Effective on October 31, 2012, the Financial Services Agency of Japan (“FSA”) amended the Japanese tender offer rules and introduced a new exemption for acquisition of shares made through a proprietary trading system (“PTS”).

Under the Financial Instruments and Exchange Law of Japan (“FIEL”), in general, a purchaser of equity securities issued by a company having a continuous disclosure obligation under the FIEL (such as a company listed on any Japanese stock exchange) must conduct a tender offer (i) when the purchaser’s shareholding ratio is greater than 5 percent after a series of off-market purchases (i.e., purchases conducted outside any Japanese stock exchange) from 11 or more persons during any 61-day period (“5% Threshold”) or (ii) when the purchaser’s shareholding ratio is more than one-third after any off-market purchase (“One-Third Threshold”).1 A PTS does not constitute a stock exchange under the FIEL and therefore PTS trading of shares was subject to the tender offer requirements. This had been said to be an impediment to development of PTS trading of shares by large institutional investors in Japan.