Koizumi wants stronger securities commission

by Reiji Yoshida

Prime Minister Junichiro Koizumi urged government officials and ruling coalition lawmakers Friday to discuss ways to give the Securities and Exchange Surveillance Commission more teeth.

The market was shocked when the Tokyo Stock Exchange was forced to shut down Jan. 18 reportedly for fear of a system overload amid a selloff stampede centering over Livedoor Co. shares after the firm was suddenly raided by prosecutors probing alleged securities law violations.

Koizumi said making the securities watchdog independent of the Financial Services Agency was one option.

“It’s OK to discuss and consider” the idea, Koizumi told reporters at the Prime Minister’s Official Residence. “Various people have various opinions. They should exchange their views” on how they might improve the commission, he said.

Hidenao Nakagawa, policy chief of Koizumi’s ruling Liberal Democratic Party, told reporters in London the LDP should consider separating the commission from the FSA to ensure its independence.

“It would increase the transparency of the stock market,” Nakagawa was quoted by media as saying.

The SESC often has been criticized for its limited manpower and authority to crack down on illegal trading.

The commission, which comes under the FSA, has only about 300 employees. The U.S. Securities and Exchange Commission has 3,000.

Financial Services Minister Kaoru Yosano, who heads the FSA, has said the SESC is too small and needs more staff.

However, he told the House of Representatives Budget Committee on Thursday that the body’s independence and legal power were not a problem.

“In terms of power and independence, (the SESC) does not compare poorly with the U.S. SEC, but it does (have shortcomings) in terms of manpower,” Yosano reckoned.

The raid on Livedoor over suspected violations of the Securities and Exchange Law shocked market players, triggering a massive selloff of Livedoor and tech shares and forcing the TSE to shut down early amid the market chaos.

On Friday, Koizumi met with Yosano and urged him to improve trading operations so the troubled bourse’s shattered international reputation can recover.

Yosano blamed the bureaucratic thinking of the TSE and its union for delaying upgrades to its trouble-prone computer system despite the recent surge in the popularity of day-trading, Koizumi said.

“It is rather difficult to change the mind-set of people working at the stock exchange,” Koizumi quoted Yosano as saying.