Japan’s 2026 Financial Regulatory Amendments: Strengthening Unfair Trading Regulations for Securities

JAMP Compliance Newsletter No. 73 | Part 5: Review of Unfair Trading Regulations for Securities

JAMP Financial Solutions Co., Ltd., a subsidiary of JAMP Corporation, publishes the JAMP Compliance Newsletter for Financial Instruments Business Operators and firms considering registration in Japan. The newsletter covers regulatory developments and other matters relevant to financial business and compliance operations.

This five-part series examines Japan’s 2026 amendments to the Financial Instruments and Exchange Act and the Payment Services Act. The legislation was submitted to the 221st session of the National Diet on April 10, 2026, enacted on July 15, and promulgated on July 23 as Act No. 64 of 2026.

The series covers the following topics:

1. Overview and Policy Context
2. Review of Cryptoasset Regulation
3. Corporate Sustainability Disclosure and Assurance
4. Promoting Funding for Startups
5. Review of Unfair Trading Regulations for Securities

This fifth and final article examines amendments intended to strengthen Japan’s regulations against unfair securities trading. The principal measures include expanding the scope of insider trading regulations, revising the administrative monetary penalty system, strengthening investigative powers, and introducing additional measures to improve market surveillance and investor protection.

The amendments are subject to different effective dates. Certain measures concerning unregistered financial instruments business took effect on August 12, 2026, while other provisions are scheduled to come into force in stages. Accordingly, not all the amendments discussed below are currently in effect.

Expanding the Scope of Insider Trading Regulations

Mergers and acquisitions involving tender offers often involve numerous external parties, including legal and financial advisors. As these transactions have become more complex, the range of persons who may gain access to material nonpublic information has expanded.

Under the previous framework, insider trading regulations relating to tender offers broadly covered persons connected with the tender offeror. On the target company side, however, the scope of covered persons was generally limited to the target company’s officers and employees.

The amendments expand the scope of regulation to include persons who have entered into contracts with the target company or are negotiating to enter into such contracts. This includes advisors to the target company who obtain material nonpublic information through their professional activities and engage in trading based on that information.

This change seeks to address a gap in the previous regulatory framework and better reflect the practical realities of modern M&A transactions. By extending the rules to additional persons with access to sensitive information, the amendments aim to further strengthen the fairness of Japan’s securities markets.

Revising the Calculation of Administrative Monetary Penalties

Japan’s administrative monetary penalty system is an important enforcement mechanism against unfair securities trading. However, changes in market conditions and trading practices have raised concerns that the existing calculation methods and penalty levels may not provide sufficient deterrence in certain cases.

The amendments revise the calculation of administrative monetary penalties for insider trading involving tender offers. Under the revised method, the reference price is the higher of 150% of the price before the public announcement or the highest price during the two weeks following the announcement. The difference between the applicable reference price and the purchase price is used in calculating the penalty.

The amendments also substantially increase administrative monetary penalties for violations of Japan’s Large Shareholding Reporting System, including failures to submit required reports and false statements in those reports.

The applicable penalty level will increase to 70 times the previous amount. For example, in a case involving shares with a market capitalization of JPY 300 billion, the penalty for failure to submit a required report or for making a false statement could increase from approximately JPY 3 million to approximately JPY 210 million.

These changes are intended to strengthen the deterrent effect of administrative monetary penalties against unfair trading and inappropriate disclosure, thereby supporting greater fairness and transparency in Japan’s securities markets.

Expanding the Scope of Administrative Monetary Penalties and Encouraging Cooperation

The amendments also expand the scope of the administrative monetary penalty system to address not only persons who directly commit unfair trading violations but also those who facilitate such misconduct.

Recent unfair trading cases have involved transactions conducted through accounts held in other people’s names, as well as third parties providing accounts that facilitate misconduct.

Under the amendments, administrative monetary penalties for unfair trading conducted through accounts provided under another person’s name will increase to 1.5 times the ordinary level. In addition, persons who facilitate unfair trading by providing accounts or through similar forms of assistance may themselves become subject to administrative monetary penalties.

