October 2021
No. A&S (EN)_012

Introduction to new 2021 Financial Service
Intermediary Business Regime
Introduction
At present, in order to act as an intermediary between a customer and a financial institution, it isnecessary to obtain separate sector specific licenses under the Banking Act, the Financial Instruments
and Exchange Act, the Insurance Act or the Money Lending Act. However, from 1 November 2021,
the Act on the Provision of Financial Services (the "Act on the Provision of Financial Services" or"PFSA") will introduce a system for the registration of one-stop intermediary service providers offinancial services (“Financial Service Intermediary Business”).
Financial Service Intermediary may only act as an "intermediary", but not as an "agent". They are notrequired to belong to a particular financial institution and are expected to work and collaborate withfinancial institutions as business partners. Foreign companies are allowed to be registered as a
Financial Service Intermediary but it is required to have a representative and an office in Japan.
In addition to PFSA, the new regime is further clarified by:••••

Cabinet Order for Partial Revision of the Order for Enforcement, etc. of the Financial
Instruments Sales Act
Cabinet Office Order on Financial Service Intermediaries, etc.
Financial Service Agency’s "Results of Public Comments on the Draft Cabinet Order andCabinet Office Orders Concerning Amendments to the Financial Instruments Sales Act, etc. of2020"
Comprehensive Supervisory Guidelines for Financial Services Intermediaries

Under PFSA regime, Financial Service Intermediary Business means any of the following as abusiness:•••••Deposit, etc. Intermediary Business Operations;
Loan Intermediary Business Operations
Securities, etc. Intermediary Business Operations
Insurance Intermediary Business Operations
Electronic Financial Service Intermediary

Additional business fields can be added through changes of registration.

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Scope of products handled by each intermediary business
1. Permitted Deposit, etc. Intermediary Business Operations•••

Intermediary for the conclusion of contracts for the acceptance of deposits, etc. (excluding
specified deposits and negotiable certificates of deposit)
Intermediary for the conclusion of contracts for the lending of funds or the discounting of bills(excluding revolving credit loans or discounted bills for individuals)
Intermediary for the conclusion of contracts involving foreign exchange transactions.

2. Permitted Loan Intermediary Services Operations•

Intermediary for the conclusion of contracts for the lending of funds or the discounted bills(excluding revolving credit loan or discounted bills for individuals)

3. Permitted Securities, etc. Intermediary Business Operations(1) In the context of intermediation for the purchase and sale of securities:•••••••••

National government bonds, Municipal bonds, Special bonds, Corporate bonds (excludingbond certificates with stock acquisition rights)
Investment securities for special corporations, Preferred securities for Cooperative Structured
Financial Institutions, Shares (excluding share option certificates)
Beneficiary Securities of Investment Trusts and Foreign Investment Trusts (excludingSecurities that are not traded or securities whose trust assets are rights related to derivativetransactions)
Investment Securities, Foreign Investment Securities (excluding Securities that are not tradedor securities whose trust assets are rights related to Derivative Transactions)Investment Corporation Bonds, Foreign Investment Corporation Bonds
Beneficiary Certificates of Trusts Issuing Beneficiary Certificates (excluding Securities that are
not traded or rights related to derivative transactions as trust assets)
Foreign securities and certificates
Depositary receipts and certificates
Rights to Be Indicated on Securities (excluding deemed securities)(2) Other••

Intermediary for brokerage of Securities trading, Market Derivatives Transactions andForeign Market Derivatives Transactions on Exchange-Traded Financial Instruments Marketsor foreign financial instruments markets (excluding Market Derivative Transactions andForeign Market Derivative Transactions)Handling of Offering of Securities or Secondary Offering of Securities, or handling of Private
Placement of Securities or solicitation of sales for specific investors, etc.
Intermediary for Investment Advisory Contracts and Discretionary Investment Contracts

4. Permitted Insurance Intermediary Business Operations
•••
•
••
•

Specific Insurance Contracts
Fire insurance (including home contents insurance)
Reinsurance contracts
Corporate contracts
Group insurance (excluding Insurance Contract underwritten in conjunction with theimplementation of events for the insured)Conversion agreement (i.e. third-sector insurance with the right to change the basic rate)
An Insurance Contract which provides for the payment of insurance benefits in excess of thefollowing amounts (policies with an annual premium of less than 5000 yen are excluded): Life insurance: 10 million yen
 Non-life insurance: 20 million yen
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 Third sector insurance: 6 million yen
Contract which the term of insurance is whole life

