TOKYO AIM FAQs

Below is a list of frequently asked questions relating to TOKYO AIM.

The purpose of these is to help J-Nomads and market participants to interpret the regulations and enforcement rules and will be updated on a regular basis.

General | Advisers | Company Applicants | Investors

How is TOKYO AIM different from TSE Mothers?

TOKYO AIM is characterized by its nature as:

(1) the first market in Japan that is based on a framework for professional investors under a revision to the Japanese Financial Instruments and Exchange Act implemented in December 2008;

(2) a market framework centred around the nominated adviser (J-NOMAD) system (based on AIM in the UK);

(3) an international market in which listings may be conducted in English and in accordance with International Accounting Standards;

(4) a market that is flexible, without numerical standards for the number of shareholders, for example, and with an optional release of quarterly earnings results and internal control reports;

(5) a market with sufficient discipline to meet the requirements of professional investors, including strict requirements for disclosure and close control over insider transactions in line with the regulatory practices of other Japanese markets.

In this manner, TOKYO AIM is to be quite different from TSE Mothers in terms of both regulatory framework and market operation.


What is meant by “a principles-based regulatory approach”?

The Regulations for J-Nomads and Companies both state that “the Exchange will operate these Regulations within a ‘principles-based framework.’

In other words the Exchange will apply the provisions within the Regulations in a manner appropriate for the operation of the market, and in accordance with the purpose and principle of each provision. Such judgments will be made in a manner that preserves the transparency and integrity of the market.

With such a “principles-based regulatory framework,” we hope to maintain (1) a set of concise and easy to understand regulations and (2) a spontaneous market discipline suitable for the needs of participants in an exchange intended for professional investors.


What type of companies and securities can list on TOKYO AIM?

We welcome the listing of companies — whether from Japan, greater Asia, or indeed anywhere in the world — that require risk capital. No particular industry sector is deemed unsuitable for listing. The listings could take several forms, perhaps entailing common stock, classified stock, or trust beneficiary certificates.

Paragraph (1) of Regulation 43 for Companies defines “Securities” as the 12 types of securities listed therein, and it is these 12 types that we consider to be within the scope of listing of these regulations. However, if considering listing the more uncommon types of securities within this definition, please contact TOKYO AIM early on.

Convertible bonds and other bond-like instruments are not appropriate for TOKYO AIM as our systems cannot support such securities.

TOKYO AIM will accommodate the needs of professional investors and other market participants in an actively by maintaining a flexible and disciplined market.


Are there any concerns over a company de-listing and re-listing at some future date?

In such case, the Exchange will examine the reason the company was delisted. The relisting company will be deemed an Initial Listing Applicant and will therefore have to comply with the listing requirements. The judgment of that J-Nomad as to the appropriateness of the company will also be important.


Will the Exchange take measures to delist a Listed Company that has filed for legal bankruptcy?

We believe that in a typical case the relevant J-Nomad, having become aware that it has become necessary for the Listed Company to file for legal bankruptcy, rehabilitation, or similar proceedings, or that the Listed Company is in an equivalent condition, will terminate its contract with the Listed Company per the terms of that contract. Should the J-Nomad choose not to terminate its contract with the Listed Company, the Exchange would promptly move to confirm the reasons why it made that decision, urge the J-Nomad to dissolve its contractual relationship, and take measures leading to the delisting of the relevant Listed Securities, etc.


Should a Listed Company fail to enter into an agreement for stock administration services with a custodian and transfer agent, would the Exchange then take measures to delist it?

Should the Exchange become aware of a situation in which a Listed Company does not enter into an agreement with an Exchange -approved custodian and transfer agency or clearly will not enter into such an agreement, and should the J-Nomad choose to not terminate its contract with the Listed Company accordingly, the Exchange would promptly move to confirm the reasons why the J-Nomad chose not to terminate the contract, urge the J-Nomad to dissolve its contractual relationship, and take measures leading to the delisting of the relevant Listed Securities, etc.


Will new share subscription rights (warrants) be eligible for listing on TOKYO AIM?

Yes, they will. At first, while keeping an eye on market needs, salability and other factors, we intend to limit the scope to “warrants without contribution” issued by companies that trade on a domestic stock market.


What you consider to be a preferable trading unit size?

