Legal Information

Conduct is a critical component of all of HSBC’s business activities. It is embedded within the Group’s strategy, business models and planning, our culture and behaviours, interaction with customers, products and services, financial markets operations, and governance and oversight processes.

We have established a Global Conduct Framework with five pillars and 15 outcomes describing the behaviours to which we aspire. It increases our understanding of how the decisions we make affect customers and other stakeholders, helping us to strengthen our business.  Our conduct framework governs everything we do and aligns to the JFSA’s Client Centric Fiduciary Principles for which our businesses in Japan fully support.

Each global business and global function must ensure that its policies are designed to deliver the outcomes set out in the Global Conduct Framework.

We are enhancing our governance framework for business which our company sells structured bonds, etc. to other securities companies ("distributors”) and our distributors conduct solicitation/sales activities regarding the structured bonds, etc. to end clients including individual investors by establishing a guideline. Key elements in the guideline and its status are as follows.

Key Elements in the Guideline

• We conduct periodic and ad-hoc reviews on status of solicitations/sales by our distributors from various points of view.
• We conduct pre-evaluation of structure and risk, set sales standard based on the evaluation, and obtain internal approval for sales of structured bonds, etc. to our distributors.

Implementation Status of the Guideline
We have already been implementing the above measures.

We do not carry any products that are an object for Common KPI.

The Company has set the following policy with respect to the handling of the customer’s Personal Information, Individual Number and Specific Personal Information (collectively, "Personal Information, etc.").

When handling customer’s Personal Information, etc., the Company will comply with this policy in addition to the relevant laws and regulations, including the Personal Information Protection Law (“PIPL”), and the relevant guidelines, including the Personal Information Protection Guideline in the Financial Industry (“Financial Industry Guideline”). The Company will continually review and improve this policy about handling of Personal Information, etc.

In this policy:

"Connected Person" means a person whose information the customer provides to the Company in connection with transactions with the Company. Connected Person may include, but is not limited to, any agent, any beneficiary, trustee or settler, and any substantial owner, representative, director or officer of the customer.

“Sensitive Information” is the one defined in Financial Industry Guideline; it includes below “Special Care-required Personal Information” and other information like membership of workers’ unions, family origin, registered domicile, health record and sex life etc. (excluding the parts under “Special Care-required Personal Information”).

“Personal Information” is the one defined in PIPL; it means information about a living individual which can identify the specific individual by a name, date of birth or other description contained in such information, or information containing an individual identification code defined in PIPL.

“Personal Data” is the one defined in PIPL; it means Personal Information constituting a personal information database etc. defined in PIPL.

"Individual Number" means the number obtained by converting a resident record code in order to identify a person (so called “My Number”);

"Specific Personal Information" means the Personal Information that includes the Individual Number;

"Special Care-required Personal Information" is the one defined in PIPL, it means personal information comprising a principal's race, creed, social status, medical history, criminal record, fact of having suffered damage by a crime, or other descriptions etc. of which the handling requires special care so as not to cause unfair discrimination, prejudice or other disadvantages to the principal.

1. Purposes of Use of Personal Information, etc.
   The Company will use Personal Information, etc. of the customer (including its Connected Persons to the extent necessary for the implementation of the following purpose of use) to the extent necessary for the following purposes of use within the following business operations, except where the Company obtains such customer’s consent or where permitted under the relevant laws and regulations. For the avoidance of doubt, the Company will use the Individual Number and Specific Personal Information only to the extent permitted under the relevant laws and regulations.
   
   (1) Business Operations
   
   
   1. Financial instruments business (including sales and purchase of securities, derivative transactions, brokerage, intermediary or agency services for sales and purchase of securities, and underwriting securities, etc.) and any business incidental thereto;
   2. Businesses and any other activities in which financial instruments business operators are permitted to engaged in accordance with the laws, including Money Lending Business; and
   3. Any other activities and related businesses in which financial instruments business operators may be engaged in (including activities which may be permitted in the future).
   
