Sensitive Industries Reporting for Japan's FEFTA

FEFTA Investor Types

Japan’s Ministry of Finance (MOF) enacted an amendment to the FEFTA in November of 2019 that came into effect in May of 2020. This change was made on account of the Japanese government wanting a better handle on the risk associated with different types of investors. They defined three different types of investors based on the risks their investments posed for the Japanese government and determined that the intensity of the restrictions for each investor type would be directly correlated with the level of risk associated with each investor type. 

Investor Types:

• Foreign Financial Institutions (FFI)
• General Investors (GI)
• State-Owned Investors (SOI)

FFIs are met with the least strict requirements, while SOIs are met with the harshest restrictions. This makes sense, as the Japanese regulator might not want companies and investment funds owned by other states owning major stakes in their national companies.

FEFTA Issuer Types

The MOF applied a similar categorisation to Japanese issuers, creating three issuer types based on sector-related concerns from least sensitive to most sensitive. 

They are as follows:

• Non-Core Designated Business Sectors
• Core Designated Business Sectors
• A third list which is a combination of the two

In this case, the intensity of restrictions for each issuer type is directly correlated to the level of risk associated with investing in these issuers. A combination of both these variables dictates at which threshold a disclosure of pre-approval is required. Given the three Investor Types and the three Issuer Types, a 3x3 matrix is made, and highlights the filing requirements for each investor.