We believe that compliance does not stop with the letter of law but that it includes all actions for winning the confidence of our customers and society. We are committed to enhancing both Group-wide initiatives and independent initiatives by our Group companies.

  To meet the expectations of society relating to compliance, all Daiwa Securities Group executives and employees must maintain a strong sense of ethics and contribute to the sound development of the securities market, in the light of the public-interest aspect of the securities industry.
  Through strong compliance awareness on the part of all our executives and employees, we will maintain a system with a self-cleansing function enabling us to independently identify and correct business-related risks.

  Daiwa Securities Group Inc. plays a central role in setting compliance policy for the entire Group. Meanwhile, individual Group companies must comply with different sets of rules and regulations, due to differences in the types and details of their businesses. For this reason, each Group company's compliance department plays a leading role in setting out detailed compliance regulations and response.
  In response to the Financial Instruments and Exchange Law and other laws that came into force in fiscal 2007, each Group company reviewed items affected by these laws and implemented systems to ensure more effective compliance. The compliance regime of the Group as a whole is maintained and promoted by having Daiwa Securities Group Inc. and Group companies fulfill their respective roles and by enhancing collaboration in their initiatives.

  In fiscal 2007, the most important compliance-related issue for Daiwa Securities Group Inc. was to implement stronger measures against criminal elements. Beginning in fiscal 2006, we also broadened our activities to nurture awareness of compliance, by conducting corporate ethics training at four Group companies and other initiatives.
  In addition to measures related to enactment of the Financial Instruments and Exchange Law and the Financial Products Sales Law in September 2007, Daiwa Securities Co. Ltd. also made stronger efforts to spread understanding of the intent of the rules by simplifying internal rules, providing training for executives and employees and other measures (see"Commitment to the Development of a Sound Securities Market").
  Daiwa Securities SMBC Co. Ltd. established a framework to conform with the Financial Products Sales Law, taking steps to prevent leaks of personal information and enhancing its system to check for conflicts of interest and money laundering.

  Reflecting stronger social pressure to eliminate the influence of criminal elements, the government has drawn up guidelines for corporations to prevent damage by such elements. The Daiwa Securities Group, firmly believing that its role in the securities industry is to stoutly stand up to criminal elements and enhance trust by creating a sound securities market, has taken various measures toward this end.
  In fiscal 2007, Daiwa Securities Group Inc. took the lead in accumulating more data, in order to shut out criminal elements.
  Based on these initiatives, we also formulated the basic policy against criminal elements outlined below.

  Our Customer Call Center was incorporated into our Compliance Division in July 2007. Feeding customer input directly into the Compliance Division allows us and our sales branches to address customer concerns promptly and appropriately.
  Since the volume and content of calls received by our Customer Call Center varies depending on market trends and performance of a wide range of financial products, it is difficult to make comparisons based only on call volume. However, the proportion of complaints received has been dropping overall in the past few years, which we believe indicates that we are responding more effectively to customers.

■Customer Call Center Calls Received

  Since January 2003, Daiwa Securities Group Inc. has operated a Corporate Ethics Hotline through which employees can report problems in the workplace directly to a corporate ethics officer or an outside lawyer. When the hotline is contacted, the Daiwa Securities Group Inc. corporate ethics officer, in cooperation with the internal control officers at each Group company, carries out a fact-finding investigation while taking steps to protect the employee. The Corporate Ethics Hotline was contacted 49 times in fiscal 2005, rising to 74 times in fiscal 2006; in fiscal 2007, the hotline was contacted 73 times.
  Effective training about the Corporate Ethics Hotline and steps to deal with problems as soon as possible have broadened the user base, and we believe that the hotline is now better known within the Group and is considered reliable. We are taking steps to expand training about the hotline so that it can work effectively as a deterrent to prevent problems before they occur.

■Examples of Complaints and Responses