Challenges Ahead — Investor/Financial Education Issues in Japan— Susumu Kohsaka Executive Chief of Operations for Institute for Securities Education & Public Relations Japan Securities Dealers Association November ９, IFIE/IOSCO Investor Education Conference

2 Contents 1. A Long Period of Low Securities Investment 2. Necessity of Rebuilding Trust (1) Rebuilding Trust in Markets: Measures Against Investment Scams (2) Rebuilding Trust in Financial Products: Investor Alerts (3) Rebuilding Trust in the Industry and its Practitioners: Exploring Measures through Hearings with a Wide Range of Participants 3. Goal of Investor Education: Nurturing “Informed and Responsible Investors” 4. Issues for the Future (1) Increasingly Limited Resources (2) Necessity of Strengthening Collaboration with Related Groups (3) International Collaboration

3 １． A Long Period of Low Securities Investment ① Japanese households hold more than half of their financial assets in cash and deposits. Securities holdings remain stagnant in the 10%-20% range. Source ： Bank of Japan

4 １． A Long Period of Low Securities Investment ② Stark contrast between Japanese and U.S. household financial assets. Comparison of Japanese and U.S. Household Financial Assets (At March 31, 2010) Source ： Bank of Japan

5 ２． Necessity of Rebuilding Trust （１） Rebuilding Trust in Markets: Measures Against Investment Scams ① –Investment scams involving unlisted stock have increased sharply. Source ： JSDA

6 ２． Necessity of Rebuilding Trust （１） Rebuilding Trust in Markets: Measures Against Investment Scams ② –Set up a dedicated call center to receive complaints or inquiries. –Collaborated with the police, Financial Services Agency, and others in carrying out investor education activities warning people of the dangers. 【 Poster 】 “Beware of this kind of unlisted stock deal!” 【 Leaflet 】 “Be cautious of unlisted stock purchase offers!” Source: JSDA

7 ２． Necessity of Rebuilding Trust （２） Rebuilding Trust in Financial Products: Investor Alerts –Financial products with complicated structures are being sold through distribution channels that are familiar to ordinary citizens. –Increasing number of cases where investors suffered unexpected losses because of a lack of understanding of the financial product mechanism or risk involved. ↓ Issue “Investor Alerts” to protect investors. Source ： FINRA

8 ２． Necessity of Rebuilding Trust （３） Rebuilding Trust in the Industry and its Practitioners: Exploring Measures through Hearings with a Wide Range of Participants ① –“Kabuya are not trusted.” (Prime Minister Aso, March 2009) –“Council for Further Development of Securities Market” formed. (Sept. 2010) → Report to be issued by June –Public survey implemented. (Oct. to Nov) → Results to be out by the end of the year.

9 ２． Necessity of Rebuilding Trust （３） Rebuilding Trust in the Industry and its Practitioners: Exploring Measures through Hearings with a Wide Range of Participants ② –Investor education also has a large part to play in rebuilding trust in the industry. 【 Leaflet 】 “How about checking these points before investing in securities?” Source: JSDA

10 ３． Goal of Investor Education: Nurturing “Informed and Responsible Investors” Nurturing “Informed and responsible investors” is a key factor in the sustained development of financial and capital markets! Guided by this goal, JSDA is implementing a variety of investor/financial education activities for all levels of Japan’s society. (Activities targeting teachers and students)  Teachers: Conduct seminars (principals, teachers responsible for investor/financial education), support independent study groups, set up dedicated websites, and publish information magazines, etc.  Students: Provide “first-hand experience” based materials (mainly middle and high school students) and support securities research activities of university students, etc. (Activities targeting the general public)  Hold lectures and seminars and talk shows, hold IR seminars, produce publications, set up securities information offices, and conduct PR activities related to securities taxation systems, etc.

11 ４． Issues for the Future (1) Increasingly Limited Resources JSDA members (securities firms, etc.) have faced a difficult business environment, and are carefully scrutinizing JSDA’s investor/financial education activities. → Being held increasingly accountable and required to make efficient use of resources. But is there an objective standard for evaluating efficiency and cost versus benefit?

12 ４． Issues for the Future （２） Necessity of Strengthening Collaboration with Related Groups On a national basis, Japan does not have an efficient framework for investor/financial education activities (overlap between related groups, competition…) Would like government to demonstrate leadership (U.K. model), but… Industywide effort = “Securities Knowledge Proliferation Project” Strengthening collaboration by investor/financial education- related organizations using the “Central Council for Financial Services Information” as a platform. （ Eight Participating Organizations ） ・ Japan Securities Dealers Association ・ Tokyo Stock Exchange Group, Inc. ・ Osaka Securities Exchange ・ Nagoya Stock Exchange ・ Fukuoka Stock Exchange ・ Sapporo Securities Exchange ・ Investment Trusts Association ・ Association of Nagoya Stock Exchange Trading Participants

13 ４． Issues for the Future （３） International Collaboration Financial literacy of the public is important no matter what our differences in culture or systems. No significant differences in the goals of our investor/financial education activities. ↓ Important that we share each country’s investor/financial education organizations’ know how and information among us.

14 Thank you for your kind attention!