Outline of JIPF

What is JIPF?

Separate management system

Securities firms ensure the preservation of customer assets by managing them separately.
  • Securities firms are required by law to manage the money, shares, bonds, and other securities entrusted by customers strictly separately from their own assets. This is called the separate management of customer assets.
  • As long as separate management is thoroughly observed, even if a securities firm goes bankrupt, this will in principle have no effect on customer assets and customers can request return of their money and securities from the bankrupt securities firm.
  • Assets which customers entrust to securities firms are protected by the dual systems of this separate management system and compensation by JIPF.

JIPF mission

JIPF's mission is to protect investors and thereby maintain the reliability of securities transactions.
JIPF's mission is to ensure the protection of investors and thereby maintain the reliability of securities transactions, through compensation payments to general customers with eligible claims against Securities firms and through other services.

Authorities of JIPF

Range of compensation

Customers eligible for compensation

Of the customers of JIPF member securities firms, those entitled to receive compensation from JIPF are general customers who are not "professional investors" that include financial institutions and other qualified institutional investors, as well as national and local governments.

Even customers who are otherwise eligible for compensation are excluded from compensation in the event of trading their assets in the name of others, using fictitious names or borrowed names.

The officers, parent companies, etc., of bankrupt securities firms are also excluded from compensation.

Transactions, etc., eligible for compensation

The money, securities, and other customer assets eligible for compensation are limited to those entrusted by customers concerning the securities-related business or the commodity derivatives-related business conducted by securities firms.

Compensation procedure

The steps of the compensation procedure are as follows:
  1. (1) Securities firms that are JIPF members must immediately notify JIPF in the event that their registration is revoked or that they file a petition for the commencement of bankruptcy proceedings (hereinafter, such member securities firms are referred to as "Notifying Members").
  2. (2) JIPF conducts an audit to confirm whether the Notifying Member preserves customers' money and securities by managing them separately from its own assets.
    • A court issues a provisional administration order to prohibit the disposition of the Notifying Member's property and appoints a provisional administrator.
    • JIPF receives a report from the provisional administrator regarding changes in the customer assets entrusted to the Notifying Member.
  3. (3) In cases where the Notifying Member is unable, or highly likely to be unable, to return the money and securities entrusted by customers, JIPF resolves to grant recognition, and issue public notice, of difficulty in payment.
    • Customers submit documents requesting payment to JIPF in accordance with the period, location, method, and other particulars for requesting compensation stated in newspaper public notices or notices mailed to customers.
  4. (4) JIPF checks the customer documents requesting payment against the records of the Notifying Member, determines the amount to be paid by JIPF, and pays the compensation.
    • Customers' money is calculated based on ledgers and documents.
    • The value of customer's securities is measured at the closing price on the market on the day the public notice was made.
    • The amount of compensation to be paid by JIPF also considers the amount obtained by deducting the customer's debt and collateral provided.
    • JIPF pays a maximum compensation of ¥10 million per customer, and acquires the claim which was the subject of the compensation from the customer in accordance with the compensation payment amount.
  5. (5) The bankruptcy trustee initiates the liquidation proceedings of the Notifying Member in parallel with JIPF's compensation payment determination process.
    • Customers requesting payments exceeding ¥10 million may be entitled to receive additional distributions.
    • JIPF confirms the status of customer assets with the bankruptcy trustee, prepares a list of customers requesting payments exceeding ¥10 million, and submits this to the court.

Fund for investor protection ("Investor Protection Fund")

Balance of Investor Protection Fund

The balance of the Investor Protection Fund of JIPF was approximately ¥57.3 billion at the end of fiscal 2016.

Investment of Investor Protection Fund

The Investor Protection Fund can be invested only in the government bonds, bank deposits, and other instruments designated by the prime minister and the minister of finance.

Collection of levies for Investor Protection Fund

The amount deemed sufficient as necessary for investor protection activities is ¥50.0 billion under the provisions of the Regulations of Business.

When the balance of the Investor Protection Fund is less than ¥50.0 billion, member securities firms must pay the levies computed based on a basic calculation amount of ¥5.0 billion per year.
Because the balance of the Investor Protection Fund has been ¥50.0 billion or more, JIPF has not collected any levies since fiscal 2003.

When levies are collected, the levies are composed of a fixed amount and a variable amount.
The basic calculation amount is set at ¥5.0 billion per year under the Regulations of Business.
The levies of each member are the total of the following (A), (B), and (C):

History

1968Entrusted Securities Indemnity Fund was established.
1969Entrusted Securities Indemnity Fund becomes an incorporated foundation.
1998Entrusted Securities Indemnity Fund reorganized into Japan Investor Protection Fund (JIPF) under the revised Securities and Exchange Act.
2002JIPF and Securities Investor Protection Fund merge to become the present JIPF.
2007The Securities and Exchange Act revised into the Financial Instruments and Exchange Act and put into force, under government policies focusing on the diversification, fairness, and transparency of financial instruments and services.

Background to the establishment of JIPF

The so-called bubble economy burst in the early 1990s, followed by harsh conditions in the Japanese economy with the bad debt problem, corporate bankruptcies, and long-term recession.

By 1998, two leading securities firms and three large financial institutions went bankrupt in Japan. The government eased regulations that had caused inefficiencies at banks, insurance companies, and securities firms, and advanced reforms toward free, fair, and global markets in the "financial big bang" from 1997 to around 2001.

In the securities field, a registration system was introduced to promote the entry of new firms, and the liberalization of the securities business was initiated. These measures, however, were expected to increase the possibility of securities firm discontinuances and bankruptcies. From the perspective of preventing unexpected customer damages, securities firms were therefore legally obliged to separately manage customer assets; and JIPF was established as a juridical person for the purpose of investor protection.