Because the Exchange is intended for professional investors, it is for the companies (with their Liquidity Provider and J-Nomad) to determine a trading unit size based on their specific and diverse capital financing needs rather than a consideration of liquidity and a desire to encourage investment by individuals.

Page Top

What is the relationship between a company and its J-Nomad?


What is meant by “a J-Nomad must assess and confirm that an applicant is appropriate for initial listing”?


What is the relationship between the J-Nomad and the Exchange?


How does a J-Nomad ensure its independence from a client company?

Page Top

Q&A relating to Regulations and Rules for Enforcement for J-Nomads

Reg 3. Criteria for Approval as a J-Nomad


Is it appropriate to require that a foreign entity seeking approval as a J-Nomad “demonstrates good knowledge and experience in transactions on Japanese capital markets”? Should this not be extended to include overseas capital markets?

TOKYO AIM will operate in Japan and will be strongly affected by not only Japanese law (Japanese Financial Instruments and Exchange Act and other relevant laws) but also by local business practices. As an international market, TOKYO AIM actively welcomes participants from around the world. However, there will be challenges for a firm to adequately fulfil the important role of a J-Nomad without prior knowledge or experience of the Japanese market. Hence the requirement that all J-Nomads, both Japanese and otherwise, have “good knowledge and experience” in Japanese capital markets.

A prospective foreign J-Nomad could fulfil this requirement and actively participate in the market by, for example, recruiting individuals with suitable knowledge and experience, or allying itself in some manner with a Japanese partner. It may also be that a firm’s knowledge and experience on overseas markets translates directly into Japanese markets experience. The Exchange will, therefore, consider each application on a case by case basis.

Reg 8. J-QE


Can the years of experience required for a J-Qualified Executive to qualify include time spent at companies other than the J-Nomad?

Yes. Time spent at other companies may be counted towards the minimum 3 years’ corporate finance advisory experience required.

Reg 10. Maintaining of Independence from a Client Company


What is meant by “maintaining adequate internal regulations within the J-Nomad to avoid … conflicts of interest”?

A conflict of interest would refer to, for instance, the use of information obtained through J-Nomad duties to profit in some other area of the J-Nomad firm.

“Adequate internal regulations” refers to appropriate safeguards, depending on the size and structure of the J-Nomad firm, to prevent conflict of interest from arising. Examples include implementing information barriers (1) on a large scale, between the IPO department and the trading department; (2) within the IPO department, between the IPO executory section and other sections; and (3) within the IPO executory section, between the J-Qualified Executive and all other members.

Reg 11. Conclusion of Appropriate Agreement with Client Company


On notice of termination of an agreement between a J-Nomad and a Client Company, the Client Company runs a high risk of being delisted if no replacement J-Nomad is found. Therefore, should there be an obligation for the Client Company to promptly disclose the notice of termination?

If such prompt disclosure of the J-Nomad’s notice of resignation is required, the Client Company may have difficulty finding a replacement J-Nomad.

Prompt disclosure, however, is required at the point the contract with the J-Nomad is terminated. If the company appoints a replacement J-Nomad, details of such appointment should be included in the announcement. If the company does not appoint a replacement J-Nomad, the Exchange will place the company on the Watch List and publicly announce this fact. The Exchange will delist any company on the Watch List after 8 business days if the company fails to appoint a new J-Nomad.

Reg 13. Management of Initial Listing


How will the J-Nomad be involved in the preparation of disclosure documents for initial listing?

Documents for listing are the responsibility of the listing applicant. However, the J-Nomad is responsible for working closely with the company, advising and guiding it in preparing the documents and reviewing content as appropriate.

Reg 14. Obligations for Monitoring and Advising a Listed Company


In what specific cases should a J-Nomad inform the Exchange of its Client Company failing to take its advice and/or consider terminating its contract with the company?

There is no exhaustive list of potential conflicts that may arise between a company and its J-Nomad. Generally speaking, we expect that matters that raise concern over the company’s appropriateness to remain on market will be brought to the Exchange’s attention. In practice, the J-Nomad should not consider terminating its contract with the company in the first instance but in exceptional circumstances. The J-Nomad should consult with the Exchange before making such a decision.

