There has been a marked increase in investments by
Japanese investors in foreign real estate funds, but the
marketing of such funds in Japan is subject to many
regulations, including the Financial Instruments and Exchange
Act (FIEA). The following is a brief summary of the two
principal regulations applicable to operators of typical
foreign real estate funds, such as limited partnerships,
investment trusts or real estate investment trusts (Reits) that
are established under foreign laws, and which are marketed to
institutional or professional investors in Japan.
Regulations applicable to offering businesses
Fund operators seeking to directly solicit interest or units
of foreign real estate funds to investors in Japan must comply
with certain licensing and registration requirements which
apply to securities offering businesses generally. Fund
operators are required to obtain FIEA registration or otherwise
retain a registered Japanese securities firm (or a securities
broker licensed in another jurisdiction but permitted to
conduct certain institutional investor solicitations as set
forth in FIEA) to conduct such solicitation. For funds
classified as collective investment schemes under the FIEA,
under which limited partnerships would fall, however, the
sophisticated investor exemption may be applicable if at least
one qualified institutional investor (QII), as defined under
the FIEA, is an investor in the fund, and provided all other
requirements applicable under the FIEA are satisfied. It should
be noted that solicitation is broadly interpreted because there
is no specific definition in the Japanese securities
regulations. For this reason, a broad range of actions and
conducts in relation to marketing a particular fund may
constitute solicitation under Japanese law.
Regulations applicable to investment management
business
Operating funds classified as collective investment schemes
under the FIEA, that are managed by the issuer itself and that
primarily (ie more than 50% of their assets) invest in
securities as defined under the FIEA, are required to obtain
registration under the FIEA (the so-called self-management
regulation). There are certain exemptions from this
registration requirement, including the above mentioned
sophisticated investor exemption. For foreign investment trusts
or foreign Reits there are no fund operator related
registration requirements or regulations generally.
The FIEA was amended, with effect from March 1 2016, whereby
the requirements to qualify for the sophisticated investor
exemption were raised, with relevant operators of funds
becoming subject to additional requirements, including
conduct-related rules.
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| Katsunori Shirozu |