Update on discussions in the Financial Services Agency’s Working Group for beneficial shareholder disclosure rule.

The working group (WG) is discussing the pros and cons of establishing beneficial shareholder disclosure rule.

Summary
Most WG members agree that a beneficial shareholder disclosure rule should be established. The UK disclosure rule can be referred.

Discussion
Information on who the shareholders are is disclosed in the register of shareholders and in the annual securities report, which describes the status of the major shareholders. On the other hand, beneficial shareholders, those who have the power to direct the voting and investment of shares, are not disclosed unless they are subject to the large shareholding reporting rule (owning more than 5% of the shares).

In the discussion, the method of disclosure of beneficial shareholders in the US and UK are used as references.

Comments of WG members
- The UK rule would be suitable to Japan to promote engagement between companies and investors.
- The introduction of new rules on beneficial shareholder disclosure rule should be based on soft law, such as stewardship codes, rather than amendment of laws.
- In addition to imposing new rule on beneficial shareholders, a method should also be adopted to make it easier for beneficial shareholders to participate in shareholder meetings.
- The disadvantage of the US rule is that it only applies to investors above a certain amount of assets under management.
- The US rule runs the risk of disclosing more information than necessary to other investors.