Japan seeks penalties against Nikko SMBC in insider crackdown
TOKYO, April 13 — Japan's securities regulator recommended today the country's third-largest broker, Nikko SMBC Securities, be punished for leaking confidential information about stock offerings in the latest crackdown on insider trading in Japan.
The Securities and Exchange Surveillance Commission (SESC) said at least 23 sales staff at Nikko had solicited clients to buy shares in a company ahead of the official announcement of a share offering in 2010 in violation of the law.
The punishment, to be carried out by the Financial Services Agency in the coming weeks, is expected to include an order for the broker to improve its internal controls.
The recommendation marks the second action by the SESC since it launched a high-profile probe in 2010 into dubious trading activities around a string of public share offerings that had raised suspicions inside information had been leaked.
Last month, the SESC recommended a 50,000 yen (RM1,860) fine against Chuo Mitsui Asset Trust Banking, saying the asset manager sold Inpex shares after a tip-off about the energy firm's plans for a $6 billion (RM18 billion) offering in 2010.
Relatively small fine
While the SESC has not named the broker involved, sources have told Reuters that an employee in the institutional sales department of Nomura Holdings is the suspected source of that leak. Nomura has declined to comment on specifics, only saying that it was cooperating with the SESC's probe.
The relatively small fine in the Chuo Mitsui case, which was calculated on the expected commission on the fund manager's profit of 14 million yen on that trade, has been held up by critics as a sign that Japan's regulations are not strong enough to deter insider trading.
For example, a similar case in the United States would have led to a fine several times as large and sanctions against the employee that provided the information, experts have said. Under Japanese law, the “tipper” does not face official sanctions unless they too conspired to profit from the trade.
But the regulator believes identifying those involved in such cases can still act as an effective deterrent in Japan, where public shaming typically carries greater weight than it might in the West.
The move against Nikko SMBC also shows that the SESC is attacking the issue from various angles. Unlike in the Chuo Mitsui case, the regulator does not believe that any insider trading took place, the sources said.
Nikko sales staff told clients about the upcoming share offerings to encourage them to buy the shares once the deal was launched, rather than to short-sell ahead of time, sources with knowledge of the matter told Reuters earlier today.
The SESC is also investigating trading related to share sales by Tokyo Electric Power and Nippon Sheet Glass around which selling and volume patterns triggered suspicions that insider trading had taken place. — Reuters