   (2) Purposes of Use
   The Company and HSBC Group Companies will use the customer's Personal Information, etc. for the following purposes in relation to the provision of financial products and services. Note, however, that in compliance with Article 123, Paragraph (1), Item (vii) of the Cabinet Order concerning Financial Instruments Business, etc., the Company will not use, nor shall it provide to a third party, any sensitive and non-public Personal Information of the customer, such as race, religious affiliation, family origin, registered domicile or health and criminal records, unless the Company deems it necessary to do so for its proper business operations or otherwise.
   
   The Company will endeavour to decide the purposes of use as concretely as possible so that they are transparent to the customers, and will endeavor to specify the purpose limitedly at the time of acquiring the information. For example, if the Company intends to propose its products using Personal Information acquired by conducting a questionnaire, the Company will disclose such intention.
   
   
   1. To provide information for the solicitation and sale of financial products and services based on Financial Instruments and Exchange Act.
   2. To (i) ascertain the customer's identity under the Act on Prevention of Transfer of Criminal Proceeds, Foreign Exchange and Foreign Trade Law and Hong Kong Monetary Authority Guidelines, (ii) avoid financial crimes, money laundering, and comply with sanctions programmes that are administered by Japan, the United States, the United Kingdom, the European Union, Hong Kong, United Nations, etc. or (iii) ascertain the customer's qualifications for eligibility to certain financial products and/or services.
   3. To make decisions about the appropriateness of providing financial products and services, such as decisions made in light of the principle of suitability.
   4. To appropriately carry out commissioned operations when commissioned with all or part of the processing of Personal Information by another business etc.
   5. To fulfill obligations and exercise rights based on contracts with the customer or based on laws.
   6. To research and develop financial products and services by conducting market research, as well as data analysis and questionnaires.
   7. To make proposals on financial products and services, by sending out direct mail etc.
   8. To make proposals on the products and services of HSBC Group Companies or associated companies etc.
   9. To effectuate cancellations of various transactions and to conduct follow-up management after the cancellations.
   10. To monitor and control the various risks that are necessary for the management of the HSBC Group Companies.
   11. To accomplish the transactions and others for customers.
   
   Notwithstanding the purpose of use provided in each item above, the Company will not use the Individual Number and Specific Personal Information for the purposes other than those permitted under the Act on the Use of Numbers to Identify a Specific Individual in Administrative Procedures. The Company’s purposes of the use of Individual Number and Specific Personal Information are as follows;
   
   1. Preparation of legal documents regarding financial instrument transactions
   2. Processing of account opening and reporting regarding financial instrument transactions
   3. Preparation of legal documents regarding payment records
   4. Other purposes in relation to 1 through 3 above.
   
   About the purposes of using Personal Information, etc. by the Company, it will be seen from the Company's web page.
   
   (3) Discontinuance of Direct Marketing
   
   In case a customer himself/herself requests the Company to stop using his/her Personal Information for the purpose of direct marketing such as sending direct mails or solicitation by phone, the Company will discontinue the usage for such purpose.
   
   
2. Proper Acquisition of Personal Information, etc.
   The Company will acquire the customer’s Personal Information, etc. if deemed necessary to achieve the purposes of use specified in item 1 above by the appropriate and legitimate methods.
   
   <Examples>
   
   
   • When the customer provides the information by filling out the forms such as a trading account application and submitting them directly to the Company (Submission of the form by the customer himself/herself, Registration of data through Web site by the customer himself/herself, etc.)
   • When the third parties such as personal credit information bureaus provide the information.
3. Personal Data Provided to Third Parties
   The Company will not provide any of customer’s Personal Data it retains to third parties without the prior consent of the individual concerned, except as permitted by the relevant laws and regulations. However, in the case where the Personal Data is provided accompanied by the Company entrusting the handling of the Personal Data within necessary scope to achieve a utilisation purpose or in the case where the Personal Data to be jointly utilised by a specified person set forth in item 6 below, the Company may provide customer’s Personal Data even without prior consent of customers.
   
