2016.11.28

2015 (A) 168

Keishu Vol. 70, No. 7

Decision concerning whether the provision of information on a material fact to journalistic organizations on condition that the source of information is kept undisclosed constitutes the "disclosure" referred to in Article 30, paragraph (1), item (i) of the Order for Enforcement of the Financial Instruments and Exchange Act (prior to the amendment by Cabinet Order No. 181 of 2011)

Case charged for violation of the Financial Instruments and Exchange Act

Decision of the First Petty Bench, dismissed

Tokyo High Court, Judgment of December 15, 2014

1. When information on a material fact is provided to journalistic organizations on condition that the source of information is kept undisclosed, such provision of information does not constitute the "disclosure" of a material fact to journalistic organizations as referred to in Article 30, paragraph (1), item (i) of the Order for Enforcement of the Financial Instruments and Exchange Act (prior to the amendment by Cabinet Order No. 181 of 2011), even if the person who provided the information is any of the persons prescribed in said item.

2. Even when a news report covering a material fact concerning a company's decision is released, the insider trading regulations under Article 166, paragraph (1) of the Financial Instruments and Exchange Act (prior to the amendment by Act No. 49 of 2011) would not become ineffective unless the source of information is disclosed.

Article 166, paragraph (1), item (iii), paragraph (2), item (i), (j), and paragraph (4) of the Financial Instruments and Exchange Act (prior to the amendment by Act No. 49 of 2011), Article 30, paragraph (1), item (i), and paragraph (2) of the Order for Enforcement of the Financial Instruments and Exchange Act (prior to the amendment by Cabinet Order No. 181 of 2011)



Financial Instruments and Exchange Act(prior to the amendment by Act No. 49 of 2011)

Article 166

(1) A person set forth in one of the following items (hereinafter referred to as a "Company Insider" in this Article) that comes to know a material fact about the business of a Listed Company, etc. (in the case of the Company Insider of a Subsidiary Company of the Listed Company, etc. (other than one that falls under the category of a Company Insider of the Listed Company, etc.), this is limited to a material fact about the business of the Subsidiary Company which is set forth in one of items (v) to (viii) inclusive of the following paragraph; the same applies hereinafter) in the manner prescribed in the relevant item must not effect a purchase and sale, or any other transfer or acquisition for value, of Specified Securities, etc. of the Listed Company, etc., nor effect a Derivatives Transaction connected with the same (hereinafter referred to as a "Purchase and Sale, etc." in this Article) before the disclosure of the material fact about its business. The same applies for one year to a Company Insider that comes to know a material fact about the business of a Listed Company, etc. in a manner prescribed in one of the following items even after the person ceases to be the Company Insider as set forth in the relevant item:

(iii) a person that has statutory authority over the Listed Company, etc.: coming to know the material fact in the course of exercising that authority;

(2) The material fact about business that is provided for in the preceding paragraph means one of the following facts (for item (i), (ii), (v), or (vi), this excludes a fact that falls under the criteria specified by Cabinet Office Ordinance as having only a minor influence on investors' investment decisions):

(i) the organ that is responsible for making decisions about the execution of operations at the Listed Company, etc. has decided that the Listed Company, etc. will effect one of the following things, or has decided that the Listed Company, etc. will not effect a thing that was subject to such a decision (limited to a decision that has already been disclosed):

(j) a merger;

(4) The disclosure referred to in paragraph (1), paragraph (2), items (i), (iii), (v), and (vii), and the preceding paragraph has been made once measures specified by Cabinet Order as measures for putting information into a format that makes it available to a large number of persons are taken by a Listed Company, etc. or the Subsidiary Company of a Listed Company, etc. in connection with a material fact about the business of the Listed Company that is provided for in paragraph (1), etc.; a decision by the organ that is responsible for making decisions about the execution of operations at the Listed Company, etc.; the Net Sales, etc. of the Listed Company, etc. or dividends from the Listed Company, etc. as prescribed in paragraph (2), item (i), sub-item (g); the Net Sales, etc. of the corporate group of which the Listed Company, etc. is a part; a decision by the organ that is responsible for making decisions about the execution of operations at the Subsidiary Company of the Listed Company, etc.; or the Net Sales, etc. of the Subsidiary Company of the Listed Company, etc. (for a Subsidiary Company, this is limited to a material fact about the business of the Subsidiary Company which is provided for in paragraph (1); a decision by the organ that is responsible for making decisions about the execution of operations at the Subsidiary Company; or the Net Sales, etc. of the Subsidiary Company; hereinafter the same applies in this paragraph); or if these matters are stated in documents specified in Article 25, paragraph (1) (excluding documents specified in Article 25, paragraph (1), item (xi)) that the Listed Company, etc. or the Subsidiary Company of the Listed Company, etc. has submitted, such a disclosure has been made once these documents are made available for public inspection pursuant to Article 25, paragraph (1).



