Japan Securities Dealer Association: Major issues facing the industry

On July 1, 2024, the Japan Securities Dealer Association (JSDA) released a document titled “Major issues facing the industry”, that comprehensively lists key initiatives the association is planning to pursue in order to improve the overall ecosystem along a number of dimensions:

• Citizens
• Market Intermediaries (i.e., association members)
• Social Collaboration
• Market Infrastructure
• International Capital Markets
• JSDA

Please note that the following translation is for informational purposes only and may not be a perfect representation of the original Japanese text.

1. Citizens

The JSDA will work to realize stable asset formation for the public by disseminating information about the asset formation support system and working to improve the system.

1.1 Initiatives to promote stable asset formation for the public and ensure a shift from savings to investment

In order to ensure that the trend from “savings to investment” that has begun to take hold becomes full-scale and sustainable, the government will take into account the “Basic Policy for the Comprehensive Promotion of Measures to Support the Stable Asset Formation of the People” (Cabinet decision of March 15, 2024) and will provide timely and appropriate information on the status of use of asset formation support systems, including NISA, while also comprehensively examining and working on information analysis, planning and promoting effective measures, etc.

The JSDA will carry out public relations activities related to the NISA system, such as operating a special website, providing pamphlets, and distributing and broadcasting commercial videos.

1.2 The Financial and Economic Education Promotion Organization (J-FLEC) aims to improve the public's financial literacy

The JSDA will steadily transfer its financial and securities education support business, as well as the personnel and funds related to said business, to the Japan Finance and Economic Education Promotion Organization (J-FLEC).

After the transfer, the JSDA will support the building of collaborative relationships between the Association members and J-FLEC, and will also support the acceptance of J-FLEC at the regional association secretariat.

With a view to supporting the activities of J-FLEC, the JSDA will take various opportunities to hold in-depth dialogue with J-FLEC and, as necessary, make recommendations to stakeholders such as the national and local governments and the business community.

The JSDA will take necessary measures to further enhance education on asset formation in schools.

1.3 Dealing with fraud related to securities investments

In response to fraud related to securities investments, the JSDA will take measures such as issuing warnings to investors and operating call centers.

1.4 Improving asset formation support systems and increasing convenience

Initiatives to improve the convenience of the NISA system: the JSDA will lobby all relevant parties to review the NISA system to further improve its convenience.

Initiatives to reform the defined contribution pension system (corporate DC, iDeCo): In preparation for the discussion on the next pension system following the announcement of the results of the Ministry of Health, Labor and Welfare’s financial review of public pensions, the JSDA will work with relevant parties to improve the systems and administrative procedures of the systems (Corporate DC, iDeCo).

1.5 Initiatives for utilizing assets of the elderly and for smooth intergenerational transfer

In order to continue asset management for the elderly generation, and proxy transactions (family transactions) to pass on assets and literacy to the next generation, the JSDA will continue to consider the possibility of a support securities account.

In order to promote the transfer of assets between generations, the JSDA will continue to consider the review of the requirements for payment in kind of inheritance tax and the assessed value, etc., and will hold discussions with relevant parties.

1.6 Initiatives to improve the investment environment for individual investors

The JSDA will lobby all parties concerned to unify financial income taxation (netting of profits and losses with derivatives).

The JSDA will consider ways to promote understanding of the significance and functions of shareholder benefit programs not only among the general public but also among issuers, institutional investors, etc.

2. Market Intermediaries

The JSDA will work to promote customer-oriented business operations and improve its functionality and credibility for market intermediaries.

2.1 Initiatives to thoroughly implement customer-oriented business operations

Consider necessary measures based on the discussions at the Financial System Council regarding “customer-oriented business operations” and the management status of the JSDA members.

2.2 Initiatives to provide financial services suited to an aging society

The JSDA will take the necessary steps to help provide financial services that are adapted to the attributes and circumstances of elderly customers.

2.3 Support for improving the level of cybersecurity measures among members

Based on the government’s strategic direction regarding economic security, the JSDA will take the necessary measures.

The JSDA will share cybersecurity information, provide members with information on government cybersecurity measures, and coordinate member participation in various government cybersecurity exercises, as well as enhance training for members.

2.4 Support for the establishment of compliance systems for JSDA members

The JSDA will support its members in establishing compliance systems through the operation of a compliance consultation desk that was established in September last year, among other measures.

The JSDA aims to further improve the qualifications of sales representatives by improving and enhancing the content of sales representative qualification renewal training.

Regarding self-regulation training (JSDA compliance training), the JSDA will further improve the training program and strive to improve convenience, etc.

2.5 Ensuring appropriate self-regulatory functions

Flexible and effective audits of the JSDA: the JSDA will continue to strive to conduct flexible and effective audits according to the operations, financial status and various information of the JSDA members, and will check the compliance with laws and regulations and self-regulation rules, and the state of internal control systems, etc.

Continuous measures to prevent insider trading: the JSDA will cooperate with market-related institutions to continuously consider and implement various measures to prevent insider trading, and will also consider ways to improve the efficiency of the J-IRISS system.

