A financial institution that sells OTC derivatives transactions or market derivatives transactions to customers is affected by this Act when it explains important matters before the sale, ensures proper solicitation, and establishes and publishes a solicitation policy.

What the Act regulates

The Financial Services Provision Act (formally the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto) brings three things together in one law. They are the rules for explanations and other conduct when financial instruments are sold, a registration system for financial service intermediary business, and basic provisions that support citizens' asset building. Its purposes are to protect customers and others who receive financial services and to improve the environment for using financial services1.

The Banking Act, the Financial Instruments and Exchange Act (FIEA), and the Insurance Business Act are laws divided by type of business. The Financial Services Provision Act sets the same kind of rules across the sale of deposits, insurance, securities, derivatives transactions, and more. The explanatory materials for the 2020 bill describe it as a cross-sector law on the provision of services, set against the legal framework divided by type of business2.

The Act rests on three pillars.

Pillar Content Main articles Relevance to derivatives transactions
Rules for selling financial instruments Explanation of important matters, prohibition of conclusive judgments and the like, liability for damages, presumption of the amount of damages, ensuring proper solicitation and the solicitation policy Articles 4 to 10 The sale of OTC derivatives transactions and market derivatives transactions is covered
Financial service intermediary business Registration with the Prime Minister, scope of business, security deposit, prohibition on accepting deposits of customers' property Article 11 onward Brokering derivatives transactions is outside the scope of business
Improving the usage environment Conducting business in light of the best interests of customers and others, the basic policy on supporting asset building, the Japan Financial Literacy and Education Corporation Article 2, Article 82 onward Provisions on the attitude toward business, not on procedures for each transaction

The sales rules also include efforts to ensure proper solicitation and the establishment and publication of a solicitation policy3.

Below the Act sit a Cabinet Order (the Order for Enforcement of the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto) and Cabinet Office Orders. The Cabinet Order sets out the range of transactions that count as sales of financial instruments, the specified customers to whom the explanation duty does not apply, the highly specialized transactions that intermediaries cannot handle, and more4. The Prime Minister delegates the Act's authority to the Commissioner of the Financial Services Agency, who in turn delegates part of it to the Securities and Exchange Surveillance Commission and to the directors-general of local finance bureaus5.

Financial instruments and persons covered

The Act lists the "sale of financial instruments" as acts such as concluding a contract to accept deposits, concluding a trust contract, concluding an insurance contract, and causing a person to acquire securities6. Four types of conduct relate to derivatives transactions.

Conduct Basis Scope
Market derivatives transactions and foreign market derivatives transactions, and brokerage for them Article 3 Transactions defined in the FIEA
OTC derivatives transactions and brokerage for them Article 3 Transactions defined in the FIEA
Transactions that agree to a payment of money based on the difference between an agreed figure and an actual figure in the future for an indicator such as an interest rate or a currency price Article 3, Article 5 of the Cabinet Order Those specified by Cabinet Order that fall under neither of the two rows above. Transactions on a commodity market under the Commodity Derivatives Transaction Act and the like are excluded by Cabinet Order
Financial derivatives transactions, etc. under the Banking Act, and brokerage for them Article 3, Article 6 of the Cabinet Order Excludes the transactions in Article 5 of the Cabinet Order (the third row above) and commodity futures transactions, etc.

The scope of this conduct borrows definitions from the FIEA. The treatment of commodity-related derivatives is covered in The Commodity Derivatives Transaction Act7.

A financial instruments seller, etc., which bears the duties, is a person who, as a business, sells financial instruments or acts as an agent or intermediary for such sales. It is determined by the conduct, not by a registration category such as financial instruments business operator or registered financial institution8. Whether the duties apply does not depend on whether the customer is an individual or a corporation. The explanation duty has exceptions for specified customers and others. The organization of the explanation duty, including the relationship to professional investors under the FIEA, is covered in Suitability and the Duty to Explain9.

Civil consequences of breaching the duty to explain

The civil consequences of failing to explain important matters can be traced step by step through the three questions in Figure 110.

YesNoDoes the seller sellfinancial instruments,e.g. OTC derivatives, asa business?Not a saleunder the ActNoYesIs the customer aspecified customer (asset by Cabinet Order)?Article 4explanationprovisiondoes not applyNoYesIs this a case where a "noexplanation needed"statement exemptsArticle 4?Article 4explanationprovisiondoes not applyWithout the explanation,within Article 6liability
Figure 1Scenarios in which a missing explanation creates liability
Figure description

The figure checks, through three questions in order, the cases in which liability for a lack of explanation arises. A "no" at question 1 means the activity is not a sale under the Financial Services Provision Act, and a "yes" at question 2 or 3 means the explanation provision does not apply. If question 1 is "yes" and questions 2 and 3 are both "no", the case falls within liability for a lack of explanation.

