SEC backs interim reform reports

Interim reports on deregulation of the securities industry — including calls to further liberalize brokerage commissions beginning April 1, 1998 — were approved May 16 by an advisory council subcommittee to the finance minister.

The reports list proposals that the Securities and Exchange Council should consider when writing its final reform paper on the nation’s securities business in June.

The council’s report will be just one of a series listing the measures the government plans to take in implementing the “Big Bang” of financial system reforms by 2001.

Reform measures are needed to keep Japanese markets attractive to investors, and they became all the more crucial Friday when the Diet passed amendments to the Foreign Exchange and Foreign Trade Control Law that will loosen Japan’s highly regulated foreign exchange business.

If the Japanese financial and capital markets remain heavily regulated, the revised foreign exchange law could help transactions shift to overseas markets.

Friday’s reports, submitted by three working groups, say that securities companies should be allowed greater freedom in setting brokerage commissions.

Currently, commissions can be freely set for trades exceeding 1 billion yen in value, but one working groups said in its report that the threshold should be lowered to less than 100 million yen by next April.

The group said other commissions that have yet to be liberalized should also be fully opened at the earliest possible time.

The interim reports also say that the industry should be allowed greater diversity in asset management and other services, especially because the liberalization of commissions could hurt smaller brokerages, which depend on such fees for a good part of their profits.

The current ban on brokerages entering into the management of accounts for settlements — an area now dominated by banks offering accounts from which withdrawals for utilities and credit card payments can be made — should also be lifted, they say.

The working groups also suggested that the various taxes related with the securities business, such as the securities transaction tax, be reviewed, but did not fully point to a specific direction such debate should take.