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The Working Group on Capital Market Regulations of Financial System Council’s Report — Insider Trading / Administrative Monetary Penalty System

Update

Mar 9, 2026

Authors Key Contacts

Takehiro Shibuya Kohga Miyamoto

Practice Areas

Finance and Financial Institutions

The Working Group on Capital Market Regulations of Financial System Council (the “WG”) published, on December 26, 2025, its Market System Working Group Report¹, which summarizes the results of its deliberations.

This article highlights recommendations expected to have a particularly significant practical impact, namely, the expansion of the scope of persons subject to insider trading regulations and the review of the administrative monetary penalty system.

¹ https://www.fsa.go.jp/singi/singi_kinyu/tosin/20251226-2/01.pdf (In Japanese)

1. Expansion of the scope of persons subject to insider trading regulations

To adequately capture violations, the WG recommended expanding the scope of “persons concerned with tender offerors, etc.” and reviewing the definition of “parent company” as follows:

Item	Background	Summary of Recommendations
Expansion of “persons concerned with tender offerors, etc.”	- It has been pointed out that advisors, etc. of the target company (issuer), while having close access to inside information, are not currently subject to regulation.	- It would be appropriate to bring the following persons within the scope of regulation. Officers of the issuer’s parent company Persons entitled to inspect the account books of the issuer (including those of its parent company) Persons having statutory authority Persons having concluded, or who are in negotiations to conclude, a contract Certain persons concerned with asset management companies of investment corporations and with their parent companies where the tender offeror, etc., or the issuer, is an investment corporation
Review of the definition of “parent company”	- Under the current definition of a “parent company”, as reported by companies in their most recent Annual Securities Reports, etc.², a regulatory gap arises beginning immediately after the acquisition of control until the next report is filed. - Even if the controlling company of a tender offeror, etc. that is not required to file an Annual Securities Report, etc., publicly discloses the relevant facts, such a disclosure does not constitute a statutory method of disclosure.	- It would be appropriate to define “parent company”, as “a company that controls the decision-making body of another company”³.

² See Article 166, paragraph (5) of the Financial Instruments and Exchange Act (the “FIEA”) and Article 29-3, paragraph (1) of the Cabinet Office Ordinance on the FIEA.

³ With respect to the details of these recommendations, on December 26, 2025, the Financial Services Agency of Japan published a draft “Partial Amendment of the Cabinet Office Ordinance on Restrictions on Securities Transactions, etc.”, and has made the draft subject to public comment procedures:
https://www.fsa.go.jp/news/r7/shouken/20251226/20251226.html (In Japanese)

2. Review of the administrative monetary penalty system

To strengthen deterrence, the WG recommended reviewing the method for calculating administrative monetary penalties, etc. as follows.

(1) Review of the method for calculating administrative monetary penalties

Item	Background	Summary of Recommendations
Administrative monetary penalties for insider trading, etc. by persons concerned with tender offerors, etc.	- The current calculation method⁴ may not sufficiently deter violations.	- A new method could be introduced under which the monetary equivalent of the economic benefit would be deemed to be the amount obtained by multiplying the closing price on the day before public disclosure by the historical average rate increase in the share price. - It would be appropriate to compare (i) the amount calculated under the current law and (ii) the amount calculated under this new method, and to set the amount of the administrative monetary penalty at the higher of two.
Administrative monetary penalties for failure to file, or false statements in, a Report on Large Volume Holdings or Alteration Report	- It has been pointed out that the current level of administrative monetary penalties⁵ is insufficient to deter malicious violations, while being excessive for inadvertent oversights.	- Excluding cases with only a minor impact on investment decisions, it would be appropriate to limit the scope of administrative monetary penalties to types of violations that are more likely to affect market prices. - Increasing the level of administrative monetary penalties by re-examining the impact on market prices of Report on Large Volume Holdings or Alteration Report would be worth considering.
Administrative monetary penalties for market manipulation, etc. through high-frequency trading activities	- It has been pointed out that, since high-frequency trading activities involve frequent order submissions and cancellation of large volumes of orders, identifying the “start and end time of the violations” under the current rules⁶ would require an enormous amount of work, potentially hindering enforcement.	- Setting the amount of the administrative monetary penalty at an amount equal to the gains realized on the day of the violation (calculated on a daily basis) would be worth considering - To allow administrative monetary penalties of less than JPY 10,000 to be imposed, it would be appropriate to lower the rounding-down threshold for fractional amounts to below JPY 1.

