J-SOX is Japan's Financial Instruments and Exchange Law, enacted in response to corporate scandals.
 
The Internal Control Committee of the Business Accounting Council of the Japanese Financial Services.

Listed companies in Japan must:

• Document internal processes and controls

• Test / evaluate the design of internal processes and control procedures
 
• Test / evaluate the operation of internal processes and control procedures

• Certify about the design and effectiveness of internal controls and certify as to the accuracy of the report

• External auditors must issue an attestation repors

Looks familiar?

The Financial Instruments and Exchange Law is effective (since April 2008) for 3,800 companies listed in Japan, along with their foreign subsidiaries.
 
Definition of Internal Control
 
Internal control is defined as a process performed by everyone in an organization and incorporated in its operating activities in order to provide reasonable assurance of achieving four objectives:

1. Effectiveness and efficiency of business operations,

2. Reliability of financial reporting,

3. Compliance with applicable laws and regulations relevant to business activities,

4. Safeguarding of assets.

Internal control consists of six basic components:  

1. Control environment

2. Risk assessment and response

3. Control activities

4. Information and communication

5. Monitoring

6. Response to IT (Information Technology)

Effectiveness and efficiency of business operations means promoting effective and efficient operations in order to achieve the objectives of business activities.
 
Reliability of financial reporting means ensuring the reliability of financial statements and the information that could have a material effect on financial statements.
 
Compliance with applicable laws and regulations relevant to business activities means promoting compliance with laws, ordinances and other codes relevant to business activities.
 
Safeguarding of assets means to ensure that assets are acquired, used and disposed of in accordance with proper procedures and approvals. 

Certified JSOX Expert (CJSOXE)
Distance Learning and Online Certification Program

The all-inclusive cost is $297

What is included in this price:

A. The official presentations we use in our Japanese Sarbanes Oxley (J-SOX) instructor-led classes (892 slides)

Course Synopsis:
www.sarbanes-oxley-association.com/CJSOXE_Course_Synopsis.htm

B. The official presentations we use in our US Sarbanes Oxley Act (CSOE) instructor-led classes (1015 slides)

We will send you the official presentations for the CSOE exam because we strongly believe that a good understanding of the US Sarbanes Oxley Act and implementation, is necessary for a good understanding of the J-SOX framework.

The CSOE exam is NOT included in the above cost. Only the CJSOXE exam is included

Course Synopsis:
www.sarbanes-oxley-association.com/CSOE_Course_Synopsis.htm

C. Up to 3 Online Exams

There is only one exam you need to pass, in order to become a Certified Japanese Sarbanes-Oxley Expert (CJSOXE).

If you fail, you must study again the official presentations, but you do not need to spend money to try again.

Up to 3 exams are included in the price.

D. Personalized Certificate printed in full colour

Processing, printing, packing and posting to your office or home

To learn more:
www.sarbanes-oxley-association.com/CJSOXE_Distance_Learning_and_Certification.htm 

From the "Securities and Exchange Law" to the "Financial Instruments and Exchange Law"

In the Financial Instruments and Exchange Law, it is stipulated that financial instruments firms should comply with the following rules of conducts (rules for sales and solicitation) in conducting sales or solicitation of securities or derivative transactions.

· Obligation on presenting signs

- All branch offices and business offices of financial instruments firms must present signs in places noticeable for the public.

· Regulation on advertisements

- An advertisement must indicate a registration number and that the advertiser is a financial instruments firm.- Concerning profit prospects, an advertisement shall not portray things in a way that is significantly different from the truth or in a way this may mislead people.

· Obligation to deliver documents in a written format before making a contract

- Documents must indicate a registration number and that the company is a financial instruments firm.

- Documents must state the outlines of the contract and the fees.

- If there is a "possibility of incurring loss" or "possibility that the loss may exceed the value of deposits received from customers," the documents must state as such.

· Obligation to deliver document in a written format at the time of a contract

· Various prohibited conducts

- It is prohibited to engage in "the delivery of false information" or "solicitation by providing decisive judgments on uncertain matters."

- Solicitation of customers who have not requested such solicitation by making visits or phone calls is prohibited (a ban on unwanted solicitation).

* It is intended that, for the time being, this will apply to over-the-counter financial futures transactions (foreign exchange margin transactions, etc.).

- Continued solicitation of customers who have once indicated that they do not wish to enter into a contract is prohibited (a ban on re-solicitation).

* It is intended that, for the time being, this will apply to financial futures transactions in general (foreign exchange margin transactions, etc.).