We expect that over time the Exchange and J-Nomads will reach consensus as to what constitutes a situation that should be reported.


Could the Exchange investigate the J-Nomad and impose sanctions against it in case of a failure of the Listed Company to follow the advice or guidance of the J-Nomad?

Yes, the Exchange may investigate the J-Nomad’s work, and the advice provided, to ensure the J-Nomad acted in accordance with the regulations. Actions taken by the Exchange may be based on such investigation.

Reg 15. Tasks concerning Ongoing Obligations after Listing


Does the J-Nomad model dilute the responsibility of the Listed Company (and its directors) to fulfil its obligations as a listed company, handle matters that may occur vis-à-visthe Exchange, disclose information in a timely manner, etc.

No. The J-Nomad‘s role is to provide advice and guidance to the Listed Company. The company remains responsible for compliance with the rules and regulation of TOKYO AIM. Any communication from the company to the Exchange, however, should be channelled through the J-Nomad (per Regulation 4 of the Regulations for Companies and Rules for Enforcement).

Reg 16. Liquidity Provider


Normally the J-Nomad will also act as the Liquidity Provider. In such case, if the Listed Company decides to seek additional financing with the J-Nomad acting as lead manager would it be necessary for the J-Nomad to refrain from serving as Liquidity Provider over a set period of time (to ensure suitable price formation)?

The J-Nomad should have appropriate internal information barriers (for example, a Chinese wall between the IPO department and the trading department). Thus, in conducting a post-listing financing deal, we see no need for the J-Nomad to refrain from also acting as a Liquidity Provider.

Reg 17. Analyst Report


Is it appropriate to require a company to obtain analyst reports?

Maintaining coverage by analyst reports is a very important factor in supporting active trading among investment professionals. It is therefore considered necessary to encourage companies and their J-Nomads to work towards producing analyst reports.

Analysts must not be approached in an improper manner. To ensure analyst independence, the reports are not a hard and fast requirement. Instead, the regulation has been put in place to increase efforts to raise analyst coverage through a variety of approaches.

Reg 20. Procedures for Changing a J-Nomad


What steps is a new J-Nomad expected to undertake when taking on an existing Listed Company to confirm that the company complies with the relevant requirements of Chapter 3 of the Regulations for Companies?

The J-Nomad should take into consideration all matters which are relevant in assessing a Listed Company’s appropriateness for continued listing, including that there is no outstanding matter at the time for the Company to disclose that has not already been disclosed in compliance with Chapter 3.

Reg 23. Obligation to Report Matters to the Exchange


What would the reporting of a J-Nomad’s business operations to the Exchange immediately after the end of each fiscal year entail? Will it include reporting on the specific matters of guidance and advice given to the Listed Company?

The format of this reporting is to be determined at a later stage, but we do not expect to request a detailed report or listing of specific matters.

Reg 24. Inspection of J-Nomad


What would be the objective of an on-site inspection of a J-Nomad? Would it include procedures relating to assessments and confirmations of a company’s eligibility for listing before applying for listing?

An on-site inspection of a J-Nomad would aim to assess the J-Nomad’s ability to act in accordance with the J-Nomad Regulations and Rules of Enforcement. It will include a review of the firm’s procedures for assessment of a company’s eligibility for listing; ability to fulfil ongoing responsibilities; and a check of the J-Nomad’s operational system, the execution of its duties, work records, and other matters as the Exchange sees fit.

Page Top

Q&A relating to Regulations for Companies and Rules for Enforcement

Reg 5. Language Used in Documents (formerly Reg. 4)


Is it permissible to present disclosure documents in one language and submission documents in another?

Yes. However, all disclosure documents must be in the same language.

Reg 7. Listing Application (formerly Reg. 8)


What is a “reverse takeover”? What procedures are necessary for a Listed Company to conduct one?

A reverse takeover occurs when a large unlisted company merges with or is acquired by a small listed company so that, in effect, the large unlisted company becomes a listed one. (This is considered to be an “improper merger, etc.” within TSE regulations.)

As TOKYO AIM may attract smaller companies and/or companies seeking growth by acquisition, reverse takeovers may be more frequent on TOKYO AIM compared to current practice in Japan.

