Governance Compliance

Basic Compliance Policy and Structure

Compliance Policy

OJR and OAM Company fully recognize the importance of social responsibility and the public mission required of investment corporations and regard compliance with social norms based on high ethical standards and compliance centered on the Investment Trust Law and the FIEA as one of the most critical management issues.

OJR

In light of the importance of the compliance stance of the Board of Directors, OJR strives to ensure that members of the Board of Directors are always aware of compliance issues and consider compliance by realizing active and sound deliberations at the Board of Directors. To ensure the practice of compliance, all directors have pledged to OJR that they will comply with the Investment Trust Law, other laws and regulations applicable to OJR, various rules established by the Tokyo Stock Exchange, Inc., and various regulations established by OJR in the execution of their duties, and they conduct their business in this spirit.

OAM

In order to comply with the FIEA, the Investment Trust Law, the Building Lots and Buildings Transaction Business Act and other related laws and regulations, the Articles of Incorporation of OJR, the rules established by the Investment Trusts Association, Japan, the Asset Management Entrustment Agreement and the Real Estate Management Entrustment Agreement with the Investment Corporation, internal rules, etc., and to execute the operations in charge per the general ethics, common sense and norms of society, the significance and importance of compliance, the basic policy on the practice of compliance, the roles of each organization in the practice of compliance, the procedures for officers and employees to practice their actions, etc., are specified in the “Compliance Manual,” which is the internal rules of OAM, and efforts are made to ensure that these policies are thoroughly implemented. In addition, each year, each officer and employee obtains a written oath of compliance with relevant laws and regulations.

System to Promote Compliance

OAM has adopted the following systems in order to achieve compliance.

Compliance Promotion

Handling of transactions with conflicts of interest, etc.

OAM, which is entrusted with the management of OJR’s assets, has, in addition to the obligations outlined in the asset management agreement with OJR, obligations under Article 42 of the FIEA to faithfully perform its duties relating to the management of assets on behalf of OJR (Article 42, Paragraph 1), and to perform its duties relating to the management of OJR’s assets with the care of a good manager (Article 42, Paragraph 2). Accordingly, in dealings with Sponsor Group, we strive daily to avoid executing transactions that would unfairly benefit Sponsor Group to the detriment of OJR.

In addition, OAM has established the Affiliated Companies Transaction Rules as internal rules regarding transactions, etc., with affiliated companies, including OAM’s Sponsor Group. Compliance with these rules eliminates the harmful effects of transactions between OJR and OAM’s stakeholders and other parties that could cause conflicts of interest. We have also created and utilized a Compliance Manual to raise awareness of legal compliance on the part of every officer and employee and establish basic implementation procedures. The result is a system that we believe ensures that OAM’s interests do not take precedence over those of OJR.

In addition, OAM’s internal rules stipulate that OAM shall obtain the prior consent of OJR’s board of directors for certain transactions, etc., with Sponsor Group, and the asset management agreement between OJR and OAM stipulates that any changes to such internal rules require the approval of OJR’s board of directors. This provision ensures a system is in place to prevent conflicts of interest in transactions with Sponsor Group.

The Compliance Committee requires the attendance of the compliance officer for resolutions, and the compliance officer has the authority to reject matters independently. We believe that giving such authority and functions to the cimpliance officer prevents the potential harm caused by transactions with conflicts of interest.

Furthermore, the Investment Committee and the Compliance Committee established by OAM have each appointed a real estate appraiser and an attorney with no vested interest in OAM as external committee members. Each committee resolution requires an external committee member’s attendance, granting the external member the power to veto resolutions independently. We believe that giving such authority and functions to external committee members ensures the third-party nature of committee decision-making, and prevents the potential harm caused by transactions with conflicts of interest.

Giving and receiving of entertainment and gifts, and prevention of corrupt practices

OAM’s Rules on Giving and Receiving of Entertainment and Gifts set forth basic rules for giving and receiving entertainment and gifts to and from business partners, public officials, etc. OAM works to prevent the use of entertainment and gifts as a means to gain unfair profits and strives to conduct fair and transparent transactions with our business partners and public officials.