5. Electronic Financial Service Intermediary

Electronic Financial Service Intermediary means Financial Service Intermediary Businessconducted using Electronic Data Processing Systems or other information andcommunications technology such as:••••Web applications and cloud applications
Software developed by third parties and made available to Financial Services Intermediaries
Software that is shared between the Financial Service Intermediary and other operators
Transmission of customer order information in accordance with APIs or other methods ofsoftware-to-software communication prescribed by the other financial institution.

Restrictions on concurrent business activities
In addition to the general grounds for refusal of registration, these restrictions on concurrent businessactivity are set out as grounds for refusal of registration for each type of business1. Prohibition on concurrent business when conducting a Deposit etc. IntermediaryBusiness Operations•••

Where an Insurance Company intends to provide Deposit Intermediary Business Operations
Where a general business operator other than a person whose main business is lending, etc.,
a credit company, a guarantee company, etc., intends to engage in Deposit IntermediaryBusiness Operations, as its main concurrent business
Where a person whose main business is lending, etc., a credit company, a guarantee company,etc., intends to provide Deposit etc. Intermediary Business Operations

2. Prohibition on concurrent business when carrying out Insurance IntermediaryBusiness Operations••

Insurance companies, foreign insurance companies, etc. or small-amount short-term
insurance business operators, or their officers or employees
An insurance solicitor or an officer or employee of an insurance company, foreign insurancecompany, etc. or small-amount and short-term insurance business operator

3. Prohibition on concurrent business when conducting Securities etc. IntermediaryBusiness Operations•••

Financial institutions that deal with deposit, etc. such as banks, etc.
Officers and employees of Type I Financial Instruments Business Operators and registeredfinancial institutions
Insurance companies and foreign insurance companies, etc.

4. Prohibition on relationship between the Financial Service Intermediary andpersons previously acting as agents, intermediaries, solicitors, etc.
••••

Deposit etc. Intermediary Business Operations: bank agents, agents for deposit-taking forfinancial institutions which deal with deposit-taking other than banks
Insurance Intermediary Business Operations: insurance solicitors or insurance brokers, ortheir officers or employees
Securities Intermediary Business Operations: Financial Instruments Business Operators
engaged in Type 1 Financial Instruments Business or Financial Instruments Intermediaries
Loan Intermediary Business Operations: money lenders

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Security Deposit
Financial Service Intermediaries are required to hold sufficient security to ensure that they have theresources to compensate users for damages. The basic amount of the security deposit is as follows:••

For the period from the date of commencement of business until the expiration of threemonths after the end of the first Business Year, 10 million yen.
For the period from the day of commencement of the business for the second year or later tothe day on which three months have elapsed from the end of the relevant Business Year, theamount is 10 million yen + (annual fees received for all business years) x 5/100 (rounded down
to the nearest 100,000 yen)

Annual received commissions are the sum of commissions, remuneration and other consideration
received in respect of Financial Service Intermediary Business in one financial year, at a rate
significantly lower than that of insurance brokers, but with no upper limit.

Duty to act fairly and in good faithFinancial Service Intermediaries and their officers and employees shall conduct their business in goodfaith and fairly towards their customers, regardless of having a commission relationship, capital
relationship or personal relationship with the financial institution that is a party to the Financial
Services Contract.

Duty to provide information
1. Matters relating to the limitation of powers
A Financial Service Intermediary is obliged to make clear to customers that the following acts may notbe performed on behalf of the Counterparty Financial Institution.
••••

Receiving requests to change the contents of a Financial Services Contract or to cancel it
Issuing a certificate or other equivalent document for a Financial Services Contract
Where Insurance Intermediary Business Operations is conducted, to receive notices ornotifications from customers concerning Insurance Contracts
Where Insurance Intermediary Business Operations is conducted, to determine whether theinsurance company is liable to cover any loss caused by an insurance accident or to determine
the amount to be covered

Please note that acting as a communication interface for the mere transmission of information fromthe Counterparty Financial Institution, such as the transmission of a request for change orcancellation of the contents of a Financial Services Contract, may be performed unless it falls under
the acts listed above.
2. In addition, the following matters must also be disclosed:•••••

