Governance Compliance
Compliance Policy
At SHAM, compliance means that directors and employees accurately understand the purpose and contents of laws and regulations, comply with them, and execute sincere and fair corporate activities that do not conflict with social norms. SHAM has established compliance rules to provide a system for directors and employees to comply with laws and regulations, properly manage the assets, and ensure proper business operations. Based on the basic policy described below, SHAM is working to ensure thorough compliance.
【 Basic Policies 】
- SHAM is fully aware that lack of compliance could undermine SHAM’s management base, and has positioned thorough compliance as one of its most important management issues.
- As a company that conducts financial instruments business and manages the assets of registered investment corporations, SHAM recognizes its responsibility to strive to realize the value of the works of SHAM, which is socially demanded. To increase the value of the work of SHAM qualitatively and quantitatively, SHAM will actively and constantly engage in compliance.
- SHAM aims to contribute to the development of the economy and society by developing the above-mentioned compliance activities, thereby enhancing the reputation from investors and establishing the trust of society at large.
Sekisui House Group (the Group), to which SHAM belongs, regards compliance as a management issue that should be constantly addressed, and strives to ensure and promote thorough compliance. The Group operates the "Sekisui House Group Corporate Ethics Guidelines" as a set of matters concerning common corporate ethics observed by the company, directors, and employees. In addition, the Group distributes pamphlets containing the Corporate Philosophy and the Corporate Ethics Guidelines to all Group employees and conducts training sessions as part of thorough-going efforts to spread awareness. Furthermore, all directors and employees are obliged to submit "Written Pledge to Comply with the Corporate Ethics Principles" every year and strive to act in accordance with corporate ethics. The Group will continue to work together to thoroughly enforce corporate ethics.
Compliance System
SHAM has established the following departments and institutions intending to ensure compliance.
[Compliance Officer and Internal Control Promotion Department]
SHAM has established the Internal Control Promotion Department which conducts work related to SHAM's risk management, monitors the status of compliance with legislation and regulations, and manages internal auditing. SHAM has also appointed a Compliance Officer as the person responsible for overseeing the compliance of SHR and SHAM in addition to the operations of the Internal Control Promotion Department. The Compliance Officer is appointed as personnel with sufficient screening and surveillance capabilities to observe compliance with legislation and norms, develop SHAM's compliance regulations and cultivate compliance awareness among directors and employees of SHAM.
[Compliance Committee]
SHAM has established the Compliance Committee as a body to deliberate and decide on compliance matters in the management of SHR's assets.
[Investment Committee]
SHAM has established the Investment Committee as an organization that deliberates and decides on the investment policy of SHR and other matters related to asset management. In making resolutions at the Investment Committee meetings, the Compliance Officer shall verify whether or not there is any problem from the perspective of compliance with laws, regulations, rules and other compliance issues. If Compliance Officer determines that there is a serious compliance problem, Compliance Officer shall order the Investment Committee to suspend its deliberations or return the proposal to the drafting department even during the deliberations of the Investment Committee.
Click here for the details of Compliance Committee and Investment Committee.
Compliance Training
SHAM has established its compliance and internal control system in accordance with "the Financial Instruments and Exchange Act", "the Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc." and "the Findings from Inspections". To gain the trust of stakeholders, SHAM recognizes that directors and employees must understand the importance of compliance and act in a compliant manner in their daily operations in addition to the establishment of the compliance system. Therefore, SHAM has set "Conducting compliance training by external experts for all directors and employees four times a year, and achieving 100% participation rate" as a KPI, and is working to create the organizational culture that emphasizes compliance, creating opportunities for all directors and employees to deepen the understanding of compliance and raise the awareness of compliance through compliance training.
Click here for the implementation status of compliance training.
Efforts to Prevent Bribery, Corruption, etc.