In such a transaction, the enlarged entity will be required to re-list to the market as a new application. It will therefore have to submit a Re-Listing Application to the Exchange, append an Auditor’s Report thereto, and pass a resolution in a general meeting approving the reverse takeover.

Reg 8. Documents to be Submitted at Time of Initial Listing Application (formerly Reg. 9)


Given that TOKYO AIM is to be limited to professional investors, will the disclosures under Specified Securities Information (SSI) and Issuer Filing Information (IFI) be more condensed that the Securities Registration Statement (SRS) or the Annual Securities Report (ASR) ?

The disclosure items required under the SSI and the IFI will not be materially condensed. However, the format of these documents will allow simplification of disclosure.

For example: (1) only consolidated historical financial information will be required, whereas conventionally both consolidated and nonconsolidated financial statements are required; (2) Trends of Principal Operating Data (so called “highlight data”) for the most recent three periods will be required, as opposed to five conventionally; and (3) Special Information will not require financial statements for the past three periods as is conventionally the case.


It is specified that the audit is to be prepared by an auditing firm, not an individual. In existing Japanese markets, however, audits may be performed by individuals or partnerships. Why are individual practitioners excluded?

To facilitate the international advancement of the market, TOKYO AIM will require the Auditor’s Report to be prepared by an audit corporation.


Should the company engage legal specialists to help prepare the listing application? If so, what would their work entail?

There is no explicit requirement under the rules to engage legal specialists.  When undertaking due diligence of the company, the J-Nomad will decide together with the company how to engage legal specialists.


Why does the Specified Securities Information require a confirmation in relation to the company’s working capital position? What does this entail?

The purpose of this confirmation is to indicate to investors that a company has adequate working capital to continue its business operations for at least 12 months from the expected date of listing. A company will therefore have to review its working capital position (with its J-Nomad) prior to listing to determine its funding requirements and ability to continue its operations over the 12 months from listing.

Reg 9.  Public Announcement at Time of Initial Listing Application (formerly Reg. 10)


Why does TOKYO AIM specify that information that is announced when a listing application is filed, when on other Japanese exchanges it is normally announced when a listing application is approved?

We explicitly state in the regulations that, in principle, a Listing Application is to be approved 10 business days after its filing. That is, approval and listing follow only 10 days after filing an application. We thus require that information pertaining to the Initial Listing Applicant be disclosed when the application is filed.other Japanese exchanges it is normally announced when a listing application is approved?

Reg 11. Qualification Requirements for Initial Listing Applicants (formerly Reg. 12)


The TSE requires a written confirmation of non-involvement with antisocial organizations and also specifies a scope of the investigation. Is the same approach to be taken by TOKYO AIM?

There is no explicit requirement for such a  document. However, we expect the J-Nomad to investigate such matters to the extent that it considers appropriate as part of the due diligence undertaken prior to listing.

Reg 12.  Listing Admission (formerly Reg. 14)


Is there a set approach for determining an offering price for an equity issue at the time of listing?

There is no particular method for determining a price stipulated in the TOKYO AIM regulations. Thus, as on existing Japanese markets, pricing for an initial offering will usually be determined by book-building or competitive bidding (if under an underwriting arrangement), or by some method judged reasonable by company management (if not under an underwriting arrangement).

Reg 16.  Restriction on Dealings (formerly Reg. 14)


Why are Officers prevented from disposing of their interests in a company’s securities for 1 year from listing?

This regulation has been put in place to ensure that business is conducted within a disciplined framework even after listing. It serves as a safeguard to prevent Officers from reducing their involvement or removing themselves altogether from the company soon after listing.

Furthermore, the Officer may, if permitted by the J-Nomad, dispose of Securities, etc., within the lock-in period (i.e. at least one year after the listing). For example, on the request of the Liquidity Provider and on the assumption that the Listed Company continues to be managed and operated under a responsible framework after the listing, the Officer may release a portion of his/her holdings to provide additional liquidity and promote fair price formation in an illiquid market.


What is meant by “appropriate system” to prevent Officers from disposing of their holdings in a company’s securities?

An “appropriate system” is not explicitly defined within the regulations, as it is likely to depend on the company, the size of its board and the interests held by its Officers. An appropriate system that monitors and controls Officers’ dealings should be agreed upon by the company and its J-Nomad.

