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Why are deposits and insurance not designated as “Securities”?

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Why are deposits and insurance not designated as “Securities”?
posted Apr 28, 2016 by Shubham Rajput

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1 Answer

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  1. Since deposits and insurance are regulated under the Banking Act and the Insurance Business Act, they are not directly regulated under the FIEA by way of designating them as “Securities”

  2. However, according to the basic idea to apply the same user protection rules (sales/solicitation rules) for Financial Instruments and transactions having the same economic nature, regulations equivalent to regulations on activities are secured for deposits and insurance with a strong investment character, by applying mutatis mutandis the regulations on activities under the FIEA pursuant to the Banking Act and the Insurance Business Act (Articles 13-4 and 52-45-2 of the Banking Act; Article 300-2 of the Insurance Business Act).

  3. Meanwhile, Financial Instruments such as ordinary deposits, time deposits, and security-type insurance have a different economic nature from instruments with a strong investment character as represented by shares and corporate bonds. They do not involve any loss of principal caused by market risks and do not require application of regulations equivalent to regulations on activities for instruments with a strong investment character, so regulations on activities under the FIEA are not applied mutatis mutandis to these instruments. These deposits and insurance have also been subject to the regulations on activities(note) under the Banking Act and the Insurance Business Act .

Note:-
Article 12-2 (Provision, etc. of Information to Depositors, etc.) and Article 13-3 (Prohibited Acts Pertaining to Business of Banks) of the Banking Act; Article 100-2 (Measures Concerning Business Operations) and Article 300 (Prohibited Acts Pertaining to Conclusion of Insurance Contract or Insurance Solicitation) of the Insurance Business Act

answer Jun 10, 2017 by Deepak Jangid
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