Self-Regulation Activities

Listing Administration - Maintaining and Enhancing the Quality of Financial Products -

Update : Jul. 14, 2011

1. Introduction

The Listed Company Compliance Department of Tokyo Stock Exchange Regulation (hereafter "TSE Regulation") strives to maintain and enhance the quality of listed financial products in order to ensure confidence in the financial instrument exchange market.

In contrast with the Listing Department of Tokyo Stock Exchange, Inc. (hereafter "TSE"), which provides consultation and support for the disclosure of corporate information, the Listed Company Compliance Department conducts self-regulatory listing administration activities independently of TSE. Should TSE Regulation (Listed Company Compliance Department) determine that its examinations, disciplinary actions or other measures against a listed company would be appropriate, TSE (Listing Department) shall delist, penalize, or take other measures against the company accordingly.

2. Activities of the Listed Company Compliance Department

1. Examination activities related to delisting and other actions regarding financial products, etc.

These activities include examinations related to the delisting of financial products, etc., designation of listed securities as Securities Under Supervision, and reassignment of issues from the 1st Section of the market to the 2nd Section.

2. Examination of information disclosure by issuers of listed securities, and activities related to decisions on disciplinary actions or other measures taken toward such issuers

In order to ensure adequacy in disclosure information, the Listed Company Compliance Department conducts examinations of disclosure conditions whenever deemed necessary and appropriate. Based on the results of these examinations, the Department then deliberates on the specific disciplinary actions or other measures required. In order to ensure effectiveness of requirements and other matters prescribed the listing rules, the Department also determines whether the following actions are necessary:
- Designation of issues as Securities on Alert and the removal of such designation,
- Submission of business improvement reports,
- Submission of improvement status reports, and other documents,
- Designation of issues as "Disclosure In Question" Securities and the removal of such designation,
- Public announcement, or
- Imposition of the listing agreement violation penalty.

3. Examinations related to delisting and other actions regarding financial products, etc.

Listed securities must fulfill requirements that ensure they can maintain appropriateness as listed products. If securities that have lost these qualities are left on the market, this can lead to investors incurring unanticipated losses, and subsequently result in a loss in confidence in the securities market. The Department therefore deliberates on the delisting of such securities.

During delisting examinations (such as examinations to determine the level of impact of false statements as defined by Article 601-11a in the Securities Listing Regulations), the Listed Company Compliance Department requires submission of necessary materials, an explanation of the circumstances from related parties, and preparing of documents that include the contents of this explanation. The Department will then deliberate after comprehensively considering the details of false statements in Securities Reports or other documents, as well as the events that led up to such false statements, the cause and circumstances, and any other facts about the situation.

4. Examination of information disclosure by issuers of listed securities, and activities related to decisions on disciplinary actions or other measures taken

Issuers of listed securities must be fully aware that timely and appropriate disclosure of corporate information forms the backbone of a sound financial instruments market. Therefore they are expected to conduct their business in good faith by continuously ensuring prompt, accurate, and fair disclosure of corporate information from the standpoint of investors. During examinations, the Listed Company Compliance Department looks at whether or not the timing of disclosure of important corporate information is appropriate, as well as whether or not there are any false statements, whether information deemed important for investor decision-making is missing, and whether the information disclosed may cause a misunderstanding among investors when making a decision. In addition, the Department deliberates on whether or not one or more of the following disciplinary actions or other measures are appropriate based on the results of other examinations, such as those that review the company's compliance with the Code of Corporate Conduct.

(1). Designation of issues as Securities on Alert and the removal of such designation (Rule 501 of the Securities Listing Regulations)

In the cases provided below, and when improvement in the internal management system, etc. of a listed company is deemed highly necessary, TSE designates listed stock, etc. as Securities on Alert, or removes such designation.

(a). When the TSE deems that a listed company is likely to fall under the delisting criteria for damage to sound transactions with controlling shareholders (Rule 601, Paragraph 1, Item 9-2 of the Securities Listing Regulations), false statements (Rule 601, Paragraph 1, Item 11(a) of the Securities Listing Regulations), adverse opinion, etc. (Rule 601, Paragraph 1, Item 11(b) of the Securities Listing Regulations), violation of the Listing Agreement (Article 601, Paragraph 1, Item 12 of the Securities Listing Regulations), involvement with anti-social forces (Rule 601, Paragraph 1, Item 19 of the Securities Listing Regulations), and/or those regarding the public interest and investor protection (Article 601, Paragraph 1, Item 20 of the Securities Listing Regulations), and that the company's internal management system, etc. is in serious need of improvement, TSE will designate the company's stock as a Security on Alert. Similarly, the TSE will remove this designation should the company no longer fall under these criteria.

(b). When the company has submitted an improvement report related to timely disclosure/the Code of Corporate Conduct but the TSE deems that there has been no improvement in implementation of improvement measures or management conditions.

(2) Submission of improvement reports (Rules 502, 504, and 505 of the Securities Listing Regulations)

When the issuer of a listed security does not properly disclose corporate information or when there has been a violation of the Code of Corporate Conduct, and the TSE deems that there is a serious need for improvement, TSE requires the issuer to submit a report that outlines the events leading up to the improper disclosure as well as steps to improve the situation (hereafter "improvement report"). TSE also requires issuers of listed securities to submit an improvement report in cases such as improper submission of documents related to corporate information disclosure.

(3) Submission of improvement status reports (Rule 503 of the Securities Listing Regulations)

TSE requires companies who submit an improvement report to also submit a report that describes the implementation and operational status of improvement measures (hereafter "improvement status report"). The company must submit this report after six months have passed since submission of the improvement report and also periodically over the five-year period thereafter. Also, TSE will oblige a company to re-submit an improvement report in cases such as when the improvement status report shows implementation and operational status of improvement measures to be inadequate.

(4) Designation of issues as "Disclosure In Question" Securities and the removal of such designation (Rule 506 of the Securities Listing Regulations)

When TSE deems that a listed company has not promptly disclosed corporate information and that the public need to be informed that such information is not yet disclosed, TSE designates such an issue as a "Disclosure In Question" Security to do so. TSE also removes this designation when appropriate.

(5) Public Announcement Measures (Rule 508 of the Securities Listing Regulations)

When a listed company is acknowledged to have violated the provisions related to timely disclosure or the Code of Corporate Conduct, TSE announces such fact

(6) Listing Agreement Violation Penalty (Rule 509 of the Securities Listing Regulations)

In cases where it has been acknowledged that a listed company has violated provisions related to timely disclosure and the Code of Corporate Conduct, when TSE deems that there has been damage to shareholders' and investors' confidence in the TSE market, TSE requires such listed company to pay a listing agreement violation penalty.