In its ruling of the Murakami Fund case about the determination on the tender offer, the Supreme Court of Japan said that “Financial Instruments and Exchange Act” Article 167 Paragraph (2) defines objectively and concretely the scope of material information. According to this definition, the material information does not need to have a significant impact on investment decisions.
This can be understood as an attempt to define clearly the scope and thereby enhancing the predictability of regulation, by restricting regulatory information on any information that may introduce a significant impact on investment decision by means of determination itself, disregarding the amount of the actual impact. It follows that a tender offer is determined when an entity makes the decision to prepare a tender offer with the intent of actually making it. The probability that the tender offer will take place does not have to be explicitly taken into consideration. This ruling of the Supreme Court of Japan, however, cannot be accepted when interpreting the Financial Investment Services and Capital Markets Act. While the Financial Instruments and Exchange Act of Japan explicitly defines material information by listing the kind of information that has a significant impact on investor’s investment decisions, the Financial Investment Services and Capital Markets Act rules that the materiality of information is conditional on the impact it has on investors’ investment decisions. For this reason, for information to be material according to the Financial Investment Services and Capital Markets Act, both its impact on the investment decision of investors, and its probability have to be considered, unlike material in formation according to the Financial Instruments and Exchange Act of Japan.
Even though investigations and preparations are made for a tender offer, for example, the tender offer cannot be said to be determined unless there is objective evidence of the likeliness of its execution. Even if preparatory measures are being taken for a tender offer, the condition for insider trading regulations is not met until it can be judged that it will have an impact on investors’ investment decisions.