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Japan regulator may include exchange rates under fair disclosure: sources

Published 10/16/2017, 02:45 AM
Updated 10/16/2017, 02:50 AM
© Reuters. FILE PHOTO: Illustration photo of Japan Yen and U.S. Dollar notes

TOKYO (Reuters) - Japan's financial regulator is likely to include exchange rates in forward contracts under fair disclosure rules for listed companies, according to two sources with direct knowledge of matter and a draft of guidelines seen by Reuters.

The move would broaden the scope of requirements already put in place by the Tokyo Stock Exchange and explain clearly what needs to be disclosed. Investors have expressed concerns that lack of clarity could prompt companies to hold back information for fear of unintentionally breaking the law.

Guidelines on what will be included in Japan's fair disclosure rules will come out in the near future, the sources said, ahead of full implementation of the law early next year.

The sources did not want to be named as they were not authorized to discuss the matter publicly. A spokesman for Japan's Financial Services Agency (FSA) declined to comment.

Existing insider trading regulations prohibit the transfer to selective parties "material information" such as plans to sell new shares, merger and acquisition plans and earnings forecast revisions.

In the new guidelines, FSA will specify further instances of what could constitute material information, such as forward foreign exchange contract rates that may help recipients of the information easily estimate changes in listed companies' financial performance, said the sources.

Fair disclosure rule does not ban listed firms from engaging in talks with investors about their business strategy, but the guidelines could ban the selective disclosure of specific plans such as profit projections, the sources said.

Listed companies are required to make public disclosure promptly if unpublished material information is given to particular parties such as analysts and institutional investors.

© Reuters. FILE PHOTO: Illustration photo of Japan Yen and U.S. Dollar notes

These measures are in line with Prime Minister Shinzo Abe's push to improve corporate governance and encourage foreign investment in a country, where the business culture has often been criticized for prioritizing the interests of executives over shareholders.

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