In response to the revelation of insider trading incidents related to public offerings among other things, the Financial System Council "Working Group on Insider Trading Regulations" has been reviewing the current regulations since July this year. Although it is necessary to take preventive measures to ensure fairness in the market and to realize the smooth capital raisings, the enforcement of excessive regulations that could wither corporate activities and cool off the market should be avoided. At the same time, the regulations that do not fit with the realities of current business conditions should be reviewed.

The following is the gist of the proposal:

• There has been a discussion about whether to prohibit acts of providing insider information and recommending trade based on insider information. In restricting such activities, however, regulations should be applied only in cases in which a trade has actually been carried out as the result of information exchanges or the recommendation of trading has been aimed to solicit insider trading. Exchanges of information necessary for business operations should be exempt.

• Concerning the discussion on the amount of monetary penalty to be increased in order to strengthen the deterrence of potential violations, a monetary penalty should continue to be imposed based on the concept of forfeiture of illicit gains as before.

• In addition, certain regulations should be eased to vitalize the capital market. For example, it should be clarified that insider trading regulations shall not be applied in cases where a person has entered into a binding contract to purchase or sell securities before becoming aware of insider information, in expectations to promote stock ownership plans for employees and executive.