A "yes" to Question 3 applies when the customer has stated that no explanation is needed and the transaction is not a commodity-related market derivatives transaction9.

The prohibition on conclusive judgments and the like has no exclusions corresponding to those in Questions 2 and 311.

Consider a hypothetical example in which Bank M (fictional) sells an OTC interest rate swap to Company N (fictional).

  • Suppose Company N is not a specified customer and has made no statement that no explanation is needed. The explanation provision for important matters applies, so a missing explanation falls within liability for damages12.
  • Suppose instead that Company N is a specified customer under the Cabinet Order. The explanation provision does not apply, and an insufficient explanation does not fall within liability for damages9. Providing conclusive judgments and the like falls within liability even when the counterparty is a specified customer11.

Liability for damages arises when a seller fails to explain important matters in a case where it must explain them, or provides conclusive judgments and the like12. The elements stated in the Act do not include intent or negligence.

When a customer claims damages, the principal loss amount is presumed to be the amount of damages. The principal loss amount is the total of the money the customer paid and is to pay through the sale, minus the total of the money the customer received and is to receive. Property other than money is also counted. Property other than money that was acquired is converted into an amount at its market value (or, if there is none, its presumed disposal value) and added to the amount deducted. On the paying side, only money equivalents specified by Cabinet Order are added. When the acquired property has been disposed of by sale or otherwise, the total disposal price is also added to the amount deducted13.

A notable feature is that it counts money to be paid as well as money paid, and money to be received as well as money received. Consider a hypothetical example in which one customer buys an option and another customer sells an option.

Case Total money paid and to be paid Total money received and to be received Difference
The customer buys an option, pays a premium of 1 million yen, and receives 300,000 yen at maturity 1 million yen 300,000 yen 700,000 yen (principal loss amount)
With the same option, the customer receives 1.5 million yen at maturity 1 million yen 1.5 million yen −500,000 yen (the customer is ahead on balance, and no principal loss arises)
The customer sells an option, receives a premium of 200,000 yen, and pays 1.2 million yen at maturity 1.2 million yen 200,000 yen 1 million yen (principal loss amount; a loss exceeding the premium received)

When the difference is positive, as in the first and third rows, that amount is presumed to be the amount of damages. When the customer is ahead on balance, as in the second row, the result of this formula is negative and no principal loss arises.

In addition to the provisions of the Financial Services Provision Act, the provisions of the Civil Code also apply to this liability14.

A breach of the FIEA's pre-contract provision of information is not listed in this liability15.

Financial service intermediary business

Financial service intermediary business means carrying out, as a business, any of deposit-related intermediary services, insurance-related intermediary services, securities-related intermediary services, and money-lending intermediary services. Registration is made by the Prime Minister, and a person without registration may not carry out the business16. The 2020 amendment created a system in which a single registration allows intermediation in banking, securities, insurance, and other fields, separate from the systems of intermediation divided by type of business, such as bank agency business, financial instruments intermediary business, and insurance solicitors. In exchange for not being affiliated with a particular financial institution, the system protects customers through limits on the range of services that can be handled, on holding customers' property, and through a security deposit17.

Brokering derivatives transactions is outside the scope of financial service intermediary business. The service closest to derivatives transactions is securities-related intermediary services. These are four services: brokering sales and purchases of securities; brokering the placement of orders for sales and purchases of securities on an exchange or for market derivatives transactions; handling the offering or secondary distribution of securities; and brokering the conclusion of investment advisory contracts or discretionary investment contracts18. Of these, the brokering of orders for market derivatives transactions excludes those that require a highly specialized explanation to the customer, and the Cabinet Order lists market derivatives transactions and foreign market derivatives transactions as such transactions19. Brokering OTC derivatives transactions is not listed in any of the four services. The explanatory materials for the March 2020 bill also give derivatives as an example of a service that cannot be handled20.

A registered financial service intermediary has the following duties.

Duty Content Article
Security deposit May not carry out the business until it has deposited a security deposit at the deposit office nearest to its principal place of business, etc. and made a notification Article 22
Prohibition on accepting deposits of customers' property Does not accept deposits of money or other property from customers, whatever the name. A Cabinet Office Order sets exceptions where the problem for customer protection is small Article 27
Prior provision of information Makes clear to the customer, before the business, matters such as its trade name, the registered type of business, the fact that it has no authority to act as agent for a financial institution, and matters on damages Article 25
Measures for business operation Takes measures such as explaining important matters and handling customer information appropriately, in accordance with a Cabinet Office Order Article 26
Complaint handling and dispute resolution If a designated dispute resolution organization exists, concludes a contract with one such organization; if not, takes complaint-handling measures and dispute-resolution measures Article 28

The specific amounts and procedures of the business, including the security deposit, are set by Cabinet Order and Cabinet Office Orders21.