   For providing the Persona Data to third parties in foreign countries (including above cases of the entrustment of the handling of the Personal Data and the joint use of the Personal Data), the Company will not do so without getting prior consent of the customer for this provision, except the cases permitted by the relevant laws and regulations. For the avoidance of doubt, for a third party in foreign countries which prescribed by rules of the Personal Information Protection Commission (“PPC”) as a foreign country establishing a personal information protection system recognised to have equivalent standards to that in Japan, or a third party establishing a system conforming to standards prescribed by rules of the PPC as necessary for continuously taking action equivalent to the one that a personal information handling business operator shall take concerning the handling of the Personal Data, the Company may provide the customers’ Personal Data to the third party without getting prior consent of the customer.
   
   Further, the Company will not provide any of Individual Number and Specific Personal Information to third parties beyond what is allowed under the laws and regulations.
   
   
4. Handling the Sensitive Information
   The Company will not acquire, utilise, nor provide to third parties, customer’s Sensitive Information, except cases as illustrated by the Financial Industry Guideline including the case based on laws and regulations and the case in which there is a prior consent of the individual concerned within the scope of business need.
   
   
5. Entrustment of the Operation concerning Personal Data
   The Company entrusts its operations concerning the Personal Data to the third party within the necessity to achieve the purposes of use as exemplified blow. Note that the Company, in entrusting its operations to a third party, will execute an agreement with the third party regarding the stringent handling of the Personal Data within such third party, and ensure that there are appropriate security control measures in place.
   
   <Examples>
   
   
   • Operations regarding printing and dispatch of documents to be sent to customer.
   • Operations to send out direct mails
   • Operations and maintenance of computer systems
   • Maintenance of books and records relating to the business operations
     
     
6. Joint Use of Personal Data
   The Company may jointly use the Personal Data (excluding Individual Number and Specific Personal Information) with the other parties as follows:

   Joint Use of Information among HSBC Group Companies
   The Company may jointly use the Personal Data with HSBC Group Companies by the destination to provide high value-added production and service and/or realise strong risk management and enhancement on the whole HSBC group business control. This joint use will be made under necessary control measure, and when there are restriction set by applicable laws/rules such as Financial Instruments and Exchange Act other than PIPL, the Company will comply with such laws/rules.

   1. Items Jointly Used Information of the customer (including its Connected Persons to the extent necessary for the implementation of the Purpose of Use) regarding the Company's financial instruments business and other transactions (name, address, date of birth, contents and purpose of the transaction, and occupation).
   2. Scope of Joint Users The Company and other HSBC group companies, the ultimate parent company of which is HSBC Holdings plc. (“HSBC Group Companies”)
      (http://www.hsbc.com/about-hsbc/structure-and-network)
   3. Purpose of Use
      
      a. The information will be used to monitor and manage the various risks that are necessary to be so monitored and managed for the business operations of the HSBC group.
      
      b. To (i) ascertain the customer's identity under the Act on Prevention of Transfer of Criminal Proceeds, Foreign Exchange and Foreign Trade Act and Hong Kong Monetary Authority Guidelines, (ii) avoid financial crimes, money laundering, and comply with sanctions programmes that are administered by Japan, the United States, the United Kingdom, the European Union, Hong Kong, United Nations, etc. or (iii) ascertain the customer's qualifications for eligibility to certain financial products and/or services.
      
      c. To properly and smoothly implement the transactions with customers.
      
      
   4. Name of Party Responsible for Management of the Personal Data HSBC Securities (Japan) Limited, Tokyo Branch
7. Procedures for Disclosure etc. of Retained Personal Data
   The Company, upon the customer's request/demand for Disclosure etc. (“Demand for Disclosure etc.”) (the term of "Disclosure etc." means notification of purpose of utilisation, disclosure, correction, addition or deletion, utilisation cease or deletion, ceasing a third party provision etc.) of the "retained personal data" defined in PIPL (“Retained Personal Data”), will effectuate the Demand for the Disclosure etc. without delay, by means of delivering documents or by other means agreed to by the customer.
   In case the customer inquiries about the existence of his/her Individual Number in the Company's record, the Company will disclose whether it retains such Individual Number or not.
   
