Response to the Principles for Preventing Corporate Scandals

The Principles for Preventing Corporate Scandals are composed of six action principles. Requiring companies to take initiatives from the perspectives of Principles 1 through 3 serves as the basic framework, which will, in turn, embed a cycle that prevents the occurrence of corporate scandals and, thereby, meet the goals of Principle 4.
Based on this basic framework, JPX is working to prevent internal corporate scandals in the following manner.

Principle 1: Gain a thorough understanding of the actual situation

  • In order to accurately and exhaustively grasp the level of compliance throughout JPX, we hold regular Risk Management Committee meetings attended by the CEO and the responsible person(s) from each division. During these meetings, members acquire a thorough understanding of the actual risks from the perspective of prevention and discuss ways to prepare and implement countermeasures.
  • When an emergency response is required, we immediately hold special Risk Management Committee meetings, during which members acquire an overarching understanding of the situation and take action towards a swift solution.
  • In addition to the initiatives taken to acquire a thorough understanding of the situation under normal circumstances as described above, in preparation for situations where the reporting lines that should have functioned as intended become clogged, we have established both an internal and external Compliance Hotline to provide a channel for an internal reporting (whistleblowing) system. We continuously share the information about the hotlines with officers and employees as part of our effort to establish an environment that makes it easy for internal voices to be heard.

Principle 2: Fulfill responsibilities with a sense of mission

  • With our corporate philosophy as a cornerstone, all officers and employees strive to fulfill their day-to-day tasks. In order to manage the company in line with the corporate philosophy, the management team takes it upon themselves to be committed to compliance and disseminate information on the level of compliance both internally and externally through annual reports and such.
  • In terms of governance, in order to further strengthen management oversight and supervisory functions and to contribute to greater transparency, the majority of the members of our Nomination Committee, Compensation Committee, and Audit Committee, as well as the majority of the Board of Directors as a whole, is composed of outside directors.
  • With the Risk Policy Committee, which consists mainly of outside directors, and the Independent Outside Directors Committee, which is entirely composed of independent outside directors, we work to exchange information and share awareness. By actively incorporating outside opinion through the aforementioned committees, we maintain an awareness of whether the customs and practices that have become entrenched within the company correspond with ever-changing social norms, and work towards continuously enhancing the effectiveness of governance within JPX and acquiring a thorough understanding of the actual situation.

Principle 3: Encourage two-way communication

  • In order to share the awareness of compliance between the workforce and management, we work to share the awareness of compliance among all of our officers and employees, such as by providing all of our officers and employees with yearly e-learning courses that aim to maintain and enhance their awareness of compliance.
  • For middle management, by incorporating a menu of activities designed to increase the awareness of compliance as part of the training for new managers, we instill an understanding that enables action based on a strong awareness of compliance.
  • During each business year, we identify critical risks within JPX. As part of the necessary actions to prevent and respond to these specific risks, we solicit and compile opinions from each division throughout JPX in relation to identifying these risks. At this time, younger employees and management directly exchange opinions and communicate in a way that ensures opinions come from both sides as we collect and summarize the opinions.
  • As a means of activating two-way communication between the workforce and management, we have established a location that allows employees, including those that are not directly related to the business of the affiliated division, to report business ideas to management. We also conduct employee awareness surveys regarding the rewarding nature of tasks and the workplace atmosphere, and hold office tours and company events to which the families of employees are invited. In this way, we work to energize communication among employees, including officers.

Principle 4: Detect non-compliance early and respond swiftly

  • As we organically link the cycle proceeding through Principles 1 through 3, we pay heed to keeping employees from falling into compliance fatigue and continue to take steps in order to prevent scandals in line with the actual situation.
  • Specifically, when we receive a contact through the hotline, we scrutinize and analyze the pertinent facts and take disciplinary action, thereby remaining a step ahead in detecting and correcting any actions that do not comply with laws, ordinances, or the Charter of Corporate Behavior, or any actions that are deemed to pose such a risk.
  • Moreover, management, including top management, sounds the alarm for near-misses reported through the Risk Management Committee, confirms similar instances through horizontal deployment, continuously sends out messages to nurture an awareness of compliance, and instills an awareness of the need to report to management faster when the news is worse. In addition to providing regular e-learning courses based on instances that have led to specific scandals, we continuously conduct surveys that scrutinize the depth of compliance awareness among the employees, identify the degree to which awareness has been nurtured and problematic points, and make revisions to our rules as necessary.

Principle 5: Execute consistent business management throughout the entire corporate group

  • Each company within JPX has important characteristics that support the core of the financial infrastructure and every one of these companies has a degree of importance that cannot be overlooked. With such recognition, we manage and supervise JPX as a single entity, and deploy our measures for Principles 1 through 4 equally throughout JPX.

Principle 6: Be accountable in view of the relevant supply chain

  • JPX operates market infrastructure in cooperation with a diverse range of stakeholders including listed companies; trading participants that receive and execute orders from investors; clearing participants that safely and reliably settle transactions; information providers that disseminate market information to society in a timely and accurate manner; and Japan Securities Depository Center and the Bank of Japan that provide settlement infrastructure for stocks and funds, respectively.
  • Serious problems that occur among such stakeholders pose the risk of damaging the credibility of Japan's financial markets, including exchanges, and the stability of trading. As such, for listed companies, for example, we have established rules and the code of corporate conduct at TSE with which listed companies must comply. Likewise, we work to ensure the qualifications of listed companies through listing examinations and listed company compliance operations by JPX-R. We also work to ensure the appropriateness and soundness of trading participants' business operations through trading participant examinations and inspections.
  • With the rapid advancement of information technology, building a highly reliable IT infrastructure has become an important mission for meeting the increasingly complex and sophisticated needs of market users and to become the market of choice. Therefore, we are driving forward with systems development by utilizing many system vendors and support personnel. When applying quality control to the services provided by system vendors and such, we have taken steps to appropriately monitor the vendors and to ensure a thorough shared awareness related to the positioning and roles of each party upon clearly demarcating the boundary of responsibility with vendors.