Best interests of customers and improving the usage environment

The Act requires persons who carry out business such as financial instruments business, banking business, and financial service intermediary business, together with their officers and employees, to conduct the business specified by Cabinet Order sincerely and fairly, with regard to the best interests of customers and others22. It is not a provision that sets procedures for each transaction; it sets the attitude toward sales and intermediary business as a whole.

There are also provisions that support citizens' asset building. The government establishes a basic policy on supporting stable asset building, adopts it by Cabinet decision, and publishes it. The purpose of the Japan Financial Literacy and Education Corporation is to promote education that develops the ability to acquire and use knowledge about finance and economics23. These provisions do not impose procedures for each transaction on financial institutions that sell derivatives transactions.

Title and the current version

The Act's title has changed twice. The table below shows dates confirmed in the amendment history on e-Gov Laws and Regulations Search24.

Date Category Content
May 31, 2000 Promulgation The "Act on Sales, etc. of Financial Instruments" (Act No. 101 of 2000; abbreviated in Japanese as the Financial Instruments Sales Act) was promulgated
June 12, 2020 Promulgation Act No. 50 of 2020 (the Act Partially Amending the Act on Sales, etc. of Financial Instruments, etc. to Improve the Convenience and Protection of Users of Financial Services) was promulgated
November 1, 2021 Enforcement Act No. 50 of 2020 took effect, and the title changed to the "Act on the Provision of Financial Services." The financial service intermediary system began
November 29, 2023 Promulgation Act No. 79 of 2023 (the Act Partially Amending the Financial Instruments and Exchange Act, etc.) was promulgated
February 1, 2024 Enforcement Part of Act No. 79 of 2023 took effect, and from this version the title is the "Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto"

The articles were checked against the version published on e-Gov Laws and Regulations Search as of October 3, 2026 (effective August 12, 2026).

e-Gov also lists amendments not yet in force, with scheduled effective dates from April 1, 2027 to June 19, 2030. Some articles will change wording by those dates, but the provisions described in the text and cited in footnotes keep the same wording in the version for the scheduled date25.

Practical implications

For a financial institution that sells derivatives transactions, the effect of this Act is that an insufficient explanation where one is required, or the provision of a conclusive judgment, is not only an administrative matter but is tied to liability for damages to the customer12. This liability is set out in a separate article from the provisions that set administrative dispositions and penalties under the FIEA. In addition, because a financial service intermediary cannot include brokering derivatives transactions in its business, it cannot do so under this registration even if a customer asks18.

What this article does not cover

The substance of the duty to explain and the suitability principle in sales, and administrative dispositions and penalties for breaches of the FIEA, are not covered on this page.

Notes

  1. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 1. ↩

  2. Financial Services Agency, "金融サービスの利用者の利便の向上及び保護を図るための金融商品の販売等に関する法律等の一部を改正する法律案 説明資料" (Explanatory materials on the bill to partially amend the Act on Sales, etc. of Financial Instruments, etc. to improve the convenience and protection of users of financial services, in Japanese), March 2020, page 3, "Creation of 'financial service intermediary business'" (page 4 of the PDF). The lower part of the figure contains the phrases "the Act on the Provision of Financial Services" and "cross-sector law on the provision of services." ↩

  3. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 9 (ensuring proper solicitation) and Article 10 (solicitation policy). ↩

  4. "金融サービスの提供及び利用環境の整備等に関する法律施行令" (Order for Enforcement of the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Articles 5 and 6 (transactions that count as sales of financial instruments), Article 12, paragraph 1 (specified customers), and Article 19 (sales and purchases of securities, etc. that require a highly specialized explanation to the customer). The Act's delegations are Article 3, paragraph 1, items 10 and 11; Article 4, paragraph 7, item 1; and Article 11, paragraph 4, each item. ↩

  5. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 137, paragraph 1 (delegation from the Prime Minister to the Commissioner of the Financial Services Agency), paragraphs 2 and 3 (delegation to the Securities and Exchange Surveillance Commission), and paragraph 5 (delegation to the director-general of a local finance bureau or local finance branch bureau). ↩

  6. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 3, paragraph 1, items 1 to 11. The conduct relating to derivatives transactions are item 8 (market derivatives transactions and foreign market derivatives transactions, brokerage), item 9 (OTC derivatives transactions, brokerage), item 10 (transactions agreeing to a payment of the difference, as specified by Cabinet Order, brokerage), and item 11 (acts specified by Cabinet Order). ↩