While we thus expect that different companies will construct different systems, we envision as one example the signing of memoranda between applicable officers and the Listed Company and/or J-Nomad.


Can an Officer make a secondary distribution of the securities before an initial listing?

An Officer may make a secondary distribution prior to the initial listing.


Why are Officers prevented from dealing in a close period?

Many of the companies listed on Japanese securities exchanges have internal rules, etc., that restrict trading in its stock by officers over a period of, say, approximately two months before the date of announcement of full-year or interim earning results or over a period in which the company begins to possess material undisclosed information.

This regulation reflects market practice to prohibit Officers dealing in company securities during the close period (as defined under Reg. 43). This is to prevent Officers from personally benefiting from information they are privy to because of their positions within the company.

Reg 18.  Disclosure and Reg 19.  Disclosure of Material Company Information (formerly Regs. 17–19)


Are companies required to provide earnings estimates?

It is for companies to decide whether to publish earnings estimates or not; there is no explicit requirement to do so. However, if a company does present earnings estimates, it should ensure prompt announcement of any material changes to them.

Reg 20.  Disclosure of Transactions with Related Parties (unchanged as Reg. 20)


Why does a company have to ensure that any related party transaction requiring announcement must be “fair and reasonable”?

The purpose of such a provision is to ensure that related party transactions undertaken by the company are in the best interests of the company and not for the benefit of the related party or prejudicial to shareholders. The company should demonstrate to its J-Nomad that related party transactions are fair and reasonable. Also, if the company is unable to assess that a transaction is fair and reasonable, then it should consult with its J-Nomad.

Reg 23.  Disclosure of Financial Results (formerly Reg. 25)


Why are the contents of interim and full-year disclosures not simpler than what is required on TSE sections 1 and 2? Also, why must the information be disclosed within 2 months?

The format currently used on TSE sections 1 and 2 are a reference point only.  A Listed Company should consult with its J-Nomad to provide a level of information appropriate for professional investors.

The deadline for the disclosure of a Listed Company’s earnings results at 2 months on industry practice as common prior to the introduction of a quarterly disclosure requirement on Japanese capital markets.

Reg 24.  Disclosure of Issuer Filing Information (formerly Reg. 26)


Three months is not enough time for a foreign company to submit Issuer Filing Information for a full business year. This should be extended to 6 months, as with other marketable securities reports.

Given that the TOKYO AIM  framework permits disclosure in English, the same 3-month deadline for domestic and foreign entities should not be an issue.


If a company chooses to present of quarterly financial statements (optional under the regulations), what should they contain?

The timing and content of quarterly financial statements (other than those at the half and full year) is at the discretion of the Listed Company and its J-Nomad.

Reg 26.  Company Website (formerly Reg. 28)


Does the language of the website have to be the same as the language used for public releases, etc.?

In principle, they should be the same. If there is concern over this, the company must consult its J-Nomad.


The regulation requires a company to disclose details of any restrictions on the transfer of its Listed Securities. What does this entail?

This requirement is mainly to help investors identify securities that are restricted by regulations other than those of TOKYO AIM. For example, any US securities not registered with the SEC but are listed on TOKYO AIM will not be freely transferable due to restrictions under US securities law.

Reg 31.  Ensuring the Existence of Liquidity Providers (unchanged as Reg. 31)


What is the role of a Liquidity Provider?

As the Trading System and Clearing & Settlement System Framework, released in January 2009 explains, a Liquidity Provider is to strive to: (1) quote bid and ask prices for the assigned issue; and (2) quote bid and ask prices equivalent to existing bid and ask prices for the assigned issue, within a scope deemed appropriate by the trading participant in consideration of trading circumstances such as prices and from a perspective of ensuring orderly closing of trades.

The Exchange does not intend to set specific numerical standards (for spreads, hours, volumes, etc.). We do intend to require that the Liquidity Provider commit itself to the Exchange in writing that it will strive to ensure orderly distribution for each issue assigned to it.

Reg 37  Measures to Assure Effectiveness of Listing Rules (formerly Reg. 38)


The Exchange may cancel a company’s listing if the company is in breach of the rules. In what situations may this sanction be imposed?

