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Nomura gets light sanction in Japan insider case

August 3, 2012

TOKYO: Japan Financial Services Minister Tadahiro Matsushita said today he had ordered Nomura Holdings to bolster internal controls after its brokerage unit was found to have leaked information on share offerings dating back to 2010.

The so-called business improvement order from the Financial Services Agency (FSA), a relatively light sanction, will require Nomura to report regularly to the regulator on its steps to prevent further leaks of confidential client information.

But it stops short of a more damaging order to suspend some operations for weeks – a penalty that had initially been seen as a possibility in this case.

The order confirmed a Reuters report late yesterday, and moves Japan’s largest brokerage closer toward a resolution of a costly scandal that triggered the resignation of chief executive Kenichi Watanabe and other senior managers last week.

The relatively light nature of the punishment was flagged earlier in the week when the Securities Exchange and Surveillance Commission, the agency that handled the investigation, recommended sanctions without calling for a halt of operations.

Nomura has acknowledged that its employees leaked information on three share issues it underwrote in 2010: energy firm Inpex Corp, Mizuho Financial Group, energy firm Inpex Corp and Tokyo Electric Power.

At the end of June, Nomura published the results of an internal investigation that found breaches of basic investment banking safeguards and announced a raft of measures to prevent recurrence.

The FSA took into account Nomura’s steps towards addressing its problems, its voluntary suspension of institutional equity sales operations for a week and the CEO’s resignation in deciding on the sanction, sources with direct knowledge of the matter told Reuters.

In a statement following the SESC’s recommendation earlier this week, Nomura apologised and said it had taken steps to keep information collected by its underwriting operation from leaking to its sales desk and investors.

Beyond the probe targeting Nomura, the FSA has not indicated when it will close out the investigation of insider trading practices in the Tokyo market.

Major brokerages face a deadline today to report to the FSA on their compliance safeguards and whether they leaked information on planned share issuances to Japan Advisory, a hedge fund advisory linked to the Whitney Japan Fund.



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