   (1) Exception
   The Company will not disclose the Retained Personal Data in its entirety or in part under the following circumstances:
   
   
   1. Where the disclosure may harm the life, body, property or other rights and interests of the principal or of a third party.
   2. Where the disclosure may significantly hinder the fair implementation of the operations of the Company.
   3. Where the disclosure may result in the breach of another law or regulation.
      
      
   If the Company decides not to accept the customer's Demand for Disclosure etc. in whole or in part, the Company will notify the customer thereof without delay.
   
   (2) Procedures for Disclosure etc.
   In order to make a Demand for Disclosure etc., the customer is required to submit the form required by the Company. Note that the Company, in effectuating the Disclosure etc. will conduct the identity checking process with regard to the customer or his/her agent in such a manner as comparable to the procedures required by the Act on Prevention of Transfer of Criminal Proceeds etc., by requesting the customer or such agent to submit official documents etc.
   
   (3) Request by Agent
   An agent who may make a Demand for Disclosure etc. on behalf of the customer shall be one of the following agents:
   
   
   1. A legal guardian of the customer who is a minor or a ward that is of age.
   2. An agent authorised by the customer to make the request for Disclosure etc.
      
      
   The Company will request a public certificate or power of attorney to confirm the agent's authority, in addition to the above mentioned identity checking process.
   
   (4) Handling Fee
   The Company will charge a fee for handling the request for notice of utilisation purpose and disclosure of JPY 1,080 per each request. The fee is payable at the time of such request and will be paid in cash.
   
   
8. Security Control Action
   The Company is taking necessary and appropriate action for the security control to avoid data leakage, loss or damage of customers’ Personal Information, etc. And the Company will exercise necessary and appropriate supervision over staffs and outsourced vendors who are handling customers’ Personal Information, etc.
   
   
9. Contacts
   The Company will be dealing with complaints properly and timely about handling of Personal Information etc. If the customer has any questions or comments on the Company's operation handling and security control action for Personal Information etc., complaints to the Company or a Demand for Disclosure etc., please contact:
   
   
   • Compliance Department, HSBC Securities (Japan) Limited
   Tel: 03-5203-3111 (Weekdays 9 a.m. - 5 p.m.)
   
   
10. Authorised Personal Information Protection Organisation
    The Company is a member of the Japan Securities Dealers Association and the Financial Futures Association of Japan which are authorised personal information protection organisations recognised by the Personal Information Protection Commission. These organisations accept complaints or consultations on its members.

[Contact for complaints/consultations]

Personal Information Consulting Centre, Japan Securities Dealers Association

Tel: 03-6665-6784 (http://www.jsda.or.jp)

Personal Information Complaints/Consultations Centre, Financial Futures Association of Japan

Tel: 03-5280-0881 (http://www.ffaj.or.jp/)

April 2018

HSBC Securities (Japan) Limited, Tokyo Branch

This Best Execution Policy establishes the policy and method in order to execute orders on the best possible terms for the client as stipulated in Article 40-2, Paragraph 1 of the Financial Instruments and Exchange Law.

When HSBC Securities (Japan) Limited ("HSBC Japan") receives an order from a client involving securities listed on financial markets in Japan, we will do our best to execute the order in accordance with the following policy, unless the client provides other instructions concerning how the transaction should be executed.

1. Applicable securities
   
   

   (1)"Listed stocks, etc." as defined in Article 16-6 of the Enforcement Ordinance of the Financial Instruments and Exchange Law, which includes stocks, convertible bonds, exchange-traded funds (beneficiary certificates of investment trusts linked to equity indexes), real estate investment trusts (REITs), etc.
   (2) Although "securities handled" as defined in Article 67-18, Item 4 of the Financial Instruments and Exchange Law, which includes Phoenix stocks, convertible bonds, etc., are legally covered by the best execution policy, we do not perform transactions for these securities.

