Japan Watchdog May Increase Headcount as Insider Probes Deepen

Japanese Financial Services Minister Tadahiro Matsushita said his banking watchdog needs more staff to bolster investigations into wrongdoing ranging from insider trading to accounting fraud.

“Personally I would like to increase” the number of staff at the Securities and Exchange Surveillance Commission, Matsushita, 73, told a group of reporters in Tokyo today. The SESC “also needs to hire more people with special knowledge of asset managers and custodians and so on, so that it can improve the quality of inspections,” he said.

After his appointment this week, Matsushita pledged to expand the SESC’s insider-trading probes to rebuild confidence in Japan’s markets. The commission this year uncovered information leaks ahead of share sales including Nippon Sheet Glass Co. and Inpex Corp. (1605), and found that AIJ Investment Advisors Co. hid more than $1 billion in pension fund losses.

The SESC, the investigative arm of the Financial Services Agency, more than doubled staff including regional inspectors over the past decade to about 710 as of March 31 from 265 in March 2002, according to its website. By comparison, the U.S. Securities and Exchange Commission employs about 3,500.

Matsushita said the SESC needs to increase the frequency of inspections to avoid a repeat of the AIJ case. It examined only 15 of Japan’s 299 registered asset management companies in the year ended March 2011. At that rate, each firm would be inspected once every 20 years.

The minister took the post this week, replacing Shozaburo Jimi as part of a Cabinet reshuffle by Prime Minister Yoshihiko Noda.

To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Shingo Kawamoto in Tokyo at skawamoto2@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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