Japan’s Financial Services Agency (FSA) has suspended ailing film and contents fund management firm Japan Digital Contents Trust Inc (JDC) from doing business for a period of three months.

The FSA cited a misappropriation of some $3.1m (Y300m) between December 2007 and June 2008. Under former president Mitsuru Hirata, the funds were withdrawn from investor trust accounts and used to pay debts and run the day-to-day operations of the company. Hirata was dismissed on June 2.

As reported last month on Screendaily.com, the FSA ordered reforms at JDC after the company’s net assets fell well below the $1.03m (Y100m) the trust business act stipulates for fund operators.

Under the suspension JDC cannot sign any new contracts and must submit a new business strategy by June 25. Daily reports of its efforts to protect existing funds of some 2,800 investors will also be required.

Cine Qua Non’s 2006 production Hula Girl earned $14.47m (Y1.4bn) as one of the JDC film funds’ few successes. However, other titles such as February release Halfway, Last Game (2008) and Bugmaster (2007) all underperformed at the box office.

With other funds, including one operated by animation house Gonzo, also failing to turn a profit, the strategy is seen to have run its course in the territory. The sentiment comes ahead of the government’s proposed $120.9m (Y11.7bn) contents fund set to pass in the Diet this autumn.