globalization of markets, reviewing insider trading, market manipulation and fraudulent activities, and studying the state of affairs of IT-based trading like algorithm trading, etc. Sometimes the information collected or the market oversight would reveal certain conducts impairing the fairness of transactions as well as other problems. In these events, following an investigation and inspection by the relevant divisions within the SESC, the SESC would make a recommendation for administrative disciplinary actions or file a criminal charge.

Inspections of financial instruments business operators and the like revealed problems involving type I financial instruments business operators, including cases where such an operator sold corporate bonds while intentionally disguising the financial status of the issuer company; a sales representative solicited investment from investors by providing corporate information obtained by an analyst to the investors; and a purported investment from a qualified institutional investor in a fund operated by a person making notification for business specially permitted for qualified institutional investors turned out to be an investment without substance because the operator virtually provided the money. In addition, with regard to investment advisories/agencies, the SESC found cases including those in which an operator provided special benefit to a customer and a non-registered operator was engaged in discretionary investment management business. The SESC also found a case of a financial instruments intermediary service operator engaging in soliciting using corporate information obtained through business other than financial instruments intermediary service. In cases where a serious violation of laws or regulations was found, including the financial instruments business operators involved in these cases, the SESC has made recommendations for administrative disciplinary actions.

Furthermore, the SESC has also filed petitions for court injunctions pursuant to Article 192 “Prohibition Order or Order for Suspension Issued by Court” of the Financial Instruments and Exchange Act (FIEA) against financial instruments business operators which committed violations of the FIEA such as by providing customers with false information for fund solicitation, and trading stocks, or acting as an intermediary for the consignment of stock trading, without proper registration as an operator. Additionally, as a result of investigations and inspections to persons making notification for business specially permitted for qualified institutional investors, the SESC also announced the names of financial instruments business operators which had violated relevant laws and regulations, such as engaging in investment solicitation or investment management without meeting the requirements of businesses specially permitted for qualified institutional investors and soliciting investment in a fund by making false representation using brochures which include information on investment method, fund performance, etc. that contradicted reality, as well as those with problems in terms of investor protection, such as inadequate handling of investment, investment management, inappropriately using invested money for dividend, redemption money to other funds and the company’s expenses.

With respect to market misconduct, the SESC made recommendations for administrative monetary penalty payment orders against several cases, including insider trading, market manipulation and fraudulent conduct. In addition, the SESC made a recommendation to the Financial Services Agency (hereinafter referred to as “FSA”) to order an administrative monetary penalty under regulations on information communication against the FIEA in which an individual of a company communicated material facts and information on a planned