Inspection/Ensuring Trustworthiness of Trading Participants

Summary of Inspections

Update : Jan. 31, 2008

The Tokyo Stock Exchange Regulation conducts inspections of trading participants such as securities companies, etc. to assess degrees of compliance with the Financial Instruments and Exchange Law as well as the TSE rules and regulations. This is an integral part of our efforts to ensure the fairness and reliability of the market.
As described in the graph below, there are several types of inspections: "General Inspection", "Follow-up Inspection", "Special Inspection", and two methods for carrying out inspections: "On-site Inspection" and "Document Inspection".

Types of Inspections

	Description
General Inspection	The TSER carries out general inspections of trading participants which it deems in the highest need of them at the time. Inspections are conducted by chronological need-based order based on several factors. These factors include the number of days since a participants' last inspection, as well as the results of past inspections and the inspection results of SESC. Presently, the TSER conducts inspections of headquarters and branch offices in conjunction with the Japan Securities Dealers Association and other securities exchanges.
Follow-up Inspection	After an inspection is completed, a follow-up inspection is conducted as needed within one year to confirm that conditions are improving.
Special Inspection	Based on a variety of information sources, special inspections are conducted with a focus on specific items.

Inspection Methods

	Description
On-site Inspection	The TSER selects offices from among trading participants' headquarters and branch offices and conducts on-site inspections at these offices. The majority of inspections are conducting using this method.
Document Inspection	If the TSER decides that the documents submitted by a trading participant are sufficient for inspection purposes or under any other circumstances, then inspections are carried out via the documents without an on-site inspection.