Sekisui House Group, to which SHAM belongs, has established and operates the “Sekisui House Group Corporate Ethics Guidelines” as a set of matters concerning common corporate ethics. This guideline stipulates entertainment and gift-giving for customers, business partners, and public officials, etc. from the viewpoint of preventing corruption. Based on this guideline, the Group established the Corruption Prevention Guidelines and is working to make them known.
In addition, this Ethics guidelines regulates the conducting of donations and political contributions, and stipulates that each contribution is required to comply with relevant laws and regulations and be approved in advance in accordance with internal rules.
Click here for Sekisui House Group Corporate Ethics Guidelines.
SHAM monitors the appropriateness of the selection of outsources and expenditures such as expenses in internal audit, and reports the results of internal audits to SHAM's Board of Directors. In addition, compliance training is provided to all directors and employees to promote their understanding of the prevention of corruption by, for example, taking up topics related to anti-corruption.
Furthermore, SHAM has formulated the “Compliance Manual” as a specific guide for directors and employees to implement compliance, and has stipulated the prohibition of fraudulent acts, such as money laundering, insider trading, bribery, embezzlement for self-interest, etc. Directors and employees who engage in improper conduct are subject to strict punishment/disciplinary action following internal regulations. In addition, SHAM has set up a monitoring and consultation system, such as a whistleblower system, that allows directors and employees to anonymously consult or report, and by accepting consultations or reports on compliance issues such as acts that violate laws and corporate ethics, to minimize problems and prevent risks.
Internal Reporting System
To prevent compliance risks from happening and minimize the impacts of noncompliance occurred, SHAM established the system called "Compliance Hotline" (hereinafter referred to as the “Hotline”) which directors and employees can consult with or report to about compliance issues related to violations of laws, regulations, and corporate ethics. The Hotline accepts and appropriately handles consultation or reporting of organizational or individual violations of laws and regulations in accordance with the Whistleblower Protection Act.
The Compliance Officer is selected as the person in charge of the Hotline. The Compliance Officer or the Internal Control Promotion Dept. functions as the contact point while the contact point may be entrusted to an external party (such as a law office) to protect whistleblowers from being exposed. Reports or consultations are accepted face-to-face, in writing, by email, telephone, etc. from all directors and employees including contract employees, part-time employees, temporary employees, and retirees who were employed within one year before the reported date. Anonymous reporting is also accepted. Once a report is accepted from a whistleblower, a person of the contact point conducts necessary investigations to confirm facts and promptly notifies the Compliance Officer with summarized details of the incident. If violations of laws or regulations are revealed as a result of the investigation, SHAM will promptly take corrective measures to prevent the same or similar incidents from happening, and carry out internal disciplinary actions to related parties as needed.
The protection of the privacy of whistleblowers and the prohibition of unfavorable treatments from a personnel, economic, daily life, or mental health standpoint, and other related matters are clearly stated on the “Compliance Hotline Rules”. Even after reports are closed, SHAM continues to confirm that the whistleblowers are not being harassed but being protected.
Directors and employees of SHAM have the access to the Sekisui House Group Compliance Helpline (hereinafter referred to as the “Helpline”) established by the Sekisui House Group. The Helpline is for directors and employees of the Sekisui House Group as well as those of the Group's business partners who have the ongoing business relationships with the Sekisui House Group, to consult on matters that are difficult to be resolved through normal reporting channels. A lawyer’s office has been set up as an external contact point, and the Compliance Office in the Legal Department of Sekisui House has been established as an internal contact point. Anonymous reporting is also accepted.
Internal Audit System
SHAM formulates an internal audit plan every business year based on the internal audit rules and conducts internal audits of all departments and their operations twice a year. Internal audits are conducted by the Compliance Officer and the Internal Control Promotion Department, headed by the Compliance Officer. For the implementation of internal audits, SHAM will formulate an internal audit plan for each business year based on the internal audit rules, and then verify whether the business is being carried out appropriately and efficiently in line with laws, regulations, internal regulations in addition to verifying whether the corporate ethics standards (including corruption, bribery and fraud) are complied. The results are then reported to the Compliance Committee, President & Representative Director, and the Board of Directors, and a policy is in place to provide recommendations and instructions for improvement to the relevant organizations and departments as necessary.
