Tokyo is an attractive location for financial service providers who are thinking of setting up an overseas office. Reason 1, because Tokyo is one of the most stable cities in Asia, both politically and socially. Reason 2, Because Tokyo offers subsidies to newcomers and emerging operators.
Previously, IJ introduced various possible forms and their standpoints when setting up business in Japan and where to seek support ( In this article, Kenji Kawahigashi, an ex-SESC inspector and lawyer experienced in supervising overseas asset management companies start up in Japan, explains about financial licenses in Japan. If you know which licenses you will need, you are entitled to receive subsidy for newcomers, if you apply by the end of March, 2021.

Tokyo Metropolitan Government (“TMG”) has been providing (upon request) subsidies to overseas asset managers.  The subsidy covers for expenses incurred for establishment of a Japanese subsidiary or a branch office in Tokyo including acquisition of related financial licenses.  The subsidy may amount to JPY 7.5 million (per applicant), encouraging overseas asset managers to enter the Japanese market.

  1.  Financial Instruments and Exchange Law of Japan (the “FIEL”)

The FIEL is the main statute regulating asset management business.  The FIEL stipulates whether and what kind of financial license (e.g., Investment Management License (“IM License”) and Investment Advisory License (“IA License”)) asset managers should obtain from Japan Financial Services Agency (“JFSA”). 


  1.  Difference between “IM” and “IA”

Under the FIEL, “Investment Management” and “Investment Advice” are distinguished.  In other words, no IM business is allowed with the IA License only, and no IA business is allowed with the IM License only.  The difference between the two are illustrated as follows.

In Chart A, the asset manager is authorized to make investment.  The asset manager with discretionary power is categorized as “IM”.  In contrast, in Chart B, the asset manager does not make investment.  In Chart B, the investor (who is advised by the asset manager) has discretionary power to make investment, not the asset manager.  Such asset manager (with no discretionary power) is categorized as “IA”.


  1.  “SMA” and “CIS”

With the IM License, the following 2 business categories can be conducted under the FIEL:


Asset management under a discretionary investment management agreement (“DIM Agreement”) with an investor (Category A); and


Acting as a general partner (“GP”) of a limited partnership (“LPS”), and as a manager of other types of fund-vehicles (e.g., unit trusts, investment trusts, investment corporation) (Category B)

Category A is sometimes referred to as “SMA” (or separate management account) business.  Category B is called as “CIS” (or collective investment scheme) business.


  1.  Investor Solicitation

As illustrated in the above charts, CIS has a fund-vehicle, and no such fund-vehicle in SMA.  Investor solicitation to the fund-vehicle requires Type 1 or Type 2 License under the FIEL.  Solicitation of investors in Category B requires Type 1 or Type 2 License.  If such solicitation is conducted by the asset manager itself, the said manager should obtain Type 1 or Type 2 License, depending upon the kind of the fund-vehicle, in addition to the IM License.

In contrast, since no fund-vehicle is involved in SMA, there is no investor solicitation to the fund-vehicle in Category A.  Even if the asset manager solicits an investor to enter into a DIM Agreement, the said manager needs no Type 1 or Type 2 License.  Please note that if someone else (i.e., someone other than the asset manager) solicits (on behalf of the asset manager) an investor to enter into a DIM Agreement (with the asset manager), such soliciting person needs to obtain Investment Advisory Agency (“IAA”) License under the FIEL. IAA is different from IA (or IM, Type 1 and Type 2).


  1.  Asset Management from Outside of Japan

Asset managers may wish to provide their services to investors in Japan, the mangers being outside of Japan, with no presence in Japan.  Under the FIEL, however, if recipient(s) of the services is/are located in Japan as illustrated in the charts below, the asset managers are, in principle required to obtain relevant license from the JFSA.

Chart C above is an example of SMA business.  The recipient of the overseas asset manager’s services is located in Japan.  In such case, the asset manager is, in principle, required to obtain IM License, notwithstanding the fact that the said manager has no presence in Japan.

In Chart D above, an LPS (which is a type of CIS fund) has one GP and some limited partners (“LPs”).  The GP is the asset manager outside of Japan with no presence in Japan.  Under the FIEL, if one (or more) LP(s) is/are Japan-resident(s), the asset manager (acting as GP) need, in principle, obtain IM License.


  1.  Keiwa Sogo’s Assistance

There are several exceptions and exemptions to the license regulations mentioned in the foregoing.  Keiwa Sogo, with in-depth knowledge and experience, can provide tailored advice and assistance to foreign asset managers.

TMG’s subsidy must be a prospective option for overseas asset managers to enter the Japan market.


About Keiwa Sogo Law Offices 

Keiwa Sogo has profound experience in international legal affairs, being a founding member of Legal Netlink Alliance, a network comprising worldwide law firms.  Keiwa Sogo’s practice area also covers Corporate Law, M&A, HR/Employment, Intellectual Properties, Antitrust/Competition Law, Reorganization/Insolvency, etc.