Steven M. Dickinson ^*
& Takeo Kosugi ^{* *}

Appendix D

DEALING IN DOMESTICALLY ISSUED COMMERCIAL PAPER (Kokunai de Hakkosareru Komasharu Pepa no Toriatsukai ni Tsuite), Ministry of Finance, Banking Bureau, Circular No. 2825 of 1987

The basic scheme for dealing in domestically issued commercial paper (hereinafter "domestic CP") has been determined as provided below. Establishing a commercial paper market in this manner will contribute one more level to the completion and expansion of [Japan's] short-term financial markets, will advance the diversification and effectiveness of means of short-term fund raising for businesses, and will contribute to the internationalization of the yen by providing a market for the employment of funds by domestic and foreign investors.

As dealers, financial institutions and short-term finance companies, together with securities companies, will constitute the core of the market. It is therefore expected that in your dealings in the domestic CP market that you will pay particular concern towards the protection of investors, and will assiduously apply yourselves towards properly carrying out the intention of establishing this market in order to contribute to the healthy development of the market.

Accordingly, please take this matter under advisement and communicate the contents of this message to the financial institutions under your jurisdiction.

Message

1. Dealings Subject Hereunder

For the purposes of this circular, "domestic CP" means a promissory note which is issued domestically by a top-ranked business as a means of raising unsecured short-term funds from institutional investors and others, and which meets all of the following requirements:

(1) Period: One month of more, and six months or less.

(2) Method of payment of interest: Discount.

(3) Face value: ¥100 million or more.

2. Dealing Business

The dealing business for financial institutions for domestic CP shall be sales and other businesses, and the dealing business for short-term broker/dealers for domestic CP shall be limited to sales business during the secondary distribution period.

3. Essential Particulars of Dealing

(1) From the standpoint of protection of investors, when dealing with domestic CP particular consideration shall be given to matters such as the financial situation of the issuer, backup lines of credit and the establishment of guarantees.

(2) Sales customers shall be limited to institutional investors and others who are thoroughly familiar with trends in the financial markets.

(3) Since domestic CP is a new investment opportunity for investors, in soliciting investors the nature of the instrument and other matters shall be completely explained.

(4) At the time of sale of domestic CP, the "Explanation of the Issuer, etc." shall be available, and necessary measures such as the distribution thereof shall be taken.

(5) Records of transactions and other documentation concerning transactions in domestic CP shall be prepared and maintained.

4. Notification and Reports

Upon the initiation of dealing in domestic CP, financial institutions and short-term broker/dealers shall notify the contents of the transactions to the competent governmental agency.

In addition, financial institutions and short-term finance companies shall report the records of dealings to the competent governmental agency as provided elsewhere.

5. The Scope of Financial Institutions, etc.

(1) In this circular, "financial institutions" means banks, mutual banks, credit associations, credit cooperatives, the Sh6k6chiikin Bank and the Norinchukin Bank.

(2) In this circular, "short-term broker/dealers" means those companies designated pursuant to the Designation of Short-Term Broker/Dealers by the Minister of Finance Pursuant to Article 1, Item 3 of the Enforcement Order for the Law Concerning the Regulation of Lending Companies (Ministry of Finance Notification No. 124 of 1984) (excluding companies specializing in brokerage for foreign currency funds)

Next Section:Appendix E

Previous Page: Appendix C