Strategic Capital: Re: the request to file an action for the return of unjust enrichments against Officers of JAPAN SECURITIES FINANCE (TOKYO Code 8511)

(Please see “https://stracap.jp/proposal-for-JSF-from-sc-2022/2023-0119_JSF_Inappropriate_Accounting_eng.pdf” for details)

TOKYO--(BUSINESS WIRE)--INTERTRUST TRUSTEES (CAYMAN) LIMITED SOLELY IN ITS CAPACITY AS TRUSTEE OF JAPAN-UP and Strategic Capital, Inc. (hereinafter collectively referred to “SC”) are shareholders of JAPAN SECURITIES FINANCE CO., LTD (hereinafter referred to as "JSF").

Improper Accounting Treatment

In accordance with the Financial Instruments and Exchange Act (FIEA), the Regulations on Financial Statements and the Cabinet Office Ordinance on Securities Finance Companies, JSF is obligated to prepare and submit an annual report including financial statements. The same financial statements are also to be published in the Annual Securities Report (YUHO).
However, in violation of the FIEA and the Cabinet Office Ordinance, JSF has long engaged in inappropriate accounting practices, such as posting gains on sales of securities, that should have been posted under non-operating income or extraordinary gains, as operating income. Most of JPY 739 million (FY21/3) and JPY 1,344 million (FY22/3) gains on sales of Other Securities were gains on sales of Japan Exchange Group, Inc. stock and should have been recorded as extraordinary gains, not as operating income nor non-operating income.
As a result, an unreasonably high amount of ordinary income was recorded compared to if proper accounting treatment had been applied.

Excessive remuneration paid to Director

Bonuses and performance-linked remuneration (“bonuses”) for JSF’s Officers are calculated based on the amount of ordinary income instead of net income (bottom line). Due to the higher amount of ordinary income from the inappropriate accounting treatment described above, the Officers were paid an excessive bonus without legal cause.
The total bonuses paid to the Officers for FY22/3 was approximately JPY 104 million.

Request to file an action for the return of unjust enrichment

Therefore, in a letter dated January 18, 2023, and received by JSF on January 19, 2023, we requested the members of JSF’s Audit Committee file a suit against each Officer for the return of unjust enrichment from the excessive bonuses paid.

Regarding the Extraordinary General Meeting of Shareholders for JSF

The EGM, which SC has requested to convene and at which the below proposal will be discussed will be held on February 7, 2023.
The proposal calls for the appointment of three lawyers to investigate the circumstances surrounding the nomination of four JSF executives who descended from the Bank of Japan, the Ministry of Finance and the Tokyo Stock Exchange.
For more details, please visit our special website.

Disclaimer

This press release is an abbreviated reference translation of the original announcement in Japanese. In the event of any differences between the original Japanese version and the English translation, the original Japanese version shall prevail.