2. Method for executing orders on the best terms

    We will handle all orders received from clients as brokerage orders and will not serve as the direct counterparty for these transactions. All orders from clients concerning listed stocks, etc. will be executed on financial markets in Japan. We will not use off-exchange transactions, including proprietary trading systems (PTS).

   (1) When an order is received from a client, we will immediately execute the transaction on a financial market in Japan where the applicable security is listed. When an order is received after trading hours for financial markets, the order will be executed after the financial market reopens. (2) Orders from clients will be executed on financial markets as follows.

    (a) For securities listed on a single financial market, the order will be executed on that market.

    (b) For securities listed on multiple financial markets, the order will be executed on the market that we select as having the highest liquidity based on trading volume and other items during a specific period. Specific reasons for selection of a particular market, in addition to the items that we already disclose, will be provided to clients upon request.

    (c) If we are not a participant or member of the market used in (a) or selected as described in (b), we will execute the transaction on that market using a party that is a participant or member of that market and with which we have a brokerage contract for orders on that market.

3. Reason for selection of a particular method
   
   

   We use financial market rather than off-exchange transactions because we believe that financial market transactions are better from the clients' standpoint. Financial markets attract a large volume of orders from investors, resulting in greater liquidity, a better possibility of completing a transaction, faster transactions, and other advantages. For securities listed on multiple financial markets, we use the market with the highest liquidity because we believe that this is in the best interests of the client.

4. Other items
   
   

   (1) Irrespective of the order execution method used as prescribed in the above item 2, the transactions listed below will be executed as follows.

    (a) For transactions where the client specifies a particular execution method (request for HSBC Securities to act as the direct counterparty, request for execution on a particular financial market, request for execution during a particular time of day, etc.), we will use the specified method.
   (b) For transactions involving odd lots or amounts of less than one trading unit (tangen), we will use financial product companies that handle these transactions

    (2) There may be instances where we are forced to select an order execution method that is not consistent with this best execution policy due to a computer system malfunction or other problem. In this case, we will do our best to execute the order on the best terms possible at that time.

Our obligation involving the best execution of orders is not restricted to the price. We are obligated to execute orders in the best manner by also taking into account cost, speed, reliability and many other factors associated with the order. Consequently, there may be instances where, following the execution of an order, the terms do not appear to be the best possible based on price alone. However, it is not possible to use solely the price as the basis for determining whether or not a particular transaction is in violation of the best-execution obligation.

HSBC Holdings plc, its subsidiaries and associates (HSBC Group) is a global organisation which provides an extensive range of financial services to its customers around the world. In Japan, HSBC Group entities include branches of The Hongkong and Shanghai Banking Corporation as well as HSBC Securities (Japan) Limited and HSBC Global Asset Management (Japan) KK.

As the HSBC Group engages in a wide range of commercial and investment banking, brokerage, funds management, hedging transactions and investments it is possible that companies or businesses within the HSBC Group may from time to time potentially have interests which conflict, or potentially conflict, with its customers' interests or with the duties that it owes to its customers.

The types of conflicts include (a) those arising between the interests of HSBC on the one hand and with the interests of its customers on the other, (b) those conflicts between different customers, and (c) conflicts between an employee of HSBC Group and a customer.

For example, HSBC Group may trade proprietary positions in a security when at the same time another business or entity within HSBC Group may have information about future transactions with customers in relation to that security. HSBC Group may also provide advisory and financing services to one customer in respect of a bid and seek to provide financing services to another customer in respect of the same bid.HSBC Group has therefore established comprehensive Conflict of Interest Management procedures which are designed to identify and manage such potential conflicts of interest. A key element of such procedures is that HSBC Group staff engaged in different business activities involving a potential conflict of interest must carry on those activities independently of one another.

