Enforcement Measures

Designation as a Security on Special Alert

In the following cases and when TSE deems it extremely necessary for a listed company to improve its internal management system, TSE may designate the listed stock, etc. issued by said listed company as a "Security on Special Alert."

 

■Cases where TSE deems that a listed company does not fall under any of the following delisting criteria after having deemed it possible that said company falls under one or more of said criteria

Securities Listing Regulations, Rule 601, Paragraph 1, Item (6) Damage to sound transactions with controlling shareholder
Securities Listing Regulations, Rule 601, Paragraph 1, Item (10), Sub-item a Breach of listing agreement, etc.
Securities Listing Regulations, Rule 601, Paragraph 1, Item (19) Involvement of anti-social forces
Securities Listing Regulations, Rule 601, Paragraph 1, Item (20) The public interest or the protection of investors
 

■Cases where a listed company falls under any of the following

[False Statements]
Cases where a listed company has made false statements (Rule 2, Item (30) of the Securities Listing Regulations) in an annual securities report, etc.

[Adverse Opinions, etc.]
Cases where a certified public accountant, etc. expresses an "adverse opinion" or makes a statement to the effect that they "will not express an opinion" in an audit report attached to a listed company's financial statements, etc. or cases where a certified public accountant, etc. makes a "negative conclusion" or makes a statement to the effect that they "will not make a conclusion" (in the case of a specified business company, this includes an "opinion that interim financial statements, etc. do not provide useful information" or a statement to the effect that they "will not express an opinion") in a quarterly review report attached to said listed company's quarterly financial statements, etc.

  • Excluding cases where statements have been made to the effect that the certified public accountant, etc. "will not express an opinion" or "will not make a conclusion" and such statements have been made due to reasons not attributable to the listed company, such as act of providence
 

■Cases where TSE deems that a listed company has violated the provisions of Timely Disclosure of Corporate Information

■Cases where TSE deems that a listed company has violated the provisions of the Matters to Be Observed in the Code of Corporate Conduct

■Cases where a listed company has submitted an improvement report pertaining to the Timely Disclosure of Corporate Information / Code of Corporate Conduct, and TSE deems that it will not recognize the listed company's improvements in the status of implementation and operation of the improvement measures

 

Flow of Events Following Designation as a Security on Special Alert

Flow of Events Following Designation as a Security on Special Alert

Making Improvements to the Internal Management System

As a rule, a listed company that is the issuer of a listed stock, etc. that has been designated as a Security on Special Alert must have an adequately developed and implemented internal management system in place by the time of the first-year examination.

However, if TSE finds that the company’s internal management system is adequately developed but does not find that it is adequately implemented at the time of the first-year examination (and it is likely that the company’s internal management system will be adequately implemented), TSE will extend the company’s designation as a Security on Special Alert. TSE requires that the company improve the status of the implementation of its internal management system by the time of the next examination, which will take place on or after the last day of the fiscal year in which the company’s designation was extended (or the following fiscal year if the company’s designation was extended within three months of the end of said fiscal year).

Examination Process

  • A listed company that is the issuer of a listed stock, etc. that has been designated as a Security on Special Alert must promptly submit a "Written Confirmation of Internal Management System" one year following said designation. The "Written Confirmation of Internal Management System" reports on the status of the listed company's internal management system.TSE will conduct its examination based on such elements as the contents of the submitted "Written Confirmation of Internal Management System" and handle each case as follows.
When TSE finds that the company's internal management system is adequately developed and implemented De-designation (*In the case of securities that are eligible for the follow-up period mentioned below: Extension of Designation)
When TSE finds that the company’s internal management system is adequately developed but does not find that it is adequately implemented (and it is likely that the company’s internal management system will be adequately implemented) Extension of Designation
When TSE finds that the company's internal management system is not adequately developed or no longer finds it likely that the company’s internal management system will be adequately implemented Delisting
  • In cases such as where the listed company does not promptly submit its "Written Confirmation of Internal Management System" (in the cases of the second and subsequent examinations mentioned below, within the deadline for said examinations) or where TSE finds that the contents of the submitted "Written Confirmation of Internal Management System" are clearly insufficient, TSE will conclude that the company's internal management system is not adequately developed and implemented
  • If a listed company’s designation as a Security on Special Alert has been extended because TSE found that the company’s internal management system was adequately developed but did not find that it was adequately implemented (and TSE believes that it is likely that the company’s internal management system will be adequately implemented), the listed company must resubmit its "Written Confirmation of Internal Management System" within three months of the last day of the fiscal year in which the company’s designation was extended (or the following fiscal year if the company’s designation was extended within three months of the end of said fiscal year).
  • TSE will conduct its examination(s) based on such elements as the contents of the resubmitted "Written Confirmation of Internal Management System" and handle each case as follows.
When TSE finds that the company's internal management system is adequately developed and implemented De-designation (*In the case of securities that are eligible for the follow-up period mentioned below: Extension of Designation)
When TSE finds that the company's internal management system is not adequately developed and implemented: Delisting
  • Regardless of the timing of the above examinations, TSE shall also delist a security that has been designated as a Security on Special Alert when it no longer finds it likely that the listed company’s internal management system will be adequately developed or implemented.

