FSA to toughen penalties for fraud


Financial regulators plan to introduce tougher penalties for using fraudulent means to win investment contracts in light of the AIJ Investment scandal, informed sources said.

The Financial Services Agency is considering revising the Financial Instruments and Exchange Act to lengthen the maximum prison term in such cases to between 5 and 10 years, instead of three.

It is also in talks with the Justice Ministry about hiking the maximum prison term so the law can be amended as soon as possible.

The move comes amid criticism that the three-year maximum is too light compared with the 10-year terms being imposed for general fraud under the Penal Code.

Such criticism has been growing since it was found earlier this year that AIJ Investment Advisors Co. lost an obscene amount of client money on bad investments while running something akin to a Ponzi scheme. The Tokyo-based investment advisory firm, which is suspected of faking its performance numbers to win investment contracts from several corporate pension funds and other clients, has lost more than ¥109 billion of the ¥145.8 billion in pension money it had under management.

A task force set up by the ruling Democratic Party of Japan to look into the matter has called for measures, including stiffer penalties, to prevent similar incidents from happening, if they haven’t already.

The FSA is also taking seriously the fact that AIJ was reporting faked performances to its clients and the agency itself.

Under current financial law, up to six months in prison and a maximum fine of ¥500,000 can be imposed for providing faked business reports to investors, while a prison term of up to a year and maximum fine of ¥3 million can be imposed for submitting faked business reports to the FSA.

In 2006, the penalty for manipulating markets and spreading rumors was tightened from up to five years and ¥5 million to 10 years and ¥10 million after the high-profile accounting scandal that embroiled Internet services company Livedoor Co., now known as LDH Corp.

ADB plans fundraiser


The Asian Development Bank plans to raise a record $12 billion to beef up its support facility for poor nations, ADB President Haruhiko Kuroda said.

The amount of funding for the Asian Development Fund, which provides grants and soft loans to poor countries, will be finalized at an annual ADB meeting set to start in Manila Wednesday.