Listed Company Compliance

Listed Company Compliance Operations

Being listed on a securities exchange means that a company's stock is quoted publicly and traded by the general public on the exchange market. Due to the nature of a listing, listed companies are required to be of a certain quality that allows investors to trade their stocks with confidence. Japan Exchange Regulation (JPX-R) constantly monitors the eligibility of listed companies based on ongoing listing requirements.

The Listed Company Compliance Department at JPX-R carries out the following:

  1. Examination related to timely disclosure
  2. Examination related to Code of Corporate Conduct
  3. Determination of measures against listed companies
  4. Delisting examination

Examination related to Timely Disclosure

Timely and appropriate disclosure of corporate information by listed companies is vital for fair price formation in the exchange market. As such, Tokyo Stock Exchange (TSE), entrusting self-regulatory operations to JPX-R, establishes rules regarding timely disclosure and requests listed companies to disclose corporate information in a prompt, accurate and fair manner.
The Listed Company Compliance Department examines whether disclosures of listed companies are in line with the rules, taking account into the following points:

Examination points related to timely disclosure

  1. Whether the timing of the disclosure is appropriate
  2. Whether disclosed information contains any false statements
  3. Whether disclosed information lacks any information deemed important for investment decisions
  4. Whether disclosed information gives rise to misunderstandings for investment decisions
  5. Whether disclosed information fall short of the disclosure requirements in any other way

  • For an outline of the timely disclosure system, please refer to the website

Examination related to Code of Corporate Conduct

Listed companies are expected to remain conscious of their position as a part of the securities market and to conduct their business in an appropriate manner in the interests of investor protection. Considering their characteristics, TSE prescribes a Code of Corporate Conduct for listed companies in its listing rules. The code is composed primarily of two sections: "matters to be observed," which are matters to be complied with, and "matters desired to be observed," which are matters that companies are expected to work toward.
The Listed Company Compliance Department examines whether listed companies comply with the code.

Main matters specified in the Code of Corporate Conduct


(Matters to be observed)

  • Matters to be observed for third-party allotments
  • Prohibition of stock splits, gratis allotment of shares, gratis allotment of subscription warrants, reverse stock splits, or changes in the number of shares per share unit which are likely to disrupt the secondary market or infringe upon shareholder interests
  • Obligation to secure independent director(s)/auditor(s)
  • Prohibition of insider trading

(Matters desired to be observed)
  • Efforts, etc. toward the shift to and maintenance of the desired investment unit level
  • Respect for the principles of corporate governance for listed companies
  • Securing an independent director on the board of directors
  • Establishment of corporate system for prevention of insider trading

  • For an outline of the Code of Corporate Conduct, please refer to the website

Measures against Listed Companies

In order to ensure compliance with the timely disclosure requirements, the Code of Corporate Conduct, and other TSE rules, the Listed Company Compliance Department conducts examinations regarding violations of these rules and deficiencies in the internal management systems of listed companies. Based on the examination, where necessary, JPX-R will determine measures against the company.

The measures are classified into two categories, penalties and improvement measures. Penalties, such as the listing agreement violation penalty (monetary fine) and public announcement measure, are imposed on a listed company which violated the rules.

Meanwhile, improvement measures are taken with the aim of urging improvements at the listed company. Depending on the severity of the deficiencies in the internal management system identified during the course of the examination, the company will be asked to submit an improvement report or designated as a security on alert. If the company does not make improvements within the specified period (generally 1 year) after designation, it may be delisted.

List of measure
  • For an overview of the above measures, please refer to the website.
Public Announcement Measures
Listing Agreement Violation Penalty
Improvement Report
Securities on Alert

Delisting Examination

TSE prescribes delisting criteria to ensure the continued quality of listed companies on the market, and the Listed Company Compliance Department monitors listed companies likely to fall under the criteria.

To inform investors that a stock is likely to fall under delisting criteria, TSE designates the stock as follows based on JPX-R's decision:

  • Designation as a "Security under supervision (confirmation)" is used during the period for confirming whether a stock falls under the formal delisting criteria, such as the number of shareholders.
  • Designation as a "Security under supervision (examination)" is used during the period for examination involving non-numerical delisting criteria, such as false statements in a securities report.
  • Designation as a "Security to be delisted" is used for a stock to be delisted as a result of the examination. The designation remains until the day before delisting.
  • For an overview of the delisting criteria, please refer to the website

Listed Company Compliance Operations and Collaboration

Process of listing management

While the Listed Company Compliance Department maintains close communications with the TSE Listing Department, it conducts examinations regarding disclosure, Code of Corporation Conduct, measures against listed companies, and delisting independently. In the course of the examination, the department requests the listed company, its audit firm and other related parties to provide documents or clarify a series of facts, where necessary.

Based on the examination, JPX-R determines whether the company should be delisted or to impose certain measures, giving comprehensive consideration of the severity of the case and its impact on investment decisions, as well as the background and cause of the violation.

The Listed Company Compliance Department conveys JPX-R's decision to the TSE Listing Department, and TSE implements the measure on the listed company and announces it publicly.

Preventative Compliance

The Listed Company Compliance Department pro-actively engages with listed companies to prevent unfair activities and identifies post-fact violations of TSE rules. Specific activities include the following.

惻Providing advice on planned corporate action events in cooperation with the TSE Listing Department, and facilitating dialog with listed companies through individual visits.

惻Disseminating information and promoting a deeper understanding of the rules by holding seminars for listed companies, publishing booklets on listing regulations and contributing articles interpreting such regulations to journals.