There are a variety of situations and factors that could lead to the cancellation of listing, but we do not expect this sanction to be imposed on a regular basis, but rather in exceptional cases. Nevertheless, the Exchange will provide the company an opportunity to state its case and present evidence before it decides to take such action.

Reg 40. Delisting other than by Application (formerly Reg. 41)


Why does the regulation not stipulate that a Listed Company can be delisted by other than application if, for instance, it fails to provide Audit Report prepared by an auditing firm or has been assigned an unfavourable opinion?

The determination of a delisting should be based on assessment and confirmation on the part of the J-Nomad and thus do not present any specific provisions for delisting.

In the specific cases mentioned, the J-Nomad may choose to terminate its contract with the Listed Company resulting in the company being de-listed. However, each situation has to be considered on a case by case.

Failure to prepare an audit report in a timely manner or receiving an qualified opinion will require prompt disclosure that will induce proper market reaction on the part of the professional investors.


The 10 business days from being placed on the Watch List (upon resignation of a J-Nomad) to de-listing is too short a period for a company to find a replacement J-Nomad.

TOKYO AIM is founded on the J-Nomad system and a company failing to retain a J-Nomad at all times will not be allowed the market.

Under the UK AIM Rules, if a company loses its Nomad, trading in the company’s securities is suspended with immediate effect. It then has 1 month to find a replacement Nomad.

In Japan, the general approach is to provide investors with an opportunity (a delisting post) to rearrange (buy and sell) their positions in the securities of a company that is set for delisting.

The Watch List waiting period instituted by TOKYO AIM represents a hybrid between these two approaches. We add that when a J-Nomad is to terminate its contract with a Listed Company, it is in principle to provide at least 1 month’s advance notice (or longer if it so wishes). So in practice, the time to find a replacement J-Nomad will be at least One and half months.

Reg 41. Delisting by Application (formerly Reg. 40)


What type of situations may result in a Listed Company being de-listed due to a failure on part of the J-Nomad?

If a Listed Company loses its J-Nomad, it is to be placed on the Watch List and, if it cannot find a new J-Nomad within 8 business days, is to be delisted.

This provision is to apply in principle even in cases in which the J-Nomad is at fault (that is, should the J-Nomad fail, etc.). In practice, every situation will be assessed on a case by case basis by the Exchange.


Does TOKYO AIM plan to establish any special standards that would allow a company listed on TOKYO AIM to relist on TSE section 1, section 2, or Mothers without having to go through an entire initial listing process?

We have no particular plan at the present time. We do think it will be necessary to consider various matters relating to mutual development with those exchanges later on.


Does TOKYO AIM intend to allow multiple concurrent listings on other domestic securities markets?

In principle, no, we do not. This is to avoid the operational confusion that would occur among market participants, beginning with investors, should we permit multiple listings, which would lead to a situation in which an issue that can be bought or sold by anyone on another domestic market cannot be bought or sold on TOKYO AIM, which is intended solely for professional investors.

Page Top

What is the scope of parties that can place buy or sell orders on TOKYO AIM through a trading participant?

The following parties will be allowed to place buy or sell orders on TOKYO AIM: (1) specified investors that are residents, and (2) all non-residents. Specified investors are considered to include life insurance companies and other accredited institutional investors, listed companies, joint-stock corporations with at least ¥500 million in capital, and, in addition to the above, other approved corporations, together with approved individuals with net and financial assets of at least ¥300 million and at least one year of trading experience* (here, “approved” means that the entity must first seek and obtain approval from a securities company).


May a holder of shares in a company listed on TOKYO AIM yet who is not a specified investor sell those shares on TOKYO AIM?

General investors will not be permitted to buy on TOKYO AIM but will be permitted to sell. Thus, a pre-existing shareholder without a specified investor qualification would be able to sell.


With regards to the holding period for new share subscription rights (including stock options) issued in the previous business year, what is the process around issuing new securities upon the execution of such rights?

With regards to a share subscription right that is granted on a day within one year before the end of the business year immediately prior to the business year containing the listing application date, the right must continue to be held up until 6 months after the date of listing (if the date one year after the date of listing is less than one year from date on which the right was granted, then the right must continue to be held for at least one year from the date of granting). This also holds true for a security issued upon the execution of the right — that is, it too is subject to this holding period requirement (there is no change in the requirement upon the exercise of the right).