For commission paid by a customer to a Financial Service Intermediary in respect of aFinancial Services Contract which the customer intends to enter into, the maximum amountthereof, or a summary of the method of calculating the sameIf the Commission, etc. to be paid by a customer to a Counterparty Financial Institution for acustomer’s Financial Services Contract differs depending on a Counterparty FinancialInstitution
Amount of the Commission, etc. to be received when conducting acts of financial services
intermediation for customers of the investment advisory business
Capital and personal relationships between the Counterparty Financial Institution pertainingto the Financial Services Contract and whether or not there is a consignment contract
pertaining to the act of financial services intermediation
Matters concerning the division of roles between the Financial Service Intermediary and theCounterparty Financial Institution pertaining to the Financial Services Contract which thecustomers contract with respect to the Financial Service Intermediary, including the provisionof information, explanation and delivery of documents to the customer
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3. Response to requests from customers
The amount of commission, remuneration or other consideration received by the Financial Service
Intermediary in relation to the Financial Service Intermediary Business and the following mattersmust be disclosed:•••

For each type of business, the trade name, name or title of the main Counterparty Financial
Institution with which the Financial Service Intermediary has a business relationship and ratioof the total amount of commission, remuneration, or other types of consideration received
from the Counterparty Financial Institution (the "Commission, etc.") to the total amount ofthe Commission, etc. received from the Counterparty Financial Institution pertaining to thefinancial service contract with the customer
The amount of guarantee money deposited by the Financial Service Intermediary, the amountto be deposited under the guarantee entrustment contract with the Financial ServiceIntermediary, or the amount of insurance under the liability insurance contract for theFinancial Service Intermediary.
System usage fees, information provision fees, advertising fees, etc. would also fall under thecategory of the Commissions, etc. if they were received from the Counterparty Financial
Institution in relation to Financial Service Intermediary.

Prohibition on depositing money etc.
From a user protection perspective, a Financial Service Intermediary shall not, for any reason, receive
deposits of money or other properties from customers or have those who have a close relationshipwith said Financial Service Intermediary deposit money or other properties of customers with regard
to its Financial Service Intermediary Business.
“Close relationship” means, for a Financial Service Intermediary, which is an individual, relatives, and,for a Financial Service Intermediary which is a corporation, officers or employees, parent corporations,etc. or subsidiary corporations, etc., and individuals who hold more than 50% of the shareholder
voting rights.
However, that does not apply in cases where risk of a lack of customer protection is low, such as wherea bank, bank agency or fund transfer agency is acting in the course of its usual business.

Personnel Structure
1. Deposit Intermediary Business Operations
Corporations are required to have a person responsible for operations to ensure compliance with laws
and regulations assigned to each office, and a supervisor assigned to each office.
In addition, in the event of conducting a special deposit, etc. intermediary activity, there must be
further suitable personnel with experience in the required area of current account operation or thelending of funds as appropriate.
2. Loan Intermediary Services Operations
One of the managing officers must have been engaged in the lending business for at least three years,
and at least one person who has been engaged in the lending business for at least one year must be
employed as a full-time officer or employee at each office engaged in the Loan Intermediary Business
Operations.
3. Securities Intermediary Business Operations
Registration is required for sales representatives who act as intermediaries in the sale and purchaseof securities, etc. on behalf of Financial Service Intermediaries.

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4. Insurance Intermediary Business Operations
Notification is required when a company intends to have its officers or employees act asintermediaries for the conclusion of Insurance Contracts.
End.

---------------------------------------------------------------------------------------------------------------------------THIS NEWSLETTER IS PROVIDED FOR INFORMATION ONLY; IT DOES NOT CONSISTUTE ANDSHOULD NOT BE RELIED UPON AS LEGAL ADVICE.
----------------------------------------------------------------------------------------------------------------------------Authors/Contacts
Yuri SuzukiPartner
Leader of Innovation Practice Group
E: yuri.suzuki@aplaw.jp

Takafumi Ochiai
Partner
Representative Director and Vice Presidentof Japan Financial Service IntermediaryBusiness Association
E: takafumi.ochiai@aplaw.jp

