From January 2006, JASDEC will introduce Foreign Indirect Account Management Institution (FIAMI) system, in line with the start of “Non-JGB bonds” settlement via JASDEC book-entry system.
One advantage of the FIAMI system is that final investors’ rights are entitled on JASDEC’s bondholders’ books as determined in the Book-Entry Law in Japan. For domestic investors, the Book-Entry Law is the only law to be governed by, in order to secure their rights. Consequently, custodians or securities firms for Japanese investors should become direct or indirect participants to protect their customers’ rights.
On the other hand, for foreign final investors, their legal rights are not automatically governed by FIAMI defined in the Book-Entry Law, as an agreement between a foreign investor and a foreign custodian is governed by Law in each country.
Foreign investors should use the “FIP” system for JGB transactions to benefit tax exemption for nonresidents, but there is not such taxation advantage for non-JGB bonds.
In light of this, the case requiring a foreign custodian to be a FIAMI appears quite limited. However, it is possible to facilitate FIAMI system for a foreign investor if it targets to secure certain rights such as collateral with the authority of Law in Japan.
MHCB is lobbying JASDEC and related authorities to clarify the aforementioned issues.More detailed information is to be provided going forward.
JASDEC and other related authorities commented that it is not mandatory and the FIAMI system is available for each investor depending on its purpose.