In addition, ORIX Group has established the ORIX Group Anti-Corruption Policy, which prohibits the giving and receiving of payments related to corruption under any circumstances, regardless of whether the other party to the transaction is a government official, a private party, or an individual. This policy also applies to OAM. The Compliance Department regularly supervises all divisions for compliance with laws and regulations in addition to the daily monitoring.

The officers and employees of OAM shall submit an oath each year to comply with the laws and regulations related to the prevention of corruption while also attending training related to the prevention of corruption (including bribery) in the form of an annual e-learning course.

During FY2024, no cases at OAM of disciplinary action against personnel for violating anti-corruption regulations existed.

Policy to eliminate antisocial forces

OAM has established a “Basic Policy to Prevent Damage Due to Antisocial Forces” to clearly lay out its stance on responding firmly to antisocial forces. In addition, OAM has established a system for excluding antisocial forces by specifying in the “Guidelines to Responding to Antisocial Forces,” OAM’s internal regulations, the exact procedures that should be followed in the event that OAM or OJR intends to begin a transaction with a third party and it becomes clear that this third party in the transaction with OAM or OJR is an antisocial force, or when an antisocial force makes an inappropriate demand to OAM or OJR.

Prevention of Money Laundering

OAM, a real estate transaction business operator and financial instruments business operator, is legally obligated as a specified business operator to prevent the transfer of criminal proceeds. OAM has established the Regulations on Prevention of Money Laundering to fulfill these obligations, as well as an accompanying operations manual. Per these internal rules, when entering into contracts for the sale and purchase of real estate and trust beneficiary rights, or acting as an agent or intermediary for such contracts, we confirm the identity of the counterparty at the time of transaction, prepare and store confirmation and transaction records, etc. In the event that a suspicious transaction is found, it will be reported to the appropriate administrative agency. These measures enable us to prevent the transfer of criminal proceeds, detect them early, and deprive them of their value.

Prevention of Insider Trading

OAM’s internal rules on the prevention of insider trading, etc., prohibit OAM officers and employees from trading in the OJR’s investment units, new investment unit subscription rights, and investment corporation bonds (hereinafter referred to as “Investment Units, etc.”) before the public announcement of any material facts learned in the course of their duties (Information about OAM or OJR, which is defined in Article 166, Paragraph 2 of the FIEA as “material facts about the business, etc.,” and information that applies to them is referred to as “insider information”). The communication of insider information is prohibited in principle. Suppose the communication of insider information is necessary during one’s duties. In that case, it may be done only to the extent required. It is stipulated that until such time as the information in question is made public, said information shall not be communicated, nor shall transactions be recommended to cause the other party to engage in sales, purchases, or other compensated transactions involving OJR’s units, etc. to enable the other party to gain profits or avoid losses. In addition, OAM has established an information sharing arrangement, including management of insider information, under the Sponsor Support Agreement dated December 24, 2013, with ORIX Corporation and ORIX Real Estate Corporation.

Prevention of unfair transactions, etc.

OJR strives to ensure fair and free competition by stipulating in its Compliance Manual the prohibition of “abuse of a superior bargaining position,” which is an unfair trade practice under the Antimonopoly Law, and compliance with the obligations stipulated in the Law on the Prevention of the Delay in the Payment of Subcontracting Charges and Related Matters.

Dealing with complaint, accident, crisis, etc.

The “Compliance Rules for Complaints, Accidents, Crises, etc.” also stipulate that in the event of a complaint, accident, crisis, etc., involving compliance issues, an officer or employee of OAM should promptly report the matter to the head of the department and then make an internal report according to the prescribed procedures.
“Complaints, accidents, crises, etc.” refer to incidents that negatively affect the operations of OJR and OAM, including legal violations, information leaks/information security incidents, system failures, fraud/misconduct by officers and employees, administrative errors, complaints/disputes, reputational damage/infringement of trademark rights, involvement with antisocial forces, disasters/accidents/incidents at owned properties, defects in products/services, negligence, and deterioration of business conditions of business partners.
Until each reported matter is concluded, the Compliance Department monitors the status of corrective measures and reports the progress semiannually to the Board of Directors of OAM. Reports are also made to the Compliance Committee and the Board of Directors of OJR as necessary. The same regulations also stipulate that in the event that a complaint, accident, crisis, etc., involving compliance issues occurs, but it is difficult for the officer or employee to report to their superior, they should report the incident directly to the General Manager of the Compliance Department or the director in charge of the Compliance Department.

