FSA to crack down on high-risk mutual funds-NIKKEI

Jan 27 (Reuters) - Japan's Financial Services Agency (FSA) is considering tighter regulation of high-risk mutual funds sold to inexperienced investors to help restore investor confidence, The Nikkei business daily reported.

Funds that promise high monthly distributions or use derivatives to make foreign currency-linked investments would be targeted, the daily said.

For the funds that pay out monthly, the FSA would limit what can be tapped for dividend payments to investment returns such as yields and capital gains, the daily said.

The regulator will also explore measures to ensure that currency-based funds are not burdened with derivative risk exceeding a certain portion of their asset balance, The Nikkei said.

The FSA expects to frame the regulations before the end of the year and submit them to the Diet, the Japanese legislature, in 2013, the paper reported.