Financial regulators are expected to complete an outline by year's end amending equity acquisition rules to remove several loopholes in the securities trading system, according to sources.

The move by the Financial Services Agency follows the Murakami Fund's sudden emergence as a major shareholder in Tokyo Broadcasting System Inc. earlier this month, the sources said Tuesday.

Under existing share acquisition rules, an investor who has purchased an equity stake of more than 5 percent in a listed company is required to report information on the purchase, such as the number of acquired shares, to the Finance Ministry within five trading days of the purchase.

But investment funds, securities companies and other investors involved in high volume, large-lot trading are exempt from the rule as it would require them to do a great deal of paper work.

These investors can submit a single report on total share acquisitions by the 15th day of the month as long as each acquisition is less than a 10 percent interest and for investment purposes only.

The Murakami Fund, led by bureaucrat-turned-investor Yoshiaki Murakami, purchased 7.45 percent of outstanding TBS shares between July and September.

But because the fund is allowed to file monthly acquisitions reports, the TBS stake was made public only on Oct. 14.

While the exemption was designed to simplify reporting procedures by institutional investors, companies are afraid that through it an unfriendly party could suddenly emerge as a huge shareholder.

Tatsuo Uemura, a Waseda University professor familiar with corporate law, said there is "no need" for the exemption to apply to investment funds.

Calls for revising share acquisition rules also have gathered steam as the Murakami Fund recently purchased a stake of nearly 40 percent in Hanshin Electric Railway Co. without a public tender offer.

Current acquisition rules require an investor who plans to buy more than one-third of the outstanding shares in a firm through off-market trading, to announce an acquisition price and other terms through a public tender offer to give the shareholders concerned opportunities to sell.

But the Murakami Fund obtained the Hanshin stake through a number of different means including purchases on the market, off-market buying of convertible bonds that were later converted into shares, and acquisition of shares made available as a result of an equity swap done by the railway to make Hanshin Department Store Co. a wholly owned subsidiary.

Experts say the existing rules cannot deal with this kind of combination of techniques.

When Internet portal operator Livedoor Co. bought a major stake in Nippon Broadcasting System Inc. in off-hours trading earlier this year, the FSA immediately made a revision to stop that practice.