly secure,

reputation for reliability as the central organization

convenient and efficient service. To this end, we ensure that

responsible for creating and operating the infrastructure forour system meets the needs of users, including investors,

securities clearing and settlement in Japan.

issuing companies and market intermediaries. We also make

Overview of implementation of corporate governance practices
Framework for management structure and corporate governance to exercise business judgments, manage operations andimplement audits.

Corporate Structure
8Annual Report 2012

• Board of Directors• Business Operations Committee

The Board of Directors is composed of 19 members, and is basically

Separately from the Board of Directors and the Board of Auditors,

structured to achieve a balanced approach to business with user-JASDEC has set up the Business Operational Committee to fullyoriented views, as well as business-oriented ideas on maintaining

reflect the needs of system users in our operations. The Committee

operational neutrality and fairness. To fully reflect the opinions ofexamines important issues related to the business of JASDEC, basedusers in our operations, nine of the 14 external directors are selectedon queries from the Board of Directors, and has ten subcommittees

from JASDEC participants. The remaining five external directors

under its control. Each subcommittee is responsible for a specificcome from an issuing company and a related organization, or fromsegment of operations, and is composed of members who are actually

the Japan Securities Dealers’ Association, academia and the legal

involved in the field. JASDEC applies the opinions provided byprofession, enabling the Board to conduct vigorous discussions fromeach subcommittee to various operational issues. JASDEC discloses

a broad perspective in consideration of the public good. In principle,

summaries of discussions and other information by the committees

the Board meets once a month to decide basic management policies

to relevant parties for greater operational transparency.

and discuss other key issues.

As the provider of key infrastructure elements for the securities
market, we are required to operate the system with an extremely• Board of Auditors

high level of fairness and accountability. To achieve this end, weJASDEC employs the corporate auditor system for corporate

have established the Advisory Committee, which is composed ofgovernance instead of the committee system, as provided for in theexperts in financial and securities systems. The committee advises

Companies Act. The Board of Auditors is made up of three auditors,

JASDEC’s president from a broad perspective about wide-ranging

two of whom are selected from eligible participants (one each fromissues relating to securities clearing and settlement system operations.

a securities company and a bank) and all three (including an auditor

JASDEC DVP Clearing Corporation (JDCC), JASDEC’s wholly

who is serving on a full-time basis) are external auditors. In principle,

owned subsidiary, operates in accordance with a business philosophy

the Board of Auditors holds a regular meeting each month. In line

similar to that of JASDEC. JDCC has also set up a committee forwith auditing plans and the basic policies established by the Board

reviewing important issues regarding DVP operations to reflectof Auditors, auditors attend important meetings, including those of

the needs of users of the DVP settlement system for non-exchange

the Board of Directors, and assess the status of services and assets

transaction deliveries (NETDs). In addition, JASDEC’s Board ofto perform audits of directors. To ensure that audits are effective,Directors receives reports regarding issues decided by JDCC’sauditors work closely with directors and conduct regular

Board of Directors to ensure consistency in the activities of theexchanges of opinions, including through meetings with thetwo companies.

representative directors.

An outline of JASDEC’s management structure and corporate
governance systems is presented on the next page.

Corporate Governance
Overview of JASDEC’s Management Structure and Corporate Governance Framework
General Shareholders’ Meeting
Appointments/Dismissals

Appointments/Dismissals

Board of Auditors(Three including one auditor
serving on a full-time basis)
Auditing

ReportingAccounting
auditors

Appointments/
Dismissals

Auditing

Appointment/
Supervision

Subcommittees
Consultation

Board of Directors(Five full-time, fourteen external)

Auditing

Auditors
OfficeBusiness Operations Committee

Opinions, reports

ChairmanPresident & CEO
Risk Management
Committee

Monitoring

Conveying
information

Compliance Office

Stock
Bond with share option
ETF
Foreign stock
Corporate bondCP
Investment trust
PSMS (Domestic Trade)
PSMS (Non-Residents’ Trade)
ISO20022

Internalaudit

Departments

Risk Management System

AdviceAdvisory Committee

JASDEC has two certified public accountants who perform
accounting audits for JASDEC in the capacity of accounting auditor
under the Companies Act: Yohei Kishi and Naoto Saito (designatedpresident. It takes measures to strengthen overall risk management,

members of a limited liability partnership under Article 34,

and regularly monitors internal control systems for various risks.

Paragraph 10-5 of the Certified Public Accountants Law).
They are employed by Ernst & Young ShinNihon LLC, a member

Internal Audits, Corporate Audits, and Accounting Audits

firm of Ernst & Young Global, and execute accounting audits,
including checks of financial documents, based on the Companies Act.

JASDEC has established the Compliance Office, and internal auditing

It is our understanding that no items of particular regard, such asaccomplished primarily through onsite surveys based on the audit

serious irregularities or instances of illegal behavior, have been foundplan, to assess the effectiveness of operational procedures. For

through the execution of accounting audits.

corporate audits, an auditor serving on a full-time basis routinely
attends important meetings, such as those of the Board of Directors

Directors’ and Corporate Auditors’ Limit of Liability

and the Executive Committee (comprised of managing directors
serving on a full-time basis) and examines circulars intended toWe expect directors and Corporate Auditors to fully demonstrateobtain approvals of decisions by persons in charge. The full-time

the skills involved in successfully executing their responsibilities.

auditor performs audits in accordance with the auditing plans

Additionally, to retain top-level professionals, we have set limits onestablished by the Board of Auditors, and provides the otherliability for damages incurred by directors and Corporate Auditors.

Corporate Auditors with updates on the progress of auditing
activities at the meeting of Corporate Auditors, which takes

Resolutions on Election/Dismissal of Directors

place monthly.
Auditors serving on a part-time basis attend meetings of the Board

The election of directors by resolution at the general meetingof Directors and monitor the directors’ execution of their duties.

of shareholders is conducted in the presence of shareholders

They also assess the legality of business operations by reviewing

representing no less than one-third of voting rights held byreports on auditing activities from the full-time auditor.
JASDEC assigns staff specifically to assist corporate auditors intheir audits.
Corporate Auditors perform audits in close cooperation with theeligible shareholders, and directors are elected by a majority voteof said shareholders.
The dismissal of directors by resolution at a general meetingof shareholders is conducted in the presence of shareholders

Company’s accounting auditors. This includes hearing reports

representing no less than one-third of voting rights held by eligible

from the accounting auditors on auditing plans and the results ofshareholders, and directors are dismissed on a vote of no less thanthe audits.

two-thirds of voting rights held by said shareholders.

Annual Report 2012

JASDEC has set up the Risk Management Committee, chaired by the9