The sharks are circling. With a large proportion of the estimated ¥1,500 trillion ($13.1 trillion) in Japanese household savings set to be unleashed on the investment trusts market, the number of unregistered and unregulated funds in Japan has grown rapidly. The country’s Financial Services Agency is worried that inexperienced amateur investors could get into trouble, and has included in its wide-ranging new Financial Instruments and Exchange Law (FIEL) measures designed to police the industry and curb aggressive sales tactics.
The law, which came into effect at the end of September, requires any collective investment scheme catering to amateur investors to register with the FSA and to provide it with information on the fund’s manager(s), balance sheet, location and activities. Funds catering to general investors will have six months to comply; those that cater to professional investors need only notify the FSA of their existence within three months of the law taking effect. After the grace period is over, unregistered funds continuing to sell to general investors can expect punitive measures, says Shiro Okita, a deputy director in the financial markets division at the FSA. "If funds selling to amateur investors have not registered with us within six months, then we have the power to go and inspect them," he says.