SHAM has also introduced an evaluation system from external perspectives by conducting audits by external specialist organizations as necessary.
Prevention Measures for Conflict-of-Interest Transactions
SHAM has stipulated the Rules for Transactions with Interested Parties concerning transactions between the Interested Parties and SHR etc. as an internal rule to exclude the adverse effect of conflicts of interest. An overview of Rules for Transactions with Interested Parties is as follows:
【Scope of Interested Parties】
From the viewpoint of preventing conflict of interest transactions, the scope of "Interested Parties" in SHAM has been expanded from the “interested persons, etc.” under the Act on Investment Trusts and Investment Corporations (Investment Trust Act) as follows.
- "Interested Parties, etc." as defined in the Investment Trust Act
- Shareholder of SHAM
- Special Purpose Companies, etc. for which discretionary investment contracts are concluded by those stipulated in (a) or (b) above
- Special Purpose Companies, etc. in which the total amount of the contributions by those outlined in (a) or (b) above is a majority of the total contributions
Transaction Terms with Interested Parties
| Acquisition of property from Interested Parties | The acquisition price (excluding taxes, cost of acquisition and others) must be no more than the amount of the appraisal value, etc. determined by a real estate appraiser who is a non-interested party appointed at the time of the acquisition. (However, in the event that a SPC is temporarily formed on the assumption that the property will be transferred to SHR, the acquisition price must be no more than the amount adding such cost.) |
|---|---|
| Disposition of property to Interested Parties | The disposition price (excluding taxes, cost of transfer and others) must be no less than the amount of the appraisal value determined by a real estate appraiser who is a non-interested party appointed at the time of the sale. |
| Payment of an agency fee to Interested Parties | The amount of agency fee to be paid must be within the range of remuneration set forth in the Building Lots and Buildings Transaction Business Act and decided based on the level of contract terms and the difficulty level of brokerage, etc. |
| Entrusting management, etc. of real estate and other assets to Interested Parties | Entrustment of management services, etc. for real estate and other assets must be based on conditions considered adequate upon comprehensive consideration of market levels of management consignment fees, the content of services to be provided, total workloads and so on. (The appropriateness of contractors is verified by independent external evaluation organizations which have no interest with SHAM once a year, in principle.) |
| Conclusion of leasing contract for real estate and other assets with Interested Parties | Lease contracts must be based on conditions considered adequate upon investigation of market rent levels and prices of similar transactions in surrounding areas, etc. and by reference to the opinions of third parties, who are non-interested parties, as needed. |
| Placing orders for construction work, etc. with Interested Parties | If the contract amount exceeds a certain amount, placement of orders with Interested Parties must be limited to cases in which the estimated price, content of services provided, etc. are not disadvantageous to SHR upon comparison with third parties. |
To ensure that unitholder interests are not impaired due to conflicts of interest between SHR and interested parties of SHAM (including Sekisui House, etc.), SHR and SHAM have established the governance system that ensures arms-length principal as follows.
- Each decision to be made by Investment Committee and Compliance Committee must be conditional upon the attendance and affirmative votes of outside members appointed from among professionals who have no special interest with Sekisui House or other interested parties.
- Appointment and dismissal of compliance officers and external committee members requires the approval of the Board of Directors of SHR, which is supervised by professionals who have no interest in Sekisui House or other interested parties.
The flow of decision-making for transactions with stakeholders is as follows.
An Example of Decision Making Flow
(Note 1)This process is investigated at the time of decision-making related to overseas real estate, etc.
(Note 2)Approval includes consent of SHR on said approval.
Sekisui House Ownership of SHR's Investment Units (Same Boat Investment)
SHR has accepted same boat investment from Sekisui House to align the interests of the investors and the sponsor Sekisui House.
Click here to see the number and percentage of units held by Sekisui House.