2.6 Middle and back office initiatives to streamline operations

As regulations and administrative procedures in the securities industry become more sophisticated and refined, member companies are currently facing difficulties in securing human resources due to the aging of employees engaged in middle and back office operations and a decline in the labor force.

In light of this, in order to maintain and streamline middle and back office operations, the JSDA will conduct cross-industry studies in the Roundtable, which has been established as an advisory body to the JSDA President, and in the subcommittees (Cybersecurity Subcommittee, Inheritance Subcommittee, Foreign Equity Corporate Action Subcommittee, Account Opening Subcommittee, Trade Surveillance Subcommittee, and Tender Offer Subcommittee).

2.7 Promoting paperless and digitalization of various procedures in securities trading

With regards to guidelines for customer awareness to ensure a smooth start to the system for making customer-delivered documents digital, the JSDA will resolve the following.

The JSDA will closely monitor the status of development of relevant laws and regulations, and take necessary measures such as considering amendments to self-regulatory rules and various Q&As, etc.

The JSDA will take measures to promote the digitalization of dividend receipt procedures (dividend receipt method).

2.8 Supporting member human resource development to solve social issues

With the aim of enabling members to acquire a wide range of knowledge related to their work, the JSDA Training Hub, a training website for members’ executives and employees, will provide videos on a variety of topics (legal systems and research, business skills, IT/DX, cybersecurity measures, SDGs, dealing with elderly customers, etc.).

In addition, the JSDA will continue to hold face-to-face training and networking events for the purpose of information exchange and interaction between members’ executives and employees.

2.9 Efforts towards scrapping and building regulations

As each JSDA member uses its ingenuity to practice customer-oriented business operations, the JSDA will take steps toward scrapping and building regulations, such as continuing to lobby for the relaxation of regulations that have become overly formal and uniform.

2.10 Response to the plan to realize an “Asset Management Nation”

Based on the discussion on the formulation of principles for product governance to control the quality of financial products, the JSDA will work towards an outcome that ensures profitability.

2.11 Responding to diversification of sales channels

In light of the diversification of sales channels, the JSDA will endeavor to grasp the actual situation and take necessary measures based on the results of the understanding of the actual situation.

3. Social Collaboration

The JSDA will work to collaborate with society through the promotion of SDGs, etc.

3.1 Strengthening domestic and international partnerships to achieve the SDGs

In order to support those working to solve social issues related to the SDGs, the JSDA will operate the “Shareholder Benefits SDGs Fund” that utilizes social contribution-type shareholder benefits, and will consider further development of the fund.

In order to promote the implementation of measures to solve social issues by utilizing the “knowledge” of universities, the JSDA will work to further collaborate with universities, etc.

3.2 Support for children in economically disadvantaged situations

In order to help children grow up with hope for the future even in economically difficult situations, the JSDA will provide support through the “Children’s Support Securities Net,” a platform that connects members with NPOs and other organizations that support children, and the “Children’s Future Used Book Donation.”

In addition, in order to further increase momentum for addressing child and young people’s poverty in the securities and banking industries, the JSDA will work with the Japanese Bankers Association to consider and implement cross-industry initiatives.

3.3 Promoting understanding of the functions and roles of securities markets and securities companies

In order to further promote understanding of the functions, roles and importance of securities companies among all segments of the public, the JSDA will utilize various media.

The JSDA will consider and implement initiatives such as broadly introducing the business and initiatives of securities companies to deepen public understanding of the basic functions of the securities market and its role in the national economy, and the JSDA will consider efforts to contribute to ongoing discussions on the restructuring of capital markets both at home and abroad.

3.4 Creating a rewarding work environment and promoting diversity

In order to further promote work style reform and diversity in the securities industry, measures will be implemented for specific targets.

(For member representatives) Information dissemination with the aim of strengthening commitment.

(For member executives and employees) Holding industry-wide conferences with the aim of raising awareness, and holding seminars that contribute to improving women’s health literacy to promote the creation of workplace environments that are easy for both men and women to work in.

(For member human resources personnel) Holding opinion exchange meetings by business type and region with the aim of providing opportunities to build industry-wide networks.

5. Market Infrastructure

The JSDA will work to strengthen the functionality and competitiveness of Japan’s capital markets, including financial innovation and responding to the needs of international financial cities.

5.1 Appropriate responses to the progress of financial innovation

Regarding securities such as bonds using blockchain technology (tokenized securities), in addition to considering ways to improve the system for transactions involving stock options, the government will also consider and respond to any issues that are necessary from the perspective of protecting investors and developing a healthy market.

5.2 Establishing a system to improve the functionality of the PTS

The Financial System Council’s “Market Institutions Working Group Second Interim Report” defined “the improvement of the functions of privately-established trading systems (PTS)”.

Based on the government’s response to the above, the JSDA will consider establishing the necessary systems.

5.3 Initiatives to promote the use of J-Ships, a securities system for specified investors

In order to further promote the use of the system, the JSDA will promote awareness of J-Ships stocks and provide information on the Specified Investor System and J-Ships.

The JSDA will consider ways to improve the system, such as relaxing the requirements for information that can be provided when giving explanations.