· Prohibitation of loss compensation

· Principle of appropriateness

- In light of customer knowledge, experience, and assets, as well as the purpose for concluding a contract, firms must not engage in inappropriate solicitation that may result in insufficient investor protection.

In addition, various regulations on conduct of businesses are being reorganized regarding "investment advisory," "investment management" and "customer asset administration" activities and the like.

More flexible regulation on conduct of businesses according to the attributes of customers

- Differentiation between professional investors and general investors -

In the Financial Instruments and Exchange Law, under the premise of user protection and with a perspective towards the smoother provision of risk capital, if a customer is a "professional investor," certain regulations regarding conduct of businesses, such as "obligation to deliver documents before making a contract," will not be applied.

All customers for financial instruments firms are categorized into "professional investors" or "general investors," some of them may apply for a change of status from one to the other.

Enhancing disclosure by listed companiesIntroducing the statutory quarterly reporting system

In order to ensure timely and prompt disclosure of financial and corporate information, "quarterly reporting" will become a mandatory requirement for listed companies, and it will be subject to audits by certified public accountants or auditing firms.

(Submission of false quarterly report will be subject to criminal or civil money penalties.)

Enhancing internal control over financial reporting

In order to ensure appropriate disclosure of financial and corporate information, "internal control reports" which provide an evaluation of the validity of internal control of financial reporting (a system to ensure appropriate information on financial matters) for each fiscal year will become a mandatory requirement for listed companies and will be subject to audits by certified public accountants or auditing firms.

In addition, listed companies will be obliged to submit "certification" by management stating that descriptions in financial statements are appropriate and in compliance with laws and regulations.

Reviewing the Tender Offer System

The number of corporate mergers and acquisitions has been accelerating rapidly in Japan along with increasing numbers of "tender offer (TOB)," one way to exercise M&A. The types of tender offers are also becoming more diversified.

Given these circumstances, the tender offer (TOB) system under the Securities and Exchange Law has been reviewed in this legislative revision.

Reviewing the reporting system for Large Shareholdings

Given the increasing incidence of high volume share acquisitions, this legislative revision will also amend "the reporting system for large shareholdings" under the Securities and Exchange Law.

For reference: The "reporting system for large shareholdings"

"The reporting system for large shareholdings" is a system to promptly disclose the status of large shareholdings to investors.

If total shareholdings in a listed company reach above 5%, the shareholder must submit a "report on large shareholdings" within 5 business days from the date of the purchase.

(If the holdings increase or decrease by 1% or more at a later date, a "report on changes" must also be submitted within 5 business days.)

However, in consideration of the administrative workload for institutional investors engaged in a large volume of trading as part of their daily business activities, a lower frequency of reporting will be required (special reporting system).

For instance, the followings will be reviewed.

Concerning the "special reporting system" for institutional investors, the deadline will be shortened and the frequency for reporting will be increased to "roughly every 2 weeks, within 5 business days."

Under the current "special reporting system," for example, if shareholdings in a listed company reach above 5%, a report must be provided "once every 3 months by the 15th of the following month."

To facilitate rapid publication through EDINET (an electronic disclosure system), "reports on large shareholdings" must be submitted electronically.

Ensuring appropriate management of self-regulatory operations by exchangesUnder current regulation, stock exchanges are allowed to be demutualized.

Regarding incorporated stock exchanges, some concerns regarding possible conflicts of interest between the following two have been raised:

· "Profitability" as a stock corporation, and

· "Self-regulatory operation" aimed at ensuring fairness and transparency of transactions on the exchange.

Under the Financial Instruments and Exchange Law, in order to ensure appropriate management of self-regulatory operations by financial exchanges, systems are being organized to allow:

(1) The entrustment of self-regulatory operations to a "self-regulatory corporation";

(2) The establishment of a "self-regulatory committee" to make decisions on matters concerning self-regulatory operations (for incorporated stock exchanges).Strict countermeasures against unfair trading

Increase in maximum criminal penalty

In order to ensure user protection, secure fairness and transparency in transactions, and establish public confidence in the markets, the current level of penalties under the Securities and Exchange Law will be increased concerning violation of disclosure requirements and unfair tradings.

For example, penalties against the following malfeasance are increased:General unfair trading, spreading of rumors, resorting to deceptive devices, market manipulation

· Submission of false registration statement regarding material information

Maximum imprisonment of 10 years
Individuals: Maximum fine of JPY 10 million
Corporations: Maximum fine of JPY 700 million