Investment Adviser and Agent Industry

In Japan, the following two activities are covered by one Investment Adviser and Agent registration procedure.

① Investment Advice

• Giving advice concerning stocks, shares and other financial instruments to contracted clients.

② Investment Agency Operations

• Sealing contracts for clients as an agent (by proxy) or intermediary.

If you plan to receive remuneration for either of the above types of work, you will need to register as an Investment Advisory and Agent Business. While of the two areas of business shown above, ① (investment advice) is more common, please note that this type of work involves no direct handling of clients’ money, with all final decision making left up to the client themselves. Examples of the kind of business that can be carried out as an Investment Adviser include: ① Providing current investment information and advice to investment funds. ② Sharing information with real estate funds concerning real estate that has been converted into beneficiary right bonds. ③ Recommending companies and brands for investment to paid members of a website or similar service. ④ Distributing up to date information concerning the stock market through a paid newsletter. ⑤ Providing real time tips and information regarding investment to paid members of an online messaging or streaming service. N.B. Carrying out investment advice or agency operations without the appropriate registration is banned under the Financial Instruments and Exchange Act. Penalties for unregistered operations can result in up to 5 years’ imprisonment, as much as ￥5m in fines or joint imposition of both of these penalties.

What Can I Do Without Registering?

The Financial Services Agency (FSA) states that in certain cases, general guidance aimed at financial instrument operators can be carried out without registering as an Investment Adviser and Agency. Examples of such exceptional cases include: ① Sale of newspapers, magazines, books or similar products

• If such products are available for anyone at any time to purchase, refer to and make investment decisions based on their judgement of the contents, this is not legally counted as investment advice. Please be aware, however, that this may not be the case for reports sold in which readers must apply in order to invest in the financial instruments described.

② Sale of software or other investment tools

• Sale of software or other investment tools made available for anyone at any time to purchase, refer to and use to make investment decisions is not generally defined as investment advice. However, should regular updates from the seller regarding investment information be made available through the software or other tools, this may require you to register as Investment Adviser and Agency.

③ Advice regarding the value of financial instruments

• A service providing advice regarding simply the value of financial instruments excluding securities is generally not legally regarded as investment advice and therefore does not require registration.

Our Service

The requirements (see below) for becoming a registered investment adviser or agency in Japan can be very strict, with a multiple hoops to jump through before it is possible to start operations. In light of this, we provide the following types of help to those who apply for our support service for registering as an Investment Adviser and Agency:

• Advice regarding necessary preparations for the registration procedure
• Creating and checking documents necessary for application
• Pre-application interview with the Financial Services Agency
• Arrangement of client contracts
• Gathering of necessary certification
• Application to the Financial Services Agency
• Depositing security deposit (see below)

We also have additional services such as providing workshops concerning the relevant laws and application procedures carried out by our financial services experts. As we adapt our service package to meet each client’s individual needs, please get in touch to hear more about how we can support you.

Basic Requirements 

In order to register as an Investment Adviser and Agency, you must be able to meet the following requirements. N.B. These are general requirements and do not necessarily reflect the reality of what may be needed for your specific application.

Security Deposit

Once your registration has been accepted by the Financial Services Agency, you must put down a security deposit of ￥5m. This deposit can be covered through such forms as: ① ￥50m in cash ② Japanese bank cheques worth ￥50m ③ Government bonds or securities worth ￥50m ④ A guarantee from your bank Of the above options, most applicants choose either ① or ② due to their relative simplicity. ※This security deposit is only necessary when applying only for registration as an Investment Adviser and Agency. For example, if you are also applying for a Type 2 Financial Instruments Operations License, you will not need to make this deposit.

Structural & Personnel Requirements

In order to register as an Investment Adviser and Agency, you must be able to show that you must have:

• A manager/managers with sufficient experience and knowledge to carry out operations handling financial instruments in a just and appropriate manner.
• Directors with sufficient understanding and experience of compliance and risk management, carrying out business with due attention to the supervision and guidance necessary to comply with the relevant laws (e.g. the Financial Instruments and Exchange Law) and possessing experience and knowledge of financial instruments business operations which allows them to do this.
• A decision-maker regarding investment advice concerning securities, the value of other financial instruments and so on who has sufficient experience and knowledge of the relevant field.
• Organisational and personnel structures necessary and appropriate for the type of business to be carried out.
• An experienced and sufficiently knowledgeable compliance manager.

You must also be able to show that you will be able to carry out the appropriate management of areas such as accounting reports, disclosure, risk management, management systems, client management, complaints and internal audits. ※N.B. For those looking to register as an Investment Adviser and Agency as an individual, requirements will an adapted version of those given above.

What is ‘sufficient knowledge and experience’?

Requirements regarding managers, directors and other responsible persons have become much stricter in recent years, with more emphasis on those carrying out investment advice and/or agency operations holding ‘sufficient knowledge and experience’. In general, ‘knowledge’ in this situation refers to qualifications or other training, while ‘experience’ refers to work experience in the financial sector or as an individual investor. Defining what exactly counts as work experience, however, is notoriously difficult. Compliance managers, for example, are required to have at least 3 years’ experience in the same type of compliance work as they plan to carry out as an Investment Adviser and Agency Japan. While some applications go through perfectly smoothly despite this somewhat demanding requirement, it is also not uncommon to come up against a wall when various interpretations of the compliance work, its scale and exact contents arise. ※N.B. It is not unusual for applications to be knocked back simply due to the specific requirements for compliance managers, so please contact us about this in advance if you are considering applying to register as an Investment Adviser and Agency.

Other Requirements

In additional to the above requirements, there are many more checks along the way, including inspection of your recent financial records (for existing companies), your plans for office space, planned responses concerning Japan’s Alternative Disputes Resolution (ADR) System and more. You will also need to ensure that the phrase ‘investment advice and agency operations’ is included in the ‘purpose’ section of your Articles of Association (for a Japanese corporation) or similar document (for non-Japanese organizations).

*Exclusion Criteria*

Please be aware that should the applicant, any directors or compliance managers of the applicant company fall into any of the following categories, any application for registration as an Investment Adviser and Agency will be automatically rejected.

• An underage person.
• An adult ward or person under curatorship.
• A person who has had registration as an Investment Adviser and Agent Licency revoked within the last 5 years.
• A person who has undertaken a period of imprisonment or more serious punishment within the last 5 years.
• A person who has been dismissed under the Financial Instruments and Exchange Act within the last 5 year.
• A member or previous member of a gang.
• An individual with close relations with a gang.
• A person who has been fined under the Japanese Financial Instruments and Exchange Act or an equivalent law of a foreign country.
• A person who has been fined (or received an equivalent penalty) for violation of the Japanese Act on Prevention of Unjust Acts by Organized Crime Group Members (excluding Paragraph 7 of Article 32 (2)), an equivalent law of a foreign country, the Penal Code or the Law Concerning Punishment of Physical Violence and Others.
• An individual who has been sentenced to imprisonment or a more serious punishment (including the equivalent in foreign countries), in particular for crimes such as fraud, computer fraud, a breach of trust or other malpractice, quasi-fraud, extortion or the attempt of any of these crimes.

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*Please be aware that the contents of this site are naturally subject to change, meaning that we cannot guarantee their accuracy at the point of access.* *For up-to-date information, please contact us directly.*  

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