[Securities Listing Regulations, Rule 503, Paragraphs 5 through 7; Rule 601, Paragraph 1, Item (9)]

 

Follow-Up Period After Making Improvements

If TSE finds that the internal management system of a listed company that has been designated as a Security on Special Alert has been adequately developed and implemented, but the security falls under the "Eligible Securities" mentioned below, TSE will extend the company’s designation for a period of up to three fiscal years and regularly examine the status of the company’s internal management system because of the great risk that the company will no longer be able to adequately maintain and implement said system.

TSE will de-designate the security after confirming that the company's internal management system has been adequately developed and implemented throughout said period.

Eligible Securities

■Cases where TSE finds that the company has not ensured its business continuity and profitability
-Cases where there are notes on the going concern assumption in the most recent financial statement or quarterly financial statement 
-Cases where the amount of profits or net assets does not satisfy the initial listing criteria for the market segment in question

Companies that are listed on the Prime Market ・The total profits in the last two years is JPY 2.5 billion or more
・The amount of net assets on the last day of the most recent business year or quarterly accounting period is JPY 5 billion or more
Companies that are listed on the Standard Market ・The total profits in the last year is JPY 100 million or more

■Cases where the company does not meet the continued listing criteria and is within the improvement period for meeting said criteria

Examination Process

  • If a listed company’s designation as a Security on Special Alert has been extended because the security falls under the "Eligible Securities" mentioned above even though TSE found that the company’s internal management system was adequately developed and implemented, the listed company must resubmit its "Written Confirmation of Internal Management System" within three months of the last day of the fiscal year in which the company’s designation was extended (or the following fiscal year if the company’s designation was extended within three months of the end of said fiscal year).
  • TSE will conduct its examination(s) based on such elements as the contents of the resubmitted "Written Confirmation of Internal Management System" and handle each case as follows.

(First and Second Examinations)

When TSE finds that the company's internal management system is adequately developed and implemented, and the security no longer falls under the "Eligible Securities" mentioned above De-designation
When TSE finds that the company's internal management system is adequately developed and implemented, and the security still falls under the "Eligible Securities" seen above Extension of Designation
When TSE finds that the company's internal management system is not adequately developed and implemented Delisting

(Third Examination)

When TSE finds that the company's internal management system is adequately developed and implemented De-designation
When TSE finds that the company's internal management system is not adequately developed and implemented Delisting
  • Regardless of the timing of the above examinations, TSE shall also delist a security whose designation as a Security on Special Alert has been extended because it is eligible for the follow-up period when TSE finds that the listed company's internal management system has not been adequately developed and implemented.

[Securities Listing Regulations, Rule 503, Paragraphs 8 through 10; Rule 601, Paragraph 1, Item (9)]

Disclosing the Status of the Development and Implementation of the Internal Management System

A listed company that is the issuer of a listed stock, etc. that has been designated as a Security on Special Alert must promptly disclose the status of the development and implementation of its internal management system one year following said designation.

If a listed company’s designation as a Security on Special Alert has been extended, the listed company must again disclose the status of the development and implementation of its internal management system within three months of the last day of the fiscal year in which the company’s designation was extended (or on the last day of said fiscal year and within three months of the last day of the following fiscal year if the company’s designation was extended within three months of the end of said fiscal year).

In addition, from the standpoint of ensuring the effectiveness of improvements to its internal management system, a listed company whose designation as a Security on Special Alert has been extended because it was eligible for the follow-up period mentioned above shall also disclose its efforts and progress toward improving any problems with its business continuity, profitability, or other issues.

[Securities Listing Regulations, Rule 408-3]

Designation of Securities on Special Alert