Order for Enforcement of the Financial Instruments and Exchange Act (prior to the amendment by Cabinet Order No. 181 of 2011)

Article 30

(1) The fact that the measures specified by Cabinet Order as those for making information available to a large number of persons are being taken by a listed company, etc., a subsidiary company of a listed company, etc. or a tender offeror, etc. as prescribed in Article 166, paragraph (4) or Article 167, paragraph (4) of the Act is that any of the following measures have been taken:

(i) a director or executive officer who is to represent a listed company, etc. prescribed in Article 163, paragraph (1) of the Act or a subsidiary company of said listed company, etc. (including officers who are to represent a cooperative structured financial institution; hereinafter the same applies in this paragraph), or a person who has been entrusted by said director or executive officer to publicize the material facts, etc. (meaning the following matters prescribed in Article 166, paragraph (4) of the Act: a material fact about the business, etc. of a listed company prescribed in paragraph (1) of said Article; a decision by the organ that is responsible for making decisions about the execution of operations at a listed company, etc.; the net sales, etc. of a listed company, etc., or dividends from a listed company, etc. prescribed in paragraph (2), item (i), (g) of said Article; the net sales, etc. of a corporate group to which a listed company, etc. belongs; a decision by the organ that is responsible for making decisions about the execution of operations at a subsidiary company of a listed company, etc.; or the net sales, etc. of a subsidiary company of a listed company, etc.; hereinafter the same applies in this paragraph), or a tender offeror, etc. prescribed in Article 167, paragraph (1) of the Act (in cases where the tender offeror, etc. is a corporation (including an organization without legal personality for which the representative person or administrator has been designated), a person to represent the corporation or the administrator thereof) or a person who has been entrusted by said tender offeror, etc. to disclose the facts of the tender offer, etc. prescribed in Article 167, paragraph (3) of the Act (hereinafter referred to as the "facts of the tender offer, etc." in this paragraph) has disclosed said material facts, etc. or said facts of a tender offer, etc. to journalistic organizations including two or more of the following journalistic organizations, and the period necessary for the disclosed material facts, etc. or facts of the tender offer, etc. to become widely known has elapsed:

(a) a newspaper publisher engaged in the sale of daily newspapers that collectively report matters on current affairs in Japan in the course of trade, and a communications agency engaged in the comprehensive transmission of matters on current affairs to such newspaper publisher in the course of trade;

(b) a newspaper publisher engaged in the sale of daily newspapers that report on general industrial and economic matters in Japan in the course of trade; and

(c) NHK (Japan Broadcasting Corporation) and a general broadcaster.

(2) The period necessary to have the disclosed facts become widely known, referred to in item (i) of the preceding paragraph, is 12 hours from the time when such facts have been disclosed to at least two of the journalistic organizations among the journalistic organizations set forth in sub-item (a), (b), or (c) of said item.

The final appeal is dismissed.

Among the reasons for final appeal argued by the defense counsel, YAMAMOTO Norimitsu, et al., the reason alleging violation of a judicial precedent is irrelevant in this case because the cited judicial precedent addressed a different type of case, and the rest, including the reason alleging violation of the Constitution, are in effect assertions of unappealable violation of laws and regulations, errors in fact finding or inappropriate sentencing; among the reasons for final appeal argued by the accused, the reason alleging violation of a judicial precedent fails to specify the judicial precedent to be cited, and the rest, including the reason alleging violation of the Constitution, are in effect assertions of unappealable violation of laws and regulations or errors in fact finding; and none of these reasons for final appeal can be regarded as a reason for final appeal permissible under Article 405 of the Code of Criminal Procedure.

Having examined the arguments, we make a determination by this court's own authority regarding the criminal facts indicated in Section I of the judgment in first instance (hereinafter referred to as the "Criminal Facts").

1. The summary of the Criminal Facts is as follows.

The accused, while in the office of the Deputy Director of the Minister's Secretariat of the Ministry of Economy, Trade and Industry, was engaged in duties by order of the Minister of Economy, Trade and Industry, such as participating in the drafting and development of plans for affairs for the development, improvement, coordination, etc. of the business relating to semiconductor devices, integrated circuits and other components, etc. of information and communication electronics, etc., which was under the jurisdiction of the Information and Communication Electronics Division, Commerce and Information Policy Bureau, Ministry of Economy, Trade and Industry, and controlling and organizing the related affairs. Around March 9, 2009, in the course of exercising his authority vested for these duties, the accused came to know of the fact that the organ that was responsible for making decisions about the execution of operations of NEC Electronics Corporation, a company which was engaged in business including the development and manufacturing of semiconductor devices and other electronic components and whose share certificates were listed on the securities market operated by the Tokyo Stock Exchange, had decided to undergo a merger with Renesas Technology Corporation (hereinafter referred to as the "Material Fact"), and without statutory grounds for exclusion, during the period from April 21 to 27, 2009, which was prior to the publication of said fact, the accused purchased a total of 5,000 shares of NEC Electronics Corporation at a total price of 4,897,900 yen in the name of his wife, on the Tokyo Stock Exchange via a securities company.

