The Japan Financial Services Agency published minutes of the Financial Services Council’s Market System Working Group meeting where members broadly agreed a draft report proposing a package of changes to Japan’s unfair trading framework. The draft centres on expanding the scope of persons covered by insider trading rules, recalibrating how administrative surcharges are calculated to raise deterrence, and bolstering investigative tools for both domestic enforcement and cross-border cooperation. On insider trading, the draft supports extending “related parties” in tender offer contexts beyond the issuer’s officers to specified persons with comparable proximity to the tender offer fact, including certain parent-company officers and other actors such as those with accounting-book inspection rights, statutory authority, contractors and negotiators, and extending coverage to specified related parties of asset management companies where the tender offeror or issuer is an investment corporation. It also proposes redefining “parent company” for insider trading purposes as a company that controls another company’s decision-making bodies, rather than relying on securities report disclosures. On surcharges, the draft proposes (i) for tender offer-related insider trading by tender offerors and related parties, calculating an assumed economic gain using an average post-announcement price increase rate derived from past cases and applying the higher of this approach and the current method; (ii) for large shareholding reporting violations, narrowing surcharge exposure for non-filing to change reports likely to affect market prices, such as changes of 1% or more in ownership percentage (with exclusions for changes considered to have minor impact), while raising surcharge levels by reassessing market impact; and (iii) for market manipulation involving high-speed trading, calculating gains on a per-day basis and lowering the rounding threshold to avoid cases where small per-stock amounts would otherwise be rounded down and escape surcharge. The report also supports higher surcharges where unfair trades use accounts in others’ names, creating surcharges for cooperative acts such as account provision or funding (illustratively set at half of the profits linked to the insider trade), and revising the surcharge reduction regime to reflect the degree of cooperation after an investigation starts, while keeping the overall deduction ceiling aligned with the current 50% reduction for pre-investigation self-reporting. The draft further proposes adding authority to request appearances to handle foreign regulators’ assistance requests in line with IOSCO’s Enhanced Multilateral Memorandum of Understanding requirements, and extending the Securities and Exchange Surveillance Commission’s criminal investigation remit to crimes involving unregistered financial instruments businesses. The chair asked the secretariat to finalise the report with limited edits, and the secretariat indicated it would move forward with system development, including legal amendments, based on the report’s contents and the meeting’s comments.

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