Naoki Kanehisa
Partner
Head of London Office
E: naoki.kanehisa@aplaw.jp

Kenichi TanizakiPartner
E: kenichi.tanizaki@aplaw.jp

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Atsumi & Sakai is a multi-award-winning, independent Tokyo law firm with a dynamic and innovative approach to legal
practice; it has been responsible for a number of ground-breaking financial deal structures and was the first Japanese law
firm to create a foreign law joint venture and so admit foreign lawyers as full partners. Expanding from its highly regarded
finance practice, the firm now acts for a wide range of international and domestic companies, banks, financial institutionsand other businesses, offering a comprehensive range of legal expertise.
Atsumi & Sakai has an outward-looking approach to its international practice, and has several foreign lawyers with extensive
experience from leading international law firms, so providing its clients with the benefit of both Japanese law expertise andreal international experience.
We are the only independent Japanese law firm with offices in London and Frankfurt and can provide real-time advice on
Japanese law to our clients in Europe, the Middle East and Africa, as well as a more convenient service to our clients in theAmericas.

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No. A&S (EN)_012

Atsumi & Sakai
www.aplawjapan.com/en/
Tokyo Office: Fukoku Seimei Bldg., 2-2-2 Uchisaiwaicho, Chiyoda-ku, Tokyo 100-0011, JapanNew York Office: Attorneys associated with the New York office will telework from Tokyo while observing the progress of theNovel Coronavirus infection. We will provide services for the time being by working from home and using web conferencing systems.

London Office: 4th Floor, 50 Mark Lane, London EC3R 7QR, United Kingdom
Frankfurt Affiliate Office: OpernTurm (13F) Bockenheimer Landstraße 2-4, 60306 Frankfurt am Main, GermanyNOTICES
1. ABOUT ATSUMI & SAKAIAtsumi & Sakai is a partnership consisting of Atsumi & Sakai Legal Professional Corporation, a Japanese professional corporation, a foreign law joint venture underthe Act on Special Measures Concerning the Handling of Legal Services by Foreign Lawyers with certain Registered Foreign Lawyers of our firm, a Japanese Civil Codepartnership among Japanese lawyers, represented by Yutaka Sakai, a lawyer admitted in Japan, and a foreign law joint venture with Janssen Foreign Law Office,represented by Markus Janssen, a foreign lawyer registered in Japan to advise on the laws of the Federal Republic of Germany. In addition to lawyers admitted inJapan, our firm includes foreign lawyers registered in Japan to advise on the laws of the US States of New York and California, the People’s Republic of China, India,England and Wales, and the State of Queensland, Australia. Foreign lawyers registered in Japan to advise on state laws also are qualified to provide advice in Japan on
the federal laws of their respective jurisdictions.
Atsumi & Sakai has established an office in London operating as Atsumi & Sakai Europe Limited (a company incorporated in England and Wales (No:09389892); soledirector Naoki Kanehisa, a lawyer admitted in Japan), and has established an office in New York operating as Atsumi & Sakai New York LLP (a limited liabilitypartnership established in New York; managing partner Bonnie L. Dixon, a lawyer admitted in New York and a Registered Foreign Lawyer in Japan). We also have anoffice in Frankfurt operating as Atsumi Sakai Janssen Rechtsanwalts- und Steuerberatungsgesellschaft mbH, a German legal and tax advisory professional corporation(local managing directors: Frank Becker, a lawyer, and Miyuki Hanaoka a tax advisor, both admitted in the Federal Republic of Germany).
2. LEGAL ADVICEJapanese legal advice provided by Atsumi & Sakai and our global offices is provided by lawyers admitted in Japan. Advice provided in Tokyo in respect of any foreign
law on which one of our foreign lawyers is registered in Japan to advise, may be provided by such a Registered Foreign Lawyer. None of Atsumi & Sakai Legal
Professional Corporation, Atsumi & Sakai Europe Limited or Mr. Naoki Kanehisa is regulated by the Solicitors Regulation Authority for England and Wales, and none
will undertake any reserved legal activity as defined in the United Kingdom Legal Services Act 2007. Advice provided in Germany on the laws of Germany will beprovided by a lawyer admitted in Germany, and advice provided in New York on the laws of New York will be provided by a lawyer admitted in New York.

7©Atsumi & Sakai 2021