Compliance is one of the key management issues for Daiwa Securities SMBC Co. Ltd. The company emphasizes proper operations under an effective system for monitoring compliance.
　 The company expects the following measures to ensure that the system is effective: 1) Establishing business conduct rules in line with all laws and regulations; 2) making the rules known and understood throughout the organization and following them strictly; 3) monitoring compliance with these rules; 4) developing and enforcing procedures to tackle identified problems; and 5) incorporating these procedures into the rules.

Daiwa Securities SMBC Co. Ltd. has appointed internal administration supervisors and internal administrators for each department who provide compliance guidance for daily operations. The Legal & Compliance Department, which coordinates these efforts, monitors and offers legal counsel on operational issues, watches out for unfair transactions, and provides guidance for intra-departmental inspections conducted by individual departments. This intra-departmental inspection watches for the effectiveness of the management of high-risk issues by having each division and department perform a self-assessment of its potential operational risks. The company is working towards a better approach to achieving compliance by creating procedures to deal with problems identified during inspections,incorporating these procedures into operational manuals, and then putting them into practice. The Internal Audit department confirms that operations are being properly carried out through department audits and spot audits on specific issues.

Daiwa Securities SMBC's approach to promoting compliance

Daiwa Securities SMBC Co. Ltd. holds instructor-led training as necessary for newly appointed executives, fresh hires, recently transferred employees, and employees leaving for overseas posts. The company is developing intra-departmental training to include selected operational topics for each department and division. In fiscal 2005, online training content was prepared on the Personal Information Protection Law, firewall regulations, and the securities broker representative license. The company plans to continue its efforts building its online training content.

Between April and August of 2005, Daiwa Securities SMBC Co. Ltd. performed a comprehensive inspection of progress made on measures implemented to tackle issues highlighted in past internal audits at each division and department. The company carried out intra-departmental training that incorporated actual examples from other companies, including recommended administrative initiatives, as well as disciplinary action taken for violations. Selfassessments and training relating to the firewall regulations ban on transferring nonpublic information was also carried out.

In addition to examining how personal information is handled in an internal assessment ordered by the Legal & Compliance Department, the company also prepared information management manuals and held training sessions for internal administration supervisors and information security managers. A system has been created through the preparation of indexes and individual management tables for each division and department to use in managing personal data.