Japanese Corporate and Municipal bonds service

22.02.2016

CBL accepts only clean (tax-exempt) corporate and municipal bonds.

The following CBL customers are eligible for the Clearstream Banking Corporate and Municipal bonds service:

  • Non-resident investors acting as intermediaries;
  • Non-resident investors holding proprietary positions;
  • Designated Financial Institutions (DFI) licensed by the FSA holding proprietary positions.

All intermediaries in the custody chain are required to have the FIAMI status for corporate bonds obtained from JASDEC. The last financial institution in the custody chain with which the final beneficial owner has the account with must, in addition to the FIAMI status, also have obtained the QFI status for corporate bonds from the National Tax Agency (NTA) Commissioner via JASDEC. CBL and CBF have already obtained FIAMI status and QFI status required to hold tax-exempt corporate/municipal bonds.

Intermediaries must request FIAMI status for corporate bonds and QFI status for corporate bonds through CBL and CBL's subcustodian HSBC, even if the status has already been obtained through another subcustodian.

Settlement process

Japanese corporate and municipal bonds settle on a T+3 cycle. Internal and external settlements are allowed, but the securities are currently not eligible for Bridge transactions with Euroclear Bank.

Settlement instructions

Customers should quote, in the narrative field of settlement instructions (Settlement Processing Narrative in CreationOnline; field :70E::SPRO// in (Creation via SWIFT and CreationDirect) the name of the previous bondholders' QFI. Please refer to the relevant instructions specifications for the requirements.

Account opening requirements

Customers who want to make their account eligible for the service should follow the procedure below. An “End Investor Registration Number” will be allocated and sent to the customer via SWIFT message. If a Registration Number was previously provided for Japanese Government Bonds (JGBs), a new number for corporate bonds will not be provided.

Documentation requirements

The documentation to be submitted in order to hold Japanese corporate bonds and municipal bonds varies depending on whether the customer is to hold the bonds as proprietary assets or as an intermediary.

Important Note: Customers may hold proprietary assets and assets for third parties but the respective holdings must be held in strictly separate accounts. For customers holding third party assets, the holding in each account may strictly be held on behalf of one single beneficial owner only.

Holding Japanese corporate bonds and municipal bonds as proprietary assets

To hold Japanese corporate bonds and municipal bonds as proprietary assets in a Clearstream Banking account, customers must submit the following documentation, depending on their status:

Non-residents of Japan

Designated Financial Institutions (DFIs)

Customers with DFI status from the Financial Services Agency (FSA) in Japan and who hold only proprietary Japanese corporate bonds and municipal bonds are eligible for the CBL Japanese Corporate and Municipal Bonds service.

Eligible customers that are DFI must be:

  • Resident for tax purposes in Japan (Japanese residents, Japanese corporations resident in Japan and branches of such resident corporations); or
  • Overseas branches of Japanese corporations; or
  • Overseas affiliates of Japanese corporations.

The official list of licensed (registered) DFIs is maintained on the FSA website.

To hold Japanese corporate bonds and municipal bonds as proprietary assets in an account with Clearstream Banking, DFIs must submit the following documentation:

Holding Japanese corporate bonds and municipal bonds as an intermediary

Customers acting as intermediaries must be non-resident investors and must, before holding the Japanese corporate bonds and municipal bonds for third parties, have:

  • Foreign Indirect Account Management Institution (FIAMI) status;
    All intermediaries in the custody chain are required to have FIAMI status for corporate bonds obtained from JASDEC.
    Details of the FIAMI definition and application procedures are available on Japan Securities Depository Center, Inc. “JASDEC” website.
  • Qualified Foreign Intermediary (QFI) status
    The last financial institution in the custody chain with which the final beneficial owner has the account must, in addition to FIAMI status, also have obtained QFI status for corporate bonds from the National Tax Agency (NTA) Commissioner via JASDEC.

Clearstream Banking (CBL and CBF) has already obtained FIAMI status and QFI status required to hold tax-exempt corporate bonds and municipal bonds.
Intermediaries must request FIAMI status for corporate bonds and QFI status for corporate bonds through CBL and CBL's sub custodian HSBC, even if the status has already been obtained through another sub custodian.

Holding Japanese corporate bonds and municipal bonds for third-party beneficial owners via Clearstream Banking

Customers must submit the following documentation:

  • Application Form;
  • Application Form for Amendment concerning Withholding Tax Exemption (if applicable),
  • Notification Form for Withholding Tax Exemption (for Partnership or Trust only),
  • Notification Form for Amendment concerning Withholding Tax Exemption (if applicable, for Partnership or Trust only).
    The forms must be dated and signed by the respective QFI on behalf of the beneficial owner and valid for five years.
  • The QFI is required to insert the ID number and name of the ID document by which the QFI has identified the applicant (Name of the ID Document by which the QFI's specified foreign branch identified the applicant (boxes 8 and 9).
    The applicant in the form should always be the ultimate beneficial owner of the securities.
    Originals are needed; a scanned copy can be first sent by email to tax@clearstream.com for review and subsequently, the original may follow upon approval.
  • Consent Letter for Securities managed under Business Regulations on the Book-Entry System for Stocks and Corporate Bonds, signed by the Clearstream Banking customer and valid until revoked.
    Note: Clearstream Banking S.A. customers must use the form “Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBL)” and
    Clearstream Banking AG customers must use the form "Consent Letter for Securities managed under the Business Regulations on the Book-Entry System for Stocks and Corporate Bonds (CBF)”.
  • SWIFT MT599 or CreationOnline free-format message, to be sent to: “Attn: Singapore Tax team - SIT”.
    Customers wishing for an account to be eligible for the Japanese Corporate and Municipal Bonds service should use the following sample text as a basis for the content of their SWIFT MT599 or CreationOnline free-format message: “We kindly request Clearstream to make account number xxxxx eligible for Japanese corporate bonds and municipal bonds and confirm that this account will be used solely for third-party business. Using this account for third-party (agent) business, we confirm that we have FIAMI and/or QFI status (delete as appropriate) and that the appropriate documentation will be provided.”
  • Copy of the document proving FIAMI status, valid until revoked;
  • Copy of document proving the QFI status (for example, Letter of approval for QFI), valid until revoked.
    This must only be provided if the Clearstream Banking customer is the last financial institution in the chain with which the foreign investor (final beneficial owner) has the account: it is the responsibility of each intermediary in the chain, where there are several intermediaries, to ensure that their direct client has obtained the QFI status (if required).
  • A valid ID document (Certificate of residence, Certificate of incorporation, Articles of association, etc.) issued by the government or any public office within six months, has to be submitted and retained by the last financial institution/QFI in the chain with whom the applicant (final beneficial owner) has the account and who must, in turn, provide it promptly to the Clearstream Banking customer, upon request at any time, for forwarding to Clearstream Banking.

Change in customer details

Where there is any change in the address, registered address or name of the bond holder, the customer must provide the completed and signed “Application Form for Amendment” or “Notification Form for Amendment” (for Partnership or Trust only).

Blocking of positions before interest payment date

Interest payment entitlements are based on positions as at record date, which is normally one day before the payment date. This is also known as frozen period and positions are non-transferable during the frozen period (that is one business day before the record date) and will be blocked at HSBC.

Beneficial Owner Disclosure Requirement

Under the Special Taxation Measures Law, customers considered as beneficial owners are required to be disclosed by CBL to the local tax authorities through our depository. Specific consent is hereby granted to CBL by customers holding Japanese corporate and municipal bonds to disclose customer information in accordance with this clause.