On 10 November 2026 the Securities and Exchange Surveillance Commission (SESC) recommended that the prime minister and the commissioner of the Financial Services Agency take administrative action against a Tokyo fund operator that ran recycled electric-vehicle battery funds. The recommendation follows an inspection by the Kanto Local Finance Bureau and cites the Act for Establishment of the Financial Services Agency.
A one-person manager with 40 funds
The operator is a limited liability company in Minato Ward with capital of ¥300,000 and one full-time officer or employee, the person who acts for its representative member. It notified authorities as a business running the special-case activity for qualified institutional investors. That regime lets a manager raise money from such investors, plus a limited group of others, without full registration. The company set up 19 voluntary partnerships and 21 silent partnerships that invest in the rental of recycled EV batteries. The SESC puts the total at 84 investors, counted cumulatively, and about ¥3.5bn in contributions.
Four findings
The SESC lists four problems.
First, an unregistered firm solicited investors. The operator says it did not delegate solicitation to TKW, an accounting and tax firm that handled its other fund work. Yet the SESC found that TKW's president or its sales head explained the funds to every customer who signed. TKW holds no registration under Article 29 of the Financial Instruments and Exchange Act, and the SESC says the operator's representative neither knew of nor controlled this.
Second, the qualifying institutional investor does not qualify in substance. The operator named TKW's president as the sole such investor for all funds. The SESC says the operator and he agreed orally that his money would pay fund expenses rather than buy batteries, with no profit distribution and no return. Customers were given the same explanation in pre-contract documents. On that basis the regulator concludes he holds no right to distributions, so the funds have no institutional investor and the special-case conditions are not met.
Third, some backers were ineligible. TKW checked eligibility by having investors declare net assets in writing, and did not ask for balance sheets or similar records, apart from some who volunteered them. The inspection confirmed that at least nine customers were not eligible investors. The operator never asked TKW to report on this work.
Fourth, the batteries were not verified. The funds buy used EV batteries and rent them out. The SESC says the trades and rentals the funds are said to carry out involve no physical handover of batteries from the battery business; delivery is handled on paper, through sale or rental contracts. At the inspection reference date the operator had not checked that business's purchase contracts. The SESC points to a January 2024 third-party report at a company that had joined the same chain, which denied that the underlying goods existed. It also cites its own March 2025 recommendation on that company, which found the battery business had not bought most of the batteries matching its sales. The release says the operator could not confirm the assets exist while solicitation continued. It does not state that the funds' own batteries do not exist.
What the recommendation is
The SESC attributes the failures to the representative's lack of legal knowledge and compliance awareness. It calls them an extremely serious investor-protection problem under Cabinet Office ordinance Article 123(1)(30). The recommendation is not a sanction. The release does not say what action it expects or when, and it says nothing on what investors can recover.