Nomura Must Clean ‘Wounds’ on Insider Probe, Nakatsuka Says
Japan wants Nomura Holdings Inc. (8604) to clean its “wounds” and uphold higher ethical standards after the country’s biggest brokerage leaked information used for insider trading, the deputy banking minister said.
“I urge Nomura’s executives and employees to reevaluate their professional ethics and identify the problems with their internal controls and business practices,” Financial Services Senior Vice Minister Ikko Nakatsuka said in an interview yesterday. “I want Nomura to drain the pus from its wounds.”
The Securities and Exchange Surveillance Commission is continuing to inspect Nomura after finding that its employees gave tips to traders on share sales it managed. As part of its efforts to crack down on insider trading, the regulator this month asked Nomura, Goldman Sachs Group Inc. (GS) and 10 other brokerages to review how they handle confidential information.
“If any brokerages misrepresent facts or conduct insufficient internal inspections, they should fully understand they will face reputational risks,” said Nakatsuka, 47, a lawmaker from the ruling Democratic Party of Japan. “We may conduct further probes and impose penalties in that case.”
Financial Services Minister Tadahiro Matsushita asked the 12 firms to submit reports by Aug. 3.
Nomura said on June 29 that it cut top executives’ pay, forced two managers to step down and suspended some operations following an internal probe into leaks ahead of 2010 equity offerings by Mizuho Financial Group Inc. (8411), Inpex Corp. (1605) and Tokyo Electric Power Co. (9501) Sales staff appeared to have been “willing to do anything to meet sales targets,” lawyers hired by Nomura to investigate the breaches said in a report.
“We will continue to cooperate with the SESC on its special investigation,” Keiko Sugai, a Tokyo-based spokeswoman for Nomura, said by phone. “We renewed our compliance system and will continue our internal examination.”
Nomura Chief Executive Officer Kenichi Watanabe, 59, told reporters on June 29 that he wasn’t sure whether there were additional leaks. The brokerage doesn’t plan to pursue any more investigations by outside lawyers, he said.
The ruling party wants a wider investigation after finding spikes in trading volumes of 20 stocks before share sales were unveiled between July 2009 and July 2011, said lawmaker Tsutomu Okubo.
The Tokyo Stock Exchange last week informed Okubo about an increase in trading volumes for All Nippon Airways Co. (9202) shares before the carrier announced an equity offering on July 3. The TSE added the case to the list of 20 stocks that were traded heavily before share offerings were unveiled since 2009.
“Japan needs to tighten up rules and impose stricter penalties to create a system to deter any suspicion,” said Masaru Hamasaki, chief strategist at Toyota Asset Management Co., which oversees the equivalent of about $24 billion in assets. “Japan has been witnessing insider-trading cases for a long time, and we know their habits and attitudes haven’t changed. I wonder if they can press out all bad things this time.”
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