2022.02.25

2021 (A) 96

Keishu Vol. 76, No. 2

Decision concerning the case in which the court determined that the case falls under the case of "coming to know the relevant fact in the course of duty" as referred to in Article 167, paragraph (1), item (vi) of the Financial Instruments and Exchange Act

Case charged for violation of the Financial Instruments and Exchange Act

Decision of the Third Petty Bench, dismissed

Osaka High Court, Judgment of December 18, 2020

An employee of a securities company who belongs to a department in charge of tender offers came to know the company name of a tender offeror as well as the fact that an organ that is responsible for making decisions about the execution of operations of the tender offeror made a decision to launch a tender offer for the share certificates of the tender offeror's listed subsidiary company by combining information that was entered in a list in a shared folder of the same department in a manner that the relevant company name would not be identified and the careless remarks of another employee who belongs to the same department regarding the assigned operations of the same department, and then identified the aforementioned subsidiary company by inspecting the annual securities report of the tender offeror and finally came to know the fact that a tender offer will be launched, a fact which said other employee came to know in association with the conclusion of a contract between the securities company and the tender offeror. Based on the aforementioned facts of this case, even if the employee identified the aforementioned subsidiary company through investigation by him/herself, the fact that the employee finally came to know the aforementioned fact falls under the case of "coming to know the relevant fact in the course of duty" as referred to in Article 167, paragraph (1), item (vi) of the Financial Instruments and Exchange Act.

Article 167, paragraph (1), item (vi) of the Financial Instruments and Exchange Act

Financial Instruments and Exchange Act

(Acts Prohibited for Persons Affiliated with the Tender Offeror)
Article 167(1)A person set forth in one of the following items (hereinafter referred to as a "person affiliated with the tender offeror, etc." in this Article) that comes to know the fact that a tender offer, etc. will be launched by the person launching a tender offer provided for in Article 27-2, paragraph (1) (but only if the main clause of that paragraph applies) or an act specified as equivalent thereto by Cabinet Order or by the person launching a tender offer provided for in Article 27-22-2, paragraph (1) (hereinafter collectively referred to as a "tender offer, etc." in this Article) for share certificates, etc. provided for in Article 27-2, paragraph (1) that are listed on a financial instruments exchange or that fall under the category of over-the-counter traded securities or tradable securities (hereinafter referred to as "listed or other share certificates, etc." in this Article) (such a person is hereinafter referred to as the "tender offeror, etc." in this Article and paragraph (2) of the following Article) or the fact that a tender offer, etc. will be suspended by such tender offeror, etc. in a manner as prescribed in the relevant item, must not effect a purchase, etc. (meaning a purchase of specified share certificates, etc. as defined below and related share certificates, etc. as defined below (hereinafter collectively referred to as "share certificates, etc." in this Article, paragraph (2) of the following Article, Article 175-2, and Article 197-2, item (xv)) or other transaction designated by Cabinet Order; hereinafter the same applies in this Article, paragraph (2) of the following Article, Article 175-2, paragraph (2), and Article 197-2, item (xv)) of the listed or other share certificates, etc. subject to the tender offer, etc., or of share certificates or corporate bond certificates with share options issued by the company issuing those listed or other share certificates, etc. or other securities specified by Cabinet Order (hereinafter referred to as "specified share certificates, etc." in this Article), or of securities set forth in Article 2, paragraph (1), item (xix) that indicate options on specified share certificates, etc. or other securities specified by Cabinet Order (hereinafter referred to as "related share certificates, etc." in this paragraph) if the person comes to know the fact that the tender offer, etc. will be launched, and must not effect the sale, etc. (meaning the sale of share certificates, etc. and other transactions specified by Cabinet Order; hereinafter the same applies in this Article, paragraph (2) of the following Article, Article 175-2, paragraph (2), and Article 197-2, item (xv)) of share certificates, etc. subject to the tender offer, etc., if the person comes to know the fact that the tender offer, etc. will be suspended, before the fact that the tender offer, etc. will be launched or the fact that the tender offer, etc. will be suspended is disclosed. The same applies for six months to a person affiliated with the tender offeror, etc. that comes to know the fact that a tender offer, etc. will be launched or the fact that a tender offer, etc. will be suspended in a manner prescribed in one of the following items, even after that person ceases to be the person affiliated with the tender offeror, etc. set forth in the relevant item:

(vi)the officer, etc. of a person set forth in item (ii), item (iv) or the preceding item which is a corporation (but only the officer, etc. of a corporation at which another officer, etc. comes to know the fact that the tender offer, etc. will be launched or the fact that the tender offer, etc. will be suspended by the tender offeror, etc. pursuant to item (ii), item (iv) or the preceding item):coming to know the relevant fact in the course of duty.

The final appeal is dismissed.

The reasons for final appeal stated by the defense counsel, NAKAMURA Masatoshi, including the argument of violation of a judicial precedent, are substantially arguments of a mere violation of laws and regulations, an erroneous finding of facts, and inappropriateness of sentencing, and do not constitute any of the reasons for a final appeal as referred to in Article 405 of the Code of Criminal Procedure.

In consideration of the defense counsel's arguments, the Court determines, by its authority, whether the fact that the accused finally came to know the fact that the tender offer of this case would be launched falls under the case of "coming to know the relevant fact in the course of duty" as referred to in Article 167, paragraph (1), item (vi) of the Financial Instruments and Exchange Act.

1. The summary of the facts of the crime found in the judgment in first instance that is upheld by the court of prior instance is as follows.

