SMBC Nikko slapped with FSA improvement order


The Financial Services Agency on Friday issued a business improvement order to SMBC Nikko Securities Inc. for divulging client information on plans to issue new shares.

The FSA ordered the securities house to take corrective measures, including tighter information control, and clarify the management’s responsibility for the irregularities, which violated the Financial Instruments and Exchange Act.

The company needs to report the steps by May 18, the agency said.

The FSA also demanded that SMBC Nikko, a unit of Sumitomo Mitsui Banking Corp., review its internal control system for crucial client information, such as new share issue plans, and conduct intensive training for executives and employees on how to handle it.

SMBC Nikko plans to punish those involved in the wrongdoing and set up a new division to exclusively handle important client information as part of corrective steps.

The FSA issued the order based on recommendations from the Securities and Exchange Surveillance Commission, which found that SMBC Nikko gave clients information in fiscal 2009 about a plan to issue new shares of Sumitomo Mitsui Financial Group Inc., the parent of Sumitomo Mitsui Banking, before the plan had been officially announced and advised them to buy the shares. SMBC Nikko was lead manager on the share placement.

In addition, unpublished information the broker had on a railway’s plan to issue new shares, which also were lead-managed by SMBC Nikko, was leaked to its marketing division in fiscal 2010.

“We will make groupwide efforts to prevent any future misconduct,” SMBC Nikko said.