  7. "金融サービスの提供及び利用環境の整備等に関する法律施行令" (Order for Enforcement of the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 5 (excluding transactions under Article 2, paragraphs 10, 13, and 14 of the Commodity Derivatives Transaction Act) and Article 6, item 3. The Financial Services Provision Act cites FIEA Article 2, paragraph 21 in Article 1-2, paragraph 4, paragraph 22 in Article 3, paragraph 1, item 9, and paragraph 23 in Article 1-2, paragraph 5. ↩

  8. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 3, paragraph 2 (sale of financial instruments, etc.) and paragraph 3 (financial instruments seller, etc.). ↩

  9. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 4, paragraph 7, items 1 and 2, and Article 12, paragraph 1 of its Cabinet Order (specified customers). ↩ ↩2 ↩3

  10. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 4, paragraph 7, items 1 and 2, Articles 5 and 6, and Article 12, paragraph 1 of its Cabinet Order. ↩

  11. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 5 (prohibition of conclusive judgments and the like). It contains no provision excluding specified customers, such as that in Article 4, paragraph 7. ↩ ↩2

  12. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 6. ↩ ↩2 ↩3

  13. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 7, paragraph 1 (presumption of the amount of damages) and paragraph 2 (principal loss amount), Article 4, paragraph 3 (valuation of property other than money), and Article 7 of its Cabinet Order (money equivalents). ↩

  14. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 8. ↩

  15. "金融商品取引法" (Financial Instruments and Exchange Act, in Japanese), Article 37-3 (provision of information before contract conclusion). The breaches listed in Article 6 of the Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto are those of its Articles 4 and 5. ↩

  16. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 11, paragraph 1 (financial service intermediary business), paragraphs 2 to 5 (the four services), and Article 12 (registration). ↩

  17. Financial Services Agency, "金融サービスの利用者の利便の向上及び保護を図るための金融商品の販売等に関する法律等の一部を改正する法律案 説明資料" (Explanatory materials on the bill to partially amend the Act on Sales, etc. of Financial Instruments, etc. to improve the convenience and protection of users of financial services, in Japanese), March 2020, pages 3 and 4 (pages 4 and 5 of the PDF). The protection through non-affiliation, the deposit of a security deposit, the prohibition on accepting users' property, and the limit on the services that can be handled is provided in the Act by Articles 11, 22, and 27. ↩

  18. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 11, paragraph 4, items 1 to 4. ↩ ↩2

  19. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 11, paragraph 4, item 2 (the parenthetical excludes what is specified by Cabinet Order as requiring a highly specialized explanation), and Article 19, paragraph 2, item 2 of its Cabinet Order (market derivatives transactions and foreign market derivatives transactions). ↩

  20. Financial Services Agency, "金融サービスの利用者の利便の向上及び保護を図るための金融商品の販売等に関する法律等の一部を改正する法律案 説明資料" (Explanatory materials on the bill to partially amend the Act on Sales, etc. of Financial Instruments, etc. to improve the convenience and protection of users of financial services, in Japanese), March 2020, page 4 (page 5 of the PDF), "(Reference) Image of services handled": the examples of services that cannot be handled are structured deposits, unlisted shares, derivatives, variable insurance, and foreign-currency-denominated insurance. This is a figure from the bill stage; the current Cabinet Order provisions are in the note above. ↩

  21. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 22, paragraphs 1, 2, and 5 (security deposit; the amount is set by Cabinet Order), Article 25, paragraph 1 (provision of information), Article 26 (measures for business operation), Article 27 (prohibition on accepting deposits of money, etc.), and Article 28, paragraph 1, item 3 (dispute-resolution measures for a person carrying out securities-related intermediary services). ↩

  22. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 2, paragraphs 1 and 2 (item 1 is financial service intermediary business, item 2 is financial instruments business, and item 3 is banking business), and Article 2 of its Cabinet Order (business specified by Cabinet Order). ↩

  23. "金融サービスの提供及び利用環境の整備等に関する法律" (Act on the Provision of Financial Services and the Development of the Accessible Environment Thereto, in Japanese), Article 82, paragraphs 1, 3, and 5 (establishment and publication of the basic policy) and Article 86 (purpose of the Japan Financial Literacy and Education Corporation). ↩

  24. Amendment history data of e-Gov Laws and Regulations Search (law ID 412AC0000000101). The short name is from the short-name field, and the start date of the intermediary system is the effective date of Act No. 50 of 2020. ↩

  25. The versions of the Act effective August 12, 2026 and scheduled for June 19, 2030 (reflecting amendments up to those by Act No. 74 of 2025) were compared article by article through the e-Gov Laws and Regulations Search API. The wording did not change in Article 3, paragraph 1, items 8 to 10; Articles 4 to 8; Article 11, paragraph 4, item 2; Article 12; Article 22; Articles 25 to 28; Article 82; and Article 86. ↩