In Japan, the Compliance Department, which is managed independently from business departments, is the responsible department for Conflict of Interest Management. The Compliance Department identifies potential conflicts of interest by monitoring the necessary business information and where applicable taking appropriate measures to manage and control conflicts of interest when they arise. These control procedures include organisational measures and administrative arrangements to safeguard the interests of customers and clients.

Where necessary, HSBC Group maintains arrangements which restrict the flow of information to certain employees in order to protect its customers' interest and to prevent improper access to customer information. Rules are also in place to prevent insider dealings by employees of HSBC Group.

In certain circumstances, HSBC Group may consider it appropriate to disclose a potential conflict of interest to a customer and obtain the customer's formal consent to proceed.

However, HSBC Group will decline to act in any circumstance where a customer declines to give consent or where it considers that the potential conflict of interest cannot be managed without risk of damage to the interest of any customer.

The scope of conflicts of interest management is the activities of The Hongkong and Shanghai Banking Corporation Limited, HSBC Securities (Japan) Limited, HSBC Global Asset Management (Japan) KK and all other HSBC Group companies worldwide which engage in financial business. Please be advised that HSBC Global Asset Management (Japan) KK does not share individual customer information with remaining HSBC Group companies.

Any customer requiring more details of our Conflict of Interest Management procedures should contact their Relationship Manager or other contacts at any of HSBC's offices in Japan.

As a responsible organisation the HSBC Group is committed to actively engaging in activities which contribute to the maintenance of stability and social order. It is our policy to take a firm stance against any group or organisation which engages in activities that may be deemed anti-social. Our position is in accordance with recent guidelines issued by both the Financial Services Agency and the Japan Securities Dealers Association, namely we will:

1. Resolutely oppose any attempt by ASFs to associate with us.
2. Take all reasonable measures to protect HSBC staff against the activities of ASFs during the performance of their jobs.
3. We will continue to support external parties, including the police and legal professionals, in their fight against ASFs.
4. We will use the Japanese legal system to protect our staff and our business against ASFs.

The Customer Complaint and Dispute Resolution Procedures for Type I Business, based on the Financial Instruments and Exchange Act Article 37-7, are set out below.

HSBC Securities ( Japan ) Limited has signed an agreement with the Financial Instruments Mediation Assistance Center ('FINMAC') with respect to the use of customer complaint and dispute resolution procedures to be provided by FINMAC, which is a Designated Dispute Resolution Body under the Financial Instruments and Exchange Act.

The Customer Complaint and Dispute Resolution Procedures for Type II Business, based on the Financial Instruments and Exchange Act Article 37-7, are set out below.

1. The customer complaint and dispute resolution procedures for this area of business are provided by FINMAC, with which body we have registered for Type II Business, and
2. The the customer complaint and dispute resolution procedures provided by the Financial Futures Association of Japan ( through FINMAC) are also available for this area of business.

Disclosure pursuant to Money Lending Business Act Article 12-2-2

HSBC Securities ( Japan ) Limited has signed an agreement with the Japan Financial Services Association ('Money Lending Business Association') with respect to the use of customer complaint and dispute resolution procedures to be provided by Money Lending Business Association, which is a Designated Dispute Resolution Body under the Money Lending Business Act.

There are other various independent bodies which provide customer complaint and dispute resolution procedures. Please click here for more information on such other bodies.

Explanatory note on unregistered credit rating
(For S&P Global Ratings)

HSBC Securities (Japan) Limited

From the viewpoint of ensuring fairness and transparency in the markets, Financial Instruments and Exchange Law has introduced the registration system for credit rating agencies. In accordance with this regulation, financial instruments business operators, etc are required to inform customers of the fact that the rating is not registered and the rationale for the registration system, etc. whenever marketing any financial products which are rated by unregistered credit rating agencies.

Rationale for the Registration System

Registered credit rating agencies are subject to the following regulations: (1) the duty of good faith; (2) the duty to maintain an operational management system which prevents conflicts of interest and ensures the fairness of the credit rating process, etc.; (3) the prohibition on giving a credit rating to a security which they hold; and (4) the duty to disclose information including to prepare and make available for public inspection the policies for credit ratings and the documents for public release and explanation. Registered credit rating agencies are also subject to supervision by the Financial Services Agency, including orders to submit information, onsite inspections and business improvement orders. However, unregistered credit rating agencies are not subject to such regulation or supervision.

