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The asset management company, Nomura Real Estate Asset Management (NREAM), has established an asset management system that focuses on compliance as shown below.
In order to construct an appropriate asset management system, based on the basic recognition that NREAM’s asset management operations for investment corporations is the management of investors’ funds, NREAM has created a Compliance Committee as a body to check the state of compliance with laws or ordinances and deliberate on items of such transactions with related parties as defined in the Investment Trust Law and competitive transactions between the investment corporation and parties such as companies which a related party provides asset management and operation advisory services. In addition to creating, revising, and eliminating compliance rules that stipulate the content and procedures for compliance checks in order to achieve the above, the Compliance Committee creates, revises, and eliminates items in the Compliance Manual that establishes principles (including the responsibilities of the trustee of investment assets) that should be adhered in order to properly manage assets.
The Compliance Committee is chaired by the compliance officer, and the members of the committee include the president & CEO, executive directors, auditor(s), and independent experts appointed by the chairman. At present, the independent experts include an independent expert in the field of compliance (1 person) and an independent lawyer (1 person). When necessary, the chairman can appoint additional members.
Compliance rules also stipulate the following: regarding not only transactions with related parties as defined in the Investment Trust Law but also transactions stipulated in (i) and (ii) below (assuming it includes transactions between companies within the Nomura Real Estate Group that are not considered related parties as defined in the Investment Trust Law and competitive transactions between parties such as clients of the Nomura Real Estate Group and the investment corporation), the Compliance Committee deliberates and examines whether there are problems related to laws and ordinances and whether responsibilities (which are stipulated in the Compliance Manual noted above) as the trustee of investment assets are being adhered to before submitting the proposal regarding these transactions to the Investment Committee. As a result, only when it is determined that there are no compliance related problems, the proposal submitted to the Investment Committee of each respective management division.
| (i) | Purchase and sale of assets such as real estate between the investment corporation and parties such as companies that a related party provides asset management advisory service to. |
| (ii) | Conclusion of contracts (property management contracts, etc.) which may entail mutual conflicts of interest between the investment corporation and parties such as companies that a related party or other parties are providing assets management advisory service to. |
Of the transactions and proposals that the compliance officer, before the proposal to the Investment Committee, confirms the need for deliberations by the Compliance Committee, as written above, the Compliance Committee conducts deliberations and examinations in advance, and only in the case where the Compliance Committee determines that there are no problems regarding the laws, ordinances, rules, principles, or other compliance issues, is the proposal submitted to the Investment Committee.
In addition, even during the deliberations by the Investment Committee, if the compliance officer determines that there are critical compliance issues, deliberations by the Investment Committee are temporarily suspended at that point, and the Compliance Committee deliberates on adherence to laws, ordinance, and rules. Therefore, only in the case where the Compliance Committee determines that there are no problems related to laws, ordinances, rules, or other compliance issues does the Investment Committee take up deliberations regarding the proposals in the following meeting.
Furthermore, the Compliance Committee receives full reports on the progress of deliberations and its conclusion by the Investment Committee, and conducts ex-post deliberation and examination on whether there are any problems with compliance.
The Compliance Committee also deliberates on the state of compliance related to the management of the investment corporations’ assets at least once every three months, and the results of the deliberations are resolved at the meeting of the Board of Directors.
Resolutions by the Compliance Committee are adopted when more than two-thirds of committee members with voting rights approve of the proposal under deliberation. When the item being deliberated on by the Compliance Committee is a competitive transaction between the investment corporation and a party such as a related party as defined in the Investment Trust Law or a company that a related party is providing asset management advisory services to, or a member of the Compliance Committee is either a director or employee of the related party, that particular member of the Compliance Committee does not have voting rights regarding the proposal. This is not limited to when the particular member of the Compliance Committee is the compliance officer or the auditor.
In addition to the Compliance Committee, NREAM has established a Compliance & Risk Management Group as the standing department responsible for compliance in order to ensure the effectiveness of internal controls related to compliance, particularly, regarding other groups.
Also, the group leader of the Compliance & Risk Management Group is appointed as the compliance officer, and is given authority over various matters. The compliance officer, who is responsible for compliance at NREAM, always monitors that operations related to the management of the investment corporations’ assets is conducted in accordance with laws, ordinances, and rules. Therefore, the compliance officer conducts prior examination of the state of compliance with laws, ordinances, and rules related to all proposals submitted to the Investment Committee, and only when it is determined that there are no critical compliance issues, is the proposal submitted to the Investment Committee. Additionally, even after the Investment Committee begins deliberations, the compliance officer conducts checks of compliance issues.
Furthermore, the compliance officer attends meetings of the Investment Committee, which is the decision-making body that sets items such as the management policy of the investment corporations’ assets, and checks compliance both during the deliberation process and regarding the results of the deliberations of all proposals submitted to the committee, and when necessary, has the right to provide opinions. However, the compliance officer does not have voting rights in the Investment Committee.
The compliance officer updates and has an understanding of the rules related to the management of investment corporations’ assets, based on both domestic and international laws, ordinances and rules, and when items such as the regulatory environment have been changed, the compliance officer contacts all in-house groups when necessary and checks the state of compliance regarding the conduct of daily operations through actions such as investigating whether there are compliance problems related to items such as particular projects and the submission of documents to external bodies while working to gain a thorough knowledge of regulations.
If major compliance problems during the operations are found in the results of the previously-mentioned checks on the state of compliance, the compliance officer immediately reports this to the president & CEO of NREAM and requests that appropriate measures be taken, including holding a Compliance Committee meeting and deliberating on the issue.
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