(2) Responses to cases involving unfair trading

Item	Background	Summary of Recommendations
Administrative monetary penalties for persons who engage in unfair trading by, for example, using accounts in another person’s name	- The use of accounts in another person’s name lowers the psychological barriers to engaging in violations and therefore requires stronger deterrence than in ordinary cases.	- Taking into account, among other factors, that the repeated violations result in the penalty amount being increased by 1.5 times, it would be appropriate to increase the level of administrative monetary penalties.
Administrative monetary penalties for persons who engage in assistance such as providing accounts	- Under current law, persons who engage in cooperative acts such as providing accounts to persons who engage in unfair trading are not subject to administrative monetary penalties.	- Recognizing that the forms of assistance vary, it would be appropriate to establish new administrative monetary penalties for persons who provide such assistance. - It would be appropriate to make the administrative monetary penalty system applicable to persons who provide assistance eligible for the administrative monetary penalty reduction system.

(3) Review of the administrative monetary penalty reduction system

Background	Summary of Recommendations
- There have been cases in which violators who self-reported their violations received reductions in administrative monetary penalties and thereafter denied the violations they had reported.	- While introducing an administrative monetary penalty reduction system that adjusts reductions based on the level of cooperation with authorities after an investigation has commenced, it would be appropriate from a deterrence perspective to maintain the aggregate cap of (i) the reduction rate applicable where a report is made prior to the commencement of an investigation and (ii) the reduction rate applicable where cooperation is provided after the commencement of an investigation, set at a level equivalent to the reduction rate under the current regime, so as to avoid any decrease in the overall penalty level as compared with the existing system.

Background

Summary of Recommendations

- There have been cases in which violators who self-reported their violations received reductions in administrative monetary penalties and thereafter denied the violations they had reported.

- While introducing an administrative monetary penalty reduction system that adjusts reductions based on the level of cooperation with authorities after an investigation has commenced, it would be appropriate from a deterrence perspective to maintain the aggregate cap of (i) the reduction rate applicable where a report is made prior to the commencement of an investigation and (ii) the reduction rate applicable where cooperation is provided after the commencement of an investigation, set at a level equivalent to the reduction rate under the current regime, so as to avoid any decrease in the overall penalty level as compared with the existing system.

⁴ See Article 175 of the FIEA.

⁵ See Articles 172-7 and 172-8 of the FIEA.

⁶ See Articles 174 and 174-2 of the FIEA.

3. Outlook

Typically, it takes more than 1 year for legislative amendments to take effect after the publication of a report by the Financial System Council. On the other hand, a proposed amendment to the Cabinet Office Ordinance regarding the definition of “parent company” has already been published and made subject to public comment procedures, which could lead to earlier implementation, so it would be wise to monitor developments in this matter closely.

Key Contacts

TakehiroShibuya

Tokyo

Partner

Takehiro Shibuya is a special counsel of Anderson Mori & Tomotsune. He has extensive experience with financial regulatory issues including the Financial Instruments and Exchange Law and various types of financial transactions. Prior to joining our firm, Mr. Shibuya served as a Securities and Exchange Inspector at the Kanto Local Finance Bureau of the Ministry of Finance for three years, where he was primarily in charge of inspection for financial instruments dealers, examination of insider trading and market operations.

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KohgaMiyamoto

Tokyo

Associate

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