The Japanese regulator, the Financial Services Agency (FSA), has responded to the recent rash of scandals involving irregularities in financial reporting by reinforcing its corporate disclosure rules. Listed companies are now required to disclose information on their unlisted parent companies.
According to a spokesman for Bank of Tokyo Mitsubishi in Tokyo, the FSA intends to revise a part of the Cabinet Office Regulations of the Securities and Exchange Law, with a view to implementing the new requirement from March 2005. The information to be disclosed will include balance sheets, profit and loss accounts, and additional information about major shareholders and board members.
FSA also plans to introduce a rule that will require the management to check (and confirm they have checked) the financial reports and details of transactions undertaken by subsidiaries. Currently, submission of this information is optional, but the FSA plans to make it mandatory by revising the Securities and Exchange Law no later than 2006. Together with this rule, FSA will introduce a system in which certified public accountants verify written confirmations submitted by listed companies.
The FSA has also decided to impose fines on companies that gave incorrect information in financial statements. The level of the fine will be more than the amount that the corporations received through fraud.
The FSA intends to submit a proposal for revision of the law in the next session of the Diet.