Name of the Credit Rating Agency Group, etc. 

Name of the Credit Rating Agency Group:
S&P Global Ratings (“S&P”)
Name of the Registered Credit Rating Agency within the Group and its Registration Number:
S&P Global Ratings Japan Inc. (FSA Commissioner (Rating) No. 5)
S&P Global SF Japan Inc. (FSA Commissioner (Rating) No. 8)

Method of Obtaining the Information about the Summaries of the Policies and Criteria for Credit Rating

The information is published in the “Unregistered Rating Information”  (「無登録格付け情報」) which can be found in the menu under “Library/Regulation Related” (「ライブラリ･規制関連」) on the website of S&P Global Ratings.

Assumptions, Significance and Limitations of the Rating

Credit ratings assigned by S&P Global Ratings are statements of opinion on the future credit quality of specific issuers or issues as of the date they are expressed and do not indicate the probability of default or guarantee the credit of the specific issuers or issues. Credit ratings are not a recommendation to purchase, sell or hold any securities, or a statement of market liquidity or prices in the secondary market of any issues.

Credit ratings may change depending on various factors, including issuers' performance, changes in external environment, performance of underlying assets, creditworthiness of counterparties and others. S&P Global Ratings conducts rating analysis based on information it believes to be reliable and provides ratings only when it believes to have enough information in terms of quality and quantity to support its opinion. However, S&P Global Ratings does not perform an audit, due diligence or independent verification of any information it receives from issuers or other third parties, nor guarantees accuracy, completeness or timeliness of the information received or the results caused by use of such information. It should be noted that, depending on the credit ratings, there may be inherent risks associated with the limitation on available historical data.

This information is prepared as of 1 May 2018 based on sources which we believe are reliable, but we do not guarantee its accuracy or completeness. For details, please refer to the above mentioned website of S&P Global Ratings.

Explanatory note on unregistered credit rating
(For Moody’s Investors Service)

HSBC Securities (Japan) Limited

From the viewpoint of ensuring fairness and transparency in the markets, Financial Instruments and Exchange Law has introduced the registration system for credit rating agencies. In accordance with this regulation, financial instruments business operators, etc. are required to inform customers of the fact that the rating is not registered and the rationale for the registration system, etc. whenever marketing any financial products which are rated by unregistered credit rating agencies.

Rationale for the Registration System

Registered credit rating agencies are subject to the following regulations: (1) the duty of good faith; (2) the duty to maintain an operational management system which prevents conflicts of interest and ensures the fairness of the credit rating process, etc.; (3) the prohibition on giving a credit rating to a security which they hold; and (4) the duty to disclose information including to prepare and make available for public inspection the policies for credit ratings and the documents for public release and explanation. Registered credit rating agencies are also subject to supervision by the Financial Services Agency, including orders to submit information, onsite inspections and business improvement orders. However, unregistered credit rating agencies are not subject to such regulation or supervision.

Name of the Credit Rating Agency Group, etc. 

Name of the Credit Rating Agency Group:
Moody’s Investors Service
Name of the Registered Credit Rating Agency within the Group and its Registration Number:
Moody’s Japan K.K. (FSA Commissioner (Rating) No. 2)
Moody’s SF Japan K.K. (FSA Commissioner (Rating) No. 3)

Method of Obtaining the Information about the Summaries of the Policies and Criteria for Credit Rating

The information is published in the “Matters Related to the Explanation of Unregistered Ratings” (「無登録格付説明関連」) in the page of “Use of Credit Ratings Given by Unregistered Companies” (「無登録業者の格付の利用」) which is displayed after clicking“Credit Rating Business” on the website of Moody’s Japan K.K. and Moody’s SF Japan K.K.).