ESG perspectives on due diligence and acquisition appraisal

OAM recognizes that, when representing OJR in the acquisition or sale of real estate-related assets, the results of their due diligence and appraisal, etc., will have a significant influence on pricing and decision-making by OJR when acquiring and transferring real estate-related assets, and therefore selects and manages contractors appropriately, not only based on their business performance and social reputation but also from the perspective of ESG initiatives. Also, when conducting due diligence and appraisal, the results reflect the content of ESG initiatives in each real estate-related asset.

Payment of Fines for Violations of Business Laws, Corruption, Environmental Laws, and Labor-related Laws and Regulations in Audited Accounts

Through FY2024, there were no fines to be paid for violations of business laws, corruption, environmental laws, labor-related laws and regulations in audited accounts.

Relevant Regulations of ORIX Group

OAM accepts part of the regulations on compliance common to ORIX Group established by ORIX, the parent company of OAM, and promotes the code of conduct and code of conduct to act in compliance with the internal regulations outlined in the regulations.

ORIX Group Code of Conduct

The ORIX Group has established a “Code of Conduct for Officers and Employees.” As a member of the ORIX Group, OAM also adheres to these principles.

Please click here to read “Code of Conduct for Officers and Employees.

Whistleblower system

As part of its effort to promote compliance, ORIX Group has set up a whistleblower hotline for business partners to report.

External whistleblower hotline

Internal whistleblower hotline

Compliance Training and Awareness

Officers and employees of OAM receive compliance training conducted by the Compliance Department when they join the company.
To raise awareness and maintain the company’s internal compliance framework, OAM’s Compliance Department holds training sessions for officers and employees (temporary staff and employees of OAM’s business trustees who are stationed at OAM are also included) at least once every six months, with group training and e-learning programs on topics including FIEA, the Investment Trusts Law, the Building Lots and Buildings Transaction Business Act, and other laws and regulations related to real estate transactions, as well as internal regulations, corruption prevention, and information security.
In addition, the President sends out a message to all officers and employees to raise their awareness of compliance, and the implementation of compliance is reflected in personnel evaluations.

Auditing and Monitoring System

The Asset Management Company outsources internal audit services to external experts. The person in charge of commissioned internal audits formulates medium-term policies and annual audit plans relating to internal audits and submits them to OAM. OAM proposes them to the Board of Directors and the board approves them. Internal audits are conducted at least once a year. The Person Responsible for Internal Audit Services reports the results of internal audits to OAM's President and CEO and the appropriate parties concerned in the form of audit reports. After receiving the report, OAM reports the results of the internal audit to the Board of Directors. The heads of the audited departments must take necessary improvement measures in response to the findings of the internal audit. Furthermore, to ensure the appropriateness and soundness of OAM’s internal controls, each department investigates whether its business operations are being conducted appropriately and effectively per the Basic Management Policy, organizational mission, key objectives, laws, regulations, ordinances, and internal rules. The results are evaluated, and appropriate operations corrections and improvements are made. OAM has established an organizational structure based on “Three Lines of Defense.” Different independent divisions have been appointed to the compliance officer and the Compliance Department, which corresponds to the second line, and the person in charge of commissioned internal audits, which corresponds to the third line. OAM also outsources some works to external experts.

Customer-Oriented Business Conduct

The concept of customer-oriented business conduct (fiduciary duty) is, in recent years, generally interpreted as going beyond its original meaning of “obligations of a trustee based on a trust agreement” and is defined to refer collectively to “the broad range of roles and responsibilities to be assumed by a person engaged in certain business activities in order to fulfill the trust that is placed by another party.” For asset management companies like ourselves, the “fiduciary duty” encompasses the duties and responsibilities based on the fiduciary relationship between investors and an asset management company. We believe that this fiduciary relationship is not bound merely by the terms of an agreement but calls for real estate management professionals to conduct business to maximize investors’ interests. Based on this concept, OAM established a “Basic Policy for Customer-Oriented Business Conduct” in September 2017 so that OAM can conduct exhaustive customer-oriented business operations.

Please click here for the concept of customer-oriented business conduct