Fund Distribution in Japan: The Article 63 Exemption and Investment Manager Licensing for Pro-Investors

White & Case LLP

Due to the strict regulations on the distribution of fund interests in Japan, raising capital in Japan has been historically challenging for offshore managers seeking Japan investors. Under Japanese law, any person that engages in the marketing of fund interests in Japan must either be registered as a Type 1 Financial Instruments Dealer or a Type 2 Financial Instruments Dealer depending on the type of fund sought to be distributed in Japan. Furthermore, an additional filing maybe necessary in connection with the offering itself if the offshore fund is an investment corporation or a unit trust.

This article is an overview of the Qualified Institutional Investor Exemption (tekikakukikan toushikatou tokurei gyoumu, the "Article 63 Exemption") set forth under Article 63 of the Financial Instruments and Exchange Law of Japan (Law No. 25of 1948, as amended or supplemented from time to time, the "FIEL"). The Article 63 Exemption is an exemption from the business registration requirements normally applicable for managers of offshore funds in relation to self-offering and self-management activities in Japan. While the Article 63 Exemption is generally only applicable to investment funds in the form of limited partnerships, the Article 63 Exemption has been increasingly used by offshore managers as a viable and simple alternative to distribute their fund products in Japan.

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