The amendments also revise the penalty reduction system. Previously, reductions were available only where a person voluntarily reported a violation before an investigation began. The revised framework introduces a mechanism under which penalties may also be reduced according to the degree of cooperation provided after an investigation has commenced.

Taken together, these measures seek to hold both direct violators and those who assist them accountable, while encouraging cooperation that can help authorities establish the full circumstances of a violation. The objective is to improve the effectiveness of market surveillance and enforcement.

Strengthening Investigative Powers

The increasing digitalization and cross-border nature of financial transactions have made unfair trading practices more complex. These developments have created a need to strengthen investigative capabilities and improve the effectiveness of market surveillance.

The amendments increase criminal penalties for conducting financial instruments business without the required registration in Japan. They also grant the Securities and Exchange Surveillance Commission (SESC) additional powers to conduct investigations into suspected criminal violations involving unregistered financial instruments business.

These two measures took effect on August 12, 2026. The statutory maximum penalty for an individual conducting unregistered financial instruments business increased from imprisonment for up to five years or a fine of up to JPY 5 million, or both, to imprisonment for up to ten years or a fine of up to JPY 10 million, or both.

The amendments also expand investigative powers in connection with requests for cooperation from foreign regulatory authorities. In particular, the relevant Japanese authorities will be able to require persons to appear as part of investigations conducted in response to such requests, supporting stronger cross-border regulatory cooperation.

Other Measures to Improve Regulatory Effectiveness and Investor Protection

The amendments include additional measures intended to improve the effectiveness and administration of Japan’s financial regulatory framework.

One measure provides for the digitalization of procedures used in investigations of suspected criminal violations of financial laws. This includes enabling certain investigation records and warrant-related procedures to be handled electronically.

Another measure establishes an administrator appointment framework to facilitate the return of customer assets when a Financial Instruments Business Operator exits the market, including cases involving cancellation of its registration.

The framework is intended to address situations in which an operator can no longer properly administer or return customer assets, including cases where responsible management personnel are no longer available. These measures are designed to improve regulatory administration and strengthen investor protection.

JAMP Commentary

The 2026 amendments reflect what we see as a clear determination by Japan’s financial authorities to strengthen the practical deterrent against unfair trading.

The changes go beyond imposing stronger sanctions on individual violators. By expanding the scope of regulated persons, revising the administrative monetary penalty system, and strengthening investigative powers, the reforms seek to improve the effectiveness of market surveillance as a whole.

Financial markets have changed substantially in recent years. M&A transactions have become more complex, high-frequency trading has become more widespread, and cross-border transactions have expanded. The amendments can be understood as an effort to adapt Japan’s regulatory framework to these structural changes.

For market participants, these developments are likely to make appropriate information management and effective compliance frameworks more important than ever. Financial institutions and other market participants may need to review their internal controls, information management practices, and compliance arrangements in light of the changing regulatory environment.

Looking back across this five-part series, the amendments concerning cryptoassets, sustainability disclosure, startup funding, and unfair trading regulations appear to reflect a consistent policy direction: improving the functioning of Japan’s capital markets while strengthening investor protection.

We believe the broader objective is to enhance both the competitiveness and credibility of Japan’s capital markets. As market conditions and investor needs continue to evolve, further regulatory reviews can be expected. We will continue to examine these developments and their practical implications for financial institutions and other market participants.

Author: JAMP Compliance Team, JAMP Financial Solutions Co., Ltd.
About This Article
This article is an adapted English edition of JAMP Compliance Newsletter No. 73, originally published in Japanese on November 5. It has been edited and supplemented where necessary to explain Japan-specific legal, regulatory and market context to readers outside Japan. It is therefore not a direct translation of the original Japanese article.

Legal and Translation Notice
Unless otherwise stated, English translations of the names of Japanese bills, proposed amendments and other terms for which no official English translation has been confirmed are provisional translations prepared for this article. The original Japanese materials should be consulted for authoritative wording.

This article is provided for general informational purposes only and does not constitute legal, regulatory, tax, accounting or investment advice. Laws, regulations, bills, official interpretations and implementation schedules may change. Readers should consult the relevant official Japanese materials and obtain advice from appropriately qualified professionals before taking action.