Learn in the textbookLaws on Fair Trade, Finance, and Product Liability
DefinitionThe Financial Instruments and Exchange Act (金融商品取引法) is the law that keeps trading in securities such as stocks and bonds fair and protects investors.
ExplanationListed companies and others must disclose their financial and business condition in an annual securities report, so that investors can decide on the basis of the same information. Insider trading, where someone in a position to know a company's important unpublished information buys or sells its shares before that information is made public, is banned. The internal control reporting system, under which management of a listed company evaluates and reports on internal control over financial reporting and has it audited, is also based on this law.
AnalogyThink of an auction where everyone reads the same catalogue before bidding, with someone watching so that a person who has peeked behind the scenes cannot get in first.
Memory hookIts short name in Japanese is Kinshōhō. Because its internal control reporting system was modeled on the US SOX Act, the system is also called J-SOX, the Japanese version of SOX.