Organization

Members

Members

Officers

Member List of Board of Directors

ChairmanKiichiro Masui
DirectorMotoya Aizawa
(Aizawa Securities Co., Ltd.)
DirectorToru Ishiguro
(Mori Hamada & Matsumoto)
DirectorMasashi Iwakigawa
(SMBC Nikko Securities Co., Ltd.)
DirectorTatsuo Uemura
(Graduate School of Law, Waseda University)
DirectorFujio Kodaka
(Musashi Securities Co., Ltd.)
DirectorKiyoshi Sato
(Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.)
DirectorTomoyuki Teraguchi
(Nomura Securities Co., Ltd.)
DirectorShinya Nishio
(Daiwa Securities Co., Ltd.)
DirectorPhilippe Avril
(BNP Paribas Securities (Japan) Limited.)
DirectorMichio Matsui
(Matsui Securities Co., Ltd.)
DirectorManabu Morimoto
(Japan Securities Dealers Association)
AuditorMasahiro Kobayashi
(Meiwa Securities Co., Ltd.)
AuditorMasayoshi Sato
(Certified Public Accountant)
Senior Managing DirectorHidemi Ijichi

General Meeting

Board of Directors

Governing Council

Compensation record

Since it was established on December 1, 1998, JIPF has paid compensation to customers in the following two cases:
  • Minami Securities Co., Ltd. (head office: Gunma Prefecture) with a total compensation amount of approx. ¥3.5 billion* (fiscal 2000) (*There was no ¥10 million compensation limit at that time); and
  • Marudai Securities Co., Ltd. (head office: Tokyo) with a total compensation amount of approx. ¥172 million (fiscal 2012).

Additionally, JIPF’s predecessor, the voluntary association Entrusted Securities Indemnity Fund, had paid compensation to customers, which had all been completed. The association's entire assets and liabilities were taken over by JIPF.

Number of members and fund scale

20132014201520162017
251249250252256
20132014201520162017
55,43655,91556,38256,86557,360

Financial information

  1. BALANCE SHEET AS OF MARCH 31, 2015
  2. BALANCE SHEET AS OF MARCH 31, 2016
  3. BALANCE SHEET AS OF MARCH 31, 2017

Information on international relations, etc

Study Group on Securities Firm Bankruptcy Laws and on Investor Protection Fund Systems

Cooperative research with Japan Securities Research Institute

1. Themes

  1. First meeting May 21, 2014
    • "Japan Investor Protection Fund: Current Conditions and Issues"
  2. Second meeting July 16, 2014
    • "US Investor Protection Fund System: Legal System and Issues concerning Securities Firm Bankruptcy"
  3. Third meeting October 22, 2014
    • "Investor Protection Mechanism in Germany"
  4. Fourth meeting December 10, 2014
    • "Investor Protection Fund System in the UK"
  5. Fifth meeting March 4, 2015
    • "Investor Protection Fund System in France"
  6. Sixth meeting April 22, 2015
    • "EU Investor Compensation Schemes in Case of Securities Firm Bankruptcies"
    • "Examinations of Draft Question Items for Overseas Field Studies"
  7. Seventh meeting June 24, 2015
    • "Canada's Investor Protection System in Case of Bankruptcies of Securities and Other Firms"
    • "Return of Customer Assets at Time of Securities Firm Bankruptcies, Etc.: Current Problems in Japan"
    • "Question Items and Other Matters for Field Study in the UK"
  8. Eighth meeting September 30, 2015
    • "Report of Field Study in the UK"
    • "Question Items and Other Matters for Field Study in France"
  9. Ninth meeting February 10, 2016
    • "Field Study in France and Pre-answer to the Question"
    • "Recent situation of US Investor Protection Fund System"
  10. Tenth meeting April 27, 2016
    • "Report of Field Study in France"
    • "Question Items and Other Matters for Field Study in Germany"
  11. Eleventh meeting July 27, 2016
    • "Report of Field Study in Germany"
    • "Ireland's Investor Compensation schemes ~relationship with EU directive~"
  12. Twelfth meeting November 16, 2016
    • "Survey report of Germany"
  13. Thirteenth meeting March 22, 2017
    • "Survey report of UK, France and Germany"
  14. Fourteenth meeting June 28, 2017
    • "Question Items and Other Matters for Field Study in US"
    • "Schedule for Field Study in US"

2. Overseas field studies

  1. (1) Scheduled for fiscal 2015
    • UK (August 2015)
    • France (January 2016)
  2. (2) Scheduled for fiscal 2016
    • Germany (August 2016)

International conferences

International Compensation Fund Meeting

  1. (1) International Compensation Fund Meeting
    Date: June 9, 2010
    Location: Montreal, CANADA
  2. (2) International Compensation Fund Meeting
    Date: April 19, 2011
    Location: Cape Town, SOUTH AFRICA
  3. (3) International Compensation Fund Meeting
    Date: May 15, 2012
    Location: Beijing, CHINA
  4. (4) International Compensation Schemes Meeting
    Date: September 21, 2013
    Location: Rome, ITALY
  5. (5) International Securities Investor Protection Conference
    Date: May 15-16, 2014
    Location: Shanghai, CHINA
  6. (6) International Seminar- Investor Compensation Schemes
    Date: June 19, 2015
    Location: London, UK
  7. (7) International Investor Compensation Fund Meeting
    Date: September 29, 2016
    Location: Vilnius, LITHUANIA

ARTICLES OF INCORPORATION and REGULATIONS OF BUSINESS