FSA’s Administrative Sanctions on Investment Managers and a Trust Bank


On October 16, 2012, the Financial Services Agency of Japan (the “FSA”) announced administrative sanctions against an investment manager (a two month business suspension order and a business improvement order) and a trust bank (a three months business suspension order and a business improvement order). On the same day, the Kanto Local Finance Bureau also announced similar administrative sanctions against another investment manager (a one month business suspension order and a business improvement order).

These companies were all sanctioned in connection with asset management services provided to one particular pension fund client. According to news reports, this pension fund had delegated investment authority with respect to JPY 6.8 billion to the three sanctioned companies, directing them to invest in certain limited partnerships (toushi jigyou yugen sekinin kumiai) which would in turn, invest into unlisted shares. Upon such direction from the pension fund and without conducting any substantive review, these companies, each acting as an asset manager, made investments into such limited partnerships. When the investments eventually proved to be unsuccessful, the pension fund incurred losses of JPY 4.6 billion. It should also be noted that this particular pension fund suffered significant losses in the recent AIJ scandal.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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