2. The judgment in prior instance affirmed the judgment in first instance that found the Criminal Facts, on the grounds that the Material Fact had not yet been published at the time of the purchase of share certificates mentioned in 1. above.

Against this finding, the defense counsel argue as follows: [i] it is highly likely that the Material Fact was published when it was disclosed pursuant to Article 166, paragraph (4) of the Financial Instruments and Exchange Act (prior to the amendment by Act No. 49 of 2011; hereinafter referred to as the "Act") and Article 30, paragraph (1), item (i) of the Order for Enforcement of the Act (prior to the amendment by Cabinet Order No. 181 of 2011; hereinafter referred to as the "Enforcement Order") by the representative director, etc. of NEC Electronics Corporation as prescribed in said item to two or more journalistic organizations, and thus it was excluded from the scope of subject of the regulations under Article 166, paragraph (1) of the Act (hereinafter referred to as the "insider trading regulations"), or it can at least be said that the public prosecutor has not fulfilled the burden of proof as to the fact that the Material Fact has not been published by such method; and [ii] the Material Fact had already been publicly known through the news report in the morning newspaper of Nippon Keizai Shimbun dated April 16, 2009, and a subsequent series of news reports (hereinafter referred to as the "News Reports"), and thus it no longer had the nature of "material fact" prescribed in Article 166 of the Act and the insider trading regulations were no longer effective.

3 (1) Article 166, paragraph (4) of the Act and Article 30 of the Enforcement Order established based on delegation by the former specify a limited list of methods of publishing a material fact as the conditions for lifting the insider trading regulations, and provide for detailed rules. The purpose of these provisions may be to ensure that information that could have a material influence on investors' investment decisions is disclosed to investors fairly and equally in compliance with laws and regulations, thereby contributing to the purpose of the insider trading regulations, i.e. fair and equitable market transactions, and securing investors' confidence, and also to clearly present to the parties subject to the insider trading regulations the criteria for determining whether or not each transaction is punishable under these regulations.

(2) As one of the methods for publishing a material fact, Article 30, paragraph (1), item (i) of the Enforcement Order provides the case where a representative director or executive officer of a listed company, etc. or a person entrusted thereby has "disclosed a material fact to two or more journalistic organizations" including those prescribed therein, and the period necessary for the disclosed material fact to become widely known (12 hours as prescribed in paragraph (2) of said Article) has elapsed. In light of the purpose of the laws and regulations mentioned in (1) above, this method is considered to be based on the assumption that publication is carried out in a manner that investors can definitely know that the content of the news reports released by the journalistic organizations is based on the information published by any of the persons prescribed in said item. Consequently, it should be construed that when information on a material fact is provided to journalistic organizations on condition that the source of information is kept undisclosed, such provision of information does not constitute the "disclosure" of a material fact to journalistic organizations as referred to in said item, even if the person who provided the information is any of the persons prescribed in said item.

In this case, the source of the information in question is not clearly indicated in the News Reports, nor can the source of the information be identified from the content of the reports, etc., and it is presumed that the information was provided to the journalistic organizations on condition that the source of the information is kept undisclosed, even if the source of the information contained in the News Reports was any of the persons prescribed in Article 30, paragraph (1), item (i) of the Enforcement Order. Consequently, it is found that in this case, the "disclosure" to journalistic organizations under said item has not taken place, and it is also impossible to find that the "publication" of a material fact under Article 166, paragraph (4) of the Act has taken place.

(3) Furthermore, in cases where a news report that implies the existence of a material fact has been released in a manner other than by a method of publication prescribed in laws and regulations, if it is construed, as argued by the defense counsel, that the insider trading regulations become ineffective upon the content of the news report becoming publicly known, this is equal to regarding such news report as having substantially the same effect as "publication" under Article 166 of the Act. Such view is basically incompatible with the purpose of the laws and regulations that provide for a limited and detailed list of methods of publications. It should rather be construed that even when a news report covering a material fact concerning a company's decision is released, the insider trading regulations under Article 166, paragraph (1) of the Act would not become ineffective unless the source of information is disclosed.

4. The judgment in prior instance is justified for affirming the judgment in prior instance that found the Criminal Facts based on the same grounds as those given above.

Therefore, according to Article 414 and Article 386, paragraph (1), item (iii) of the Code of Criminal Procedure, the decision has been rendered in the form of the main text by the unanimous consent of the Justices.

Justice SAKURAI Ryuko

Justice OTANI Naoto

Justice KOIKE Hiroshi

Justice KIZAWA Katsuyuki