Nomura Embroiled in Insider Trading of Elpida Shares in 2011
Nov. 2 (Bloomberg) -- Nomura Holdings Inc., Japan’s largest brokerage, was found by the country’s securities watchdog to have been involved in an insider-trading incident last year.
A Nomura employee tipped off staff from Japan Advisory Ltd., a hedge fund advisory firm, about a share sale it managed for Elpida Memory Inc. in 2011, an official from the Securities and Exchange Surveillance Commission said at a news briefing today, speaking anonymously in accordance with the agency’s policy. Japan Advisory then traded Elpida shares, the SESC said.
Nomura has been embroiled in four of six cases unveiled this year as authorities crack down on trading based on tips provided by underwriters about clients’ equity offerings. The latest revelations underscore the task Chief Executive Officer Koji Nagai faces in proving to investors that internal controls have been tightened after the scandal cost it investment banking mandates and prompted his predecessor to resign.
“Nomura’s track record in leaking information has given companies, issuers and the market a great distrust of the bank,” said Shiro Yoshioka, an analyst at Japaninvest Group Plc in Tokyo. “Nomura will have to come up with clearer and stronger measures to ease them.”
The SESC’s findings were helped by an internal probe conducted by Tokyo-based Nomura, the official said.
“During one of our voluntary investigations we learned of circumstances with a strong possibility of being related to this incident and we reported our findings to the commission,” Nomura said in a statement today.
Japan Advisory traded shares of Elpida on July 6, 2011, five days before the chipmaker announced an equity offering. Its staff received the information from an employee of an underwriter on July 5, the commission said in a statement.
The commission recommended a 120,000 yen ($1,500) fine against Japan Advisory. Under current rules, parties who leak confidential information used for insider trading aren’t typically subject to fines.
The hedge fund adviser sold 32,600 Elpida shares for 30.4 million yen after realizing the share sale was imminent when information on the chipmaker was deleted from a research report provided by a Nomura employee at a meeting, the SESC said.
Nomura used to omit companies from research notes when it was working on their public offerings to prevent early solicitation of investors, the bank said today. Those omissions may have provided clues that the firm was working on Elpida’s share sale, it said.
“Nomura has implemented a series of improvement measures and has continued to conduct voluntary inspections and investigations in relation to internal controls for corporate- related information,” it said.
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