5.4 Creating an environment to promote the supply of growth capital to startups

In order to promote the supply of growth capital to startups, the JSDA is promoting equity investment crowdfunding and registered PTS operating companies.

The government will consider ways to improve the system for trading unlisted securities. It will also strengthen public awareness activities regarding trading systems for unlisted stocks, etc.

5.5 Creating an environment for the expansion and diversification of the corporate bond market

Based on the discussions in the Working Group on Infrastructure Development for Revitalizing the Corporate Bond Market, the Government will continue to consider ways to encourage the granting of covenants and the further use of corporate bond administration assistance, in order to develop an environment in which companies with relatively high credit risk can issue corporate bonds.

The Working Group on the Development of Corporate Bond Price Information Infrastructure has established a reporting and publication system for corporate bond trading information.

The JSDA will continue to conduct regular reviews of the extent to which the results are accurate and to consider expanding the range of securities included in the announcement.

5.6 Initiatives to expand the scope of use of the My Number system

The JSDA will conduct specific studies and coordinate with relevant parties to expand the scope of use of My Number in the securities industry.

5.7 Training to maintain market functions

The BCP training for the securities market was prepared with the aim of confirming the industry-wide information communication system in the event of a large-scale disaster, etc.

5.8 Initiatives to contribute to the realization of an international financial center

In order to further enhance the international presence of Japan’s financial and capital markets, the JSDA will consider measures that will contribute to improving Japan’s status as an “international financial hub and center in Asia,” and will support and promote initiatives in Tokyo, Osaka, and other cities.

5.9 Collecting information regarding shortening the stock settlement period (T+1)

In light of the current situation in which major overseas markets are either implementing or considering a transition to a T+1 settlement period for stocks, the JSDA will work with relevant organizations to gather information on issues to be addressed in order to further shorten the settlement period.

6. International Capital Markets

The JSDA will work to expand global information dissemination and collaboration, including the promotion of sustainable finance.

6.1 Promotional activities to attract investment to Japan's capital markets

To ensure that overseas stakeholders accurately understand the current state of Japan’s financial and capital markets and our initiatives, and to promote the development of the Japanese market, the JSDA will actively carry out promotional activities with the main objective of encouraging investment and expansion into the country.

Provision of information in English will be strengthened through English-language websites and other content regarding information that is of great international interest.

6.2 Japan's Transition Finance Initiatives in the International Capital Market

The JSDA will consider and implement support measures to communicate the significance of and promote understanding of Japan’s Green Transformation (GX) and transition finance initiatives to those involved in international capital markets, such as by holding factory tours related to GX technologies.

6.3 Encouraging market participants on the latest initiatives in the international capital market

The JSDA will consider and implement measures that contribute to the promotion of the latest initiatives in the international capital market, such as sustainable finance, by co-hosting conferences with the International Capital Market Association (ICMA), etc.

The JSDA will also work to strengthen cooperation and collaboration with related institutions both at home and abroad, including in Asia.

6.4 Follow up and respond to international securities regulatory trends

IOSCO (International Organization of Securities Commissions) and other organizations are examining changes in the retail market environment and new issues.

In light of these trends, the Government will closely monitor these international developments and use them to develop appropriate domestic responses.

Further promote the exchange of opinions and information sharing within the securities industry regarding discussions on accounting, auditing, and sustainability standards.

6.5 Further promoting collaboration and cooperation with relevant overseas institutions

Taking advantage of opportunities such as hosting the Tokyo General Meeting of the Asian Securities Forum (ASF), the JSDA will lead information exchange and collaboration among related parties.

It will address common challenges within Asia and provide support for emerging markets.

The JSDA will actively exchange information with and contribute to ICSA (International Conference of Securities Dealers Associations) and other overseas organizations to address common issues and provide feedback to Japan as necessary.

7. JSDA

The JSDA will work to further revitalize the association's secretariat organization.

7.1 Promoting efficiency through business scrap-and-build and utilization of digital transformation

Promote scrap-and-build of business operations and utilize generative AI, RPA, secure cloud services, etc.

This will further promote simplification and efficiency of operations.

7.2 Maintenance and improvement of business continuity systems, including cybersecurity measures

Promote the JSDA’s security defense measures to respond appropriately to cyber attacks.

Strive to maintain and improve the JSDA’s BCP through the PDCA cycle, including responses in the event of a disaster.

7.3 Further improvement of staff capabilities and qualifications

Enhancement of training on specialized knowledge necessary for the JSDA’s business, provision of various work experience opportunities, and the ability to make independent and proactive proposals.

The JSDA will strive to further improve the capabilities and qualifications of our employees by promoting improvements to the work environment, etc.

7.4 Promoting the creation of rewarding and comfortable working environment

The JSDA will realize the effects of the reorganization of the headquarters secretariat, and will further promote the creation of a rewarding work environment by sharing and clarifying organizational goals and principles, and by further promoting invigorating communication within the organization .

The JSDA will promote efforts to balance work and life so that each employee can fully utilize their abilities and continue to work with peace of mind.

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