Assumptions, Significance and Limitations of the Rating

Credit ratings are Moody’s Investors Service's (“Moody’s”) current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. Moody’s defines credit risk as the risk that an entity may not meet its contractual, financial obligations as they come due and any estimated financial loss in the event of default. Credit ratings do not address any other risk, including but not limited to: liquidity risk, market value risk, or price volatility. Credit ratings do not constitute investment or financial advice, and credit ratings are not recommendations to purchase, sell, or hold particular securities. No warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such rating or other opinion or information is given or made by Moody’s in any form or manner whatsoever.

Based on the information received from issuers or from public sources, the credit risks of the issuers or obligations are assessed. Moody’s adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody’s considers to be reliable. However, Moody’s is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

This information is prepared as of 1 May 2018 based on sources which we believe are reliable, but we do not guarantee its accuracy or completeness. For details, please refer to the above website of Moody’s Japan K.K. and Moody’s SF Japan K.K.

Explanatory note on unregistered credit rating
(For Fitch Ratings)

HSBC Securities (Japan) Limited

From the viewpoint of ensuring fairness and transparency in the markets, Financial Instruments and Exchange Law has introduced the registration system for credit rating agencies. In accordance with this regulation, financial instruments business operators, etc. are required to inform customers of the fact that the rating is not registered and the rationale for the registration system, etc. whenever marketing any financial products which are rated by unregistered credit rating agencies.

Rationale for the Registration System

Registered credit rating agencies are subject the following regulations: (1) the duty of good faith; (2) the duty to maintain an operational management system which prevents conflicts of interest and ensures the fairness of the credit rating process, etc.; (3) the prohibition on giving a credit rating to a security which they hold; and (4) the duty to disclose information including to prepare and make available for public inspection the policies for credit ratings and the documents for public release and explanation. Registered credit rating agencies are also subject to supervision by the Financial Services Agency, including orders to submit information, onsite inspections and business improvement orders. However, unregistered credit rating agencies are not subject to such regulation or supervision.

Name of the Credit Rating Agency Group, etc. 

Name of the Credit Rating Agency Group:
Fitch Ratings (“Fitch”)
Name of the Registered Credit Rating Agency within the Group and its Registration Number:
Fitch Ratings Japan Limited (FSA Commissioner (Rating) No. 7)

Method of Obtaining the Information about the Summaries of the Policies and Criteria for Credit Rating

The information is published in the “Overview of Policies etc for Credit Rating” (｢格付方針等の概要｣) in the “Regulation Related” (｢規制関連」) section on the website of Fitch Ratings Japan Limited .

Assumptions, Significance and Limitations of the Rating

Ratings assigned by Fitch are opinions based on established criteria and methodologies. Ratings are not facts, and therefore cannot be described as being "accurate" or "inaccurate". Credit ratings do not directly address any risk other than credit risk. Credit ratings do not comment on the adequacy of market price or market liquidity for rated instruments. Ratings are relative measures of risk; as a result, the assignment of ratings in the same category to entities and obligations may not fully reflect small differences in the degrees of risk. Credit ratings, as opinions on relative ranking of vulnerability to default, do not imply or convey a specific statistical probability of default.

In issuing and maintaining its ratings, Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The assignment of a rating to any issuer or any security should not be viewed as a guarantee of the accuracy, completeness, or timeliness of the information relied on in connection with the rating or the results obtained from the use of such information. If any such information should turn out to contain misrepresentations or to be otherwise misleading, the rating associated with that information may not be appropriate.  Despite any verification of current facts, ratings can be affected by future events or conditions that were not anticipated at the time a rating was issued or affirmed. 

For a detailed explanation on the assumption, significance, and limits of credit rating, please refer to the section on “Definition regarding credit rating and other forms of opinions” on Fitch’s Japanese website.

This information is prepared as of 1 May 2018 based on sources which we believe are reliable, but we do not guarantee its accuracy or completeness. For details, please refer to the above mentioned website of Fitch Ratings Japan Limited.