With respect to the violation of disclosure requirements, the SESC made recommendations to the FSA to order an administrative monetary penalty against a listed company that had submitted securities registration statements and annual securities reports, etc., containing material misstatements on important matters including reporting sales by executing sales agreements while, in reality, there were no executions of a trade based on such agreements and assets (software in progress) by faking the software development. Further, even in the case where the SESC finds no material misstatement on important matters in the disclosure documents as a result of inspection, the SESC urges issuers to revise their annual securities report, etc., voluntarily, when deemed necessary.

With respect to malicious offenses which impair fairness of markets, the SESC filed criminal charges against cases of insider trading by an individual who obtained information on the planned TOB in conspiracy with his/her acquaintance, market manipulation by day traders in a conspiracy regarding 4 listed shares through deceptions of layering of order book and spoofing, etc., and submission of an annual securities report containing material misstatements by recording fictitious sales and inflated recoveries from receivables that had been written off. Furthermore, the SESC continuously watched the overall market and exposed a wide range of malicious criminal acts, including filing criminal charges against the perpetrators. For example, in cooperation with law enforcement agencies, the SESC investigated and filed criminal charges against the cases of market manipulation regarding one listed share through wash trading, price ramping and marking the close, and submission of an annual securities report containing material misstatements through recording fictitious sales amounts.

With respect to the enhancement of market discipline, the SESC has worked with financial instruments exchanges and financial instruments firms associations, etc., to share their respective awareness of problems through periodic exchanges of information. In addition, the SESC has continued to actively engage in dialogue with market participants and dissemination of information to the market so as to encourage the voluntary efforts of each market participant. Specifically, the SESC made speeches at compliance forums for listed companies organized by different securities exchanges throughout Japan, and contributed articles to various public relations and mass media. The SESC also used the SESC Email Magazine to disseminate details of its activities, its awareness of problems and other information in a timely manner. Furthermore, in order to enhance the transparency of market surveillance administration and to encourage the self-discipline of market participants, the SESC published an edition of the Casebook on the Administrative Monetary Penalties under the FIEA (Market Misconduct and Violation of Disclosure Requirements) in August 2014, which are compilations of preceding cases recommended to the commissioner of the FSA for administrative monetary penalties.

### 2. Future Challenges

As described above, the SESC has been engaged in effective and efficient market surveillance for the past year.

On the other hand, given the dynamically changing environment surrounding the Japanese