Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 4

Each market must have clear rules assuring investor protection by safeguarding participants from the financial risks of failed settlement and ensuring that listed companies are required to follow sound policies on corporate governance, transfer of economic benefits and shareholder rights.

1.	Does the depository or the market have securities lending and borrowing schemes in place, and are these open to all market participants and their settlement agents?	A participant of JASDEC and its customer can lend or borrow securities (stocks) utilising the function of a JASDEC book-entry system. However, stock lending and borrowing is arranged directly by the parties concerned or through a securities finance corporation, and JASDEC is not involved in any business of those parties. JASDEC neither acts as a principal nor intermediates between parties concerned.
2.	Does the settlement system mark fail trades to market and collect margin from the failing counterparty to protect the innocent counterpart's interest?	No. There is no regulatory scheme to protect a counterpart’s interest from fail trades in JASDEC system. When a delivery fails, it is presumed that the instruction for the delivery has not been made.
3.	Does the market operate a guarantee fund or have an equivalent procedure to protect against the cost of failed transactions; and which sectors of the market does it cover?	There are investor protection funds to protect investors, which are contributed by securities firms. The funds will be utilised, with a certain condition, for covering any damages of an investor of a broker who goes bankrupt. Each stock Exchange has a default reserve fund to guarantee settlement at the exchange. The funds will be utilised for settling any outstanding transactions of a member broker that will be in default.
4.	Are the stock transfer agents (share registrars) linked electronically to the depository?	The stock transfer agents receive shareholders’ report data from JASDEC by a file transfer method (which should be approved by JASDEC as appropriate for transmitting data file from its computer system.). Therefore, both JASDEC and all stock transfer agents are electronically connected through the JASDEC network. This exercise is generally conducted semi-annually based upon the shareholders’ report of the record date by participants of JASDEC.
5.	Is there a legal maximum time period to complete ownership transfers in the books of the issuer? If so, does market practice adhere to the deadline?	As ownership transfer should be accomplished on an exercise period (which is the last day of the accounting period for the dividend payment, for example), shareholders’ report should be transmitted by the deadline of that date. As that period is legally determined, JASDEC and the participants adhere to the procedure provided by the rule of JASDEC for securities holders’ exercising their rights. Market Practice is for depository participants to ensure that cum-entitlement transactions must be completed in JASDEC on or before record date.
6.	Are investors entitled to all benefits arising on a security from the point of purchase; and how are any rules enforced?	Under the rules of the stock exchanges, a member firm is required to make a good delivery of securities with regard to settling trade through the stock exchanges. Thus, an investor is entitled to all benefits arising from the point of execution of a trade. The stock exchanges may take disciplinary action(s) including suspension of trade against non-complying member.
7.	Is proxy voting permissible in the market and can such proxies be lodged by post or other remote delivery method?	Proxies are permissible, and normally forms are enclosed in notices of shareholder’s meeting and can be lodged by post. Electronic voting has not been permitted yet.
8.	Are there binding rules in the market stating the minimum and maximum lapsed time between the announcement and completion of key events, including registration, the calling of shareholder meetings, the payment of dividends or interest, rights issues, tender offers and other voluntary corporate actions?	The Commercial Code covers the main area such as: Announcement of setting a date for recording shareholders should be done 2 weeks before the actual closing. Notice of shareholder meeting should be sent at latest 2 weeks before the meeting. Timetable of issuance of new shares and tender offers is governed by the Commercial Code and the Securities and Exchange Law. AGM must be held within 3 months of fiscal year end. Tender offer period is min 20, max 60 days. Tokyo Stock Exchange rule state that ex-date is 3 business days prior to record date.
9.	Are all voluntary corporate actions advised through a central mechanism assuring consistent information to all investors?	There is a direct communication mechanism installed for JASDEC deposited stocks by which beneficiary holders are registered in a beneficiary stock holder registry maintained by an issuer or its registrar. All voluntary corporate actions are advised directly from the issuer to beneficiary stock holders as well as to ordinary stock holders. In addition, the issuer reports all related information to JASDEC by mail in accordance with JASDEC rule. JASDEC publicises such information on a daily publication available only to the participants, but not to the general public or investors. Therefore, there is no such a central mechanism currently provided by JASDEC. It could be said that information necessary is delivered to all interested parties through participants. In addition, all information related to corporate actions is publicised by stock exchanges and a securities dealers’ association for the stocks registered with such organisations and eligible at JASDEC. Such information is available to the public.
10.	Is information on corporate actions available electronically, and is the minimum lapsed time for responding to such actions sufficient to enable all domestic and foreign investors to respond in a timely and considered fashion?	Information on corporate actions available electronically to the participants, not to general public, through the JASDEC web site created under the Tokyo Stock Exchange Wide Area Network. Information so disseminated is usually provided to the investing public through the participants. While creation of JASDEC web site is not intended to respond to public inquiries of the corporate actions, investors inside and outside of the country can obtain through participants necessary information in a timely fashion and have enough time for exercising their rights.