Employee B (hereinafter referred to as "B") of Securities Company A (hereinafter referred to as "Company A") came to know the fact that a tender offer would be launched in association with the conclusion of a financial advisory contract with Stock Company C (hereinafter referred to as "Company C"). That fact was to the effect that an organ that is responsible for making decisions about the execution of operations of Company C made a decision to launch a tender offer (hereinafter referred to as the "Tender Offer") for the share certificates of Stock Company D (hereinafter referred to as "Company D") that had listed its share certificates on a securities market operated by the Tokyo Stock Exchange. Around July 27, 2016, the accused finally came to know that fact as an employee of Company A in the course of duty. The accused communicated the fact that the Tender Offer would be launched to his/her acquaintance E (hereinafter referred to as "E") before the publication of the same fact, for the purpose of having E purchase the share certificates of Company D in advance to make profits. Then, E purchased a total of 296,000 share certificates of Company D for 53,268,100 yen in total at the Tokyo Stock Exchange through a securities company before the publication of the same fact, during the period from July 28, 2016 to August 3, 2016, without statutory ground for exemption.

2. According to the findings of the judgment in prior instance, as well as the case records, the way the accused finally came to know the fact that the Tender Offer would be launched is as follows.

(1) The organ that is responsible for making decisions about the execution of operations of Company C made a decision to launch the Tender Offer, and on July 11, 2016, Company C concluded a financial advisory contract with Company A on the receipt of the provision of support service toward launching the Tender Offer. Department F of Company A (hereinafter referred to as "Department F") had taken charge of relevant operations. At Department F, several employees of Company A, including B, who was in the position of a junior (a subordinate person in charge of practice who engages in operations under the instructions of his/her supervisor), took charge of the case pertaining to the Tender Offer, and B, etc. came to know the fact that the Tender Offer would be launched in association with the conclusion of the aforementioned contract.

The accused was a junior of Department F and was working in the same room as B though he/she was not in charge of the case pertaining to the Tender Offer. The accused thus could hear what B was talking about on the phone.

Employees belonging to Department F were supposed to be careful about what they say and to use case names, etc. that do not cause relevant company names to be identified in order to prevent information about assigned cases from being known to other employees who are not in charge of relevant cases before publication. The case pertaining to the Tender Offer was called "Infinity." In addition, at Department F, juniors were supposed to enter the outline of their assigned operations in their own columns in a list in a shared folder of Department F (hereinafter referred to as the "List") in order to make it possible for their superior to understand the status of busyness of individual juniors. Therefore, employees belonging to Department F could access the List.

(2) By July 27, 2016, the accused inspected B's column in the List and came to know the facts that B was in charge of the Infinity case and that in the same case, a listed company that had concluded a financial advisory contract with Company A would launch a tender offer for the share certificates of its listed subsidiary company and thereby make the subsidiary company be its wholly owned subsidiary company.

On July 27, 2016, at his/her own desk, the accused heard that B said "C" as the name of a client company out of carelessness while B was talking about the Infinity case with his/her superior on the phone at his/her own desk. Thereby, the accused came to know the fact that the tender offeror in the Infinity case was Company C.

(3) After that, the accused did an internet search and inspected Company C's annual securities report and thereby confirmed that Company D was the only listed subsidiary company out of Company C's related companies. Thereby, the accused came to know the fact that the subject of the Tender Offer was the share certificates of Company D.

3. The judgment in prior instance upheld the judgment in first instance that determined that the accused finally came to know the fact that the Tender Offer would be launched in the course of duty on the premise of the facts mentioned above and applied Article 197-2, item (xv) and Article 167-2, paragraph (2) (Article 167, paragraph (1), item (vi)) of the Financial Instruments and Exchange Act.

On the other hand, the defense counsel argues as follows: the judgment in prior instance interpreted that Article 167, paragraph (1), item (vi) of the Financial Instruments and Exchange Act is also applicable to the case where a person came to know part of the fact concerning the launch of a tender offer in the course of duty; and such interpretation is unclear in terms of the scope of punishment from the perspective of employees of securities companies, who engage in operations, such as collection and analysis of information about the stock market, etc., on a daily basis to provide their clients with useful information, and it thus contains violation of laws and regulations of the erroneous interpretation of the same Act.

4. However, the accused, who was Company A's employee belonging to Department F, came to know the fact that an organ that is responsible for making decisions about the execution of operations of Company C made a decision to launch a tender offer for the share certificates of Company C's listed subsidiary company by combining information that was entered in the List accessible to any person being in the same position as the accused in a manner that the relevant company name would not be identified and B's careless remarks about Department F's assigned operations, and then identified the aforementioned subsidiary company as Company D by inspecting Company C's annual securities report and finally came to know the fact that the Tender Offer would be launched. Based on such facts, even if the accused identified the aforementioned subsidiary company through investigation by him/herself, it is clear, in light of the purpose of the Financial Instruments and Exchange Act, that is, ensuring the confidence of general investors in the fairness and soundness of the securities market, that the fact that the accused finally came to know the fact that the Tender Offer would be launched falls under the case of "coming to know the relevant fact in the course of duty" as referred to in Article 167, paragraph (1), item (vi) of the same Act. Therefore, the determination of the court of prior instance that upheld the judgment in first instance that found the establishment of the crime of violation of Article 197-2, item (xv) and Article 167-2, paragraph (2) of the same Act in relation to the accused is justifiable.

Accordingly, in accordance with Article 414, Article 386, paragraph (1), item (iii), and the proviso to Article 181, paragraph (1) of the Code of Criminal Procedure, the Court unanimously decides as set forth in the main text of the decision.

Justice WATANABE Eriko

Justice TOKURA Saburo

Justice UGA Katsuya

Justice HAYASHI Michiharu

Justice NAGAMINE Yasumasa