Nomura Holdings Inc. will continue to check for further cases of insider trading involving its employees, according to sources.
Japan’s top brokerage — already reeling from three confirmed stock trading scandals — and its panel of outside lawyers will investigate whether Nomura employees leaked any other confidential information, the sources said Wednesday.
The Securities and Exchange Surveillance Commission has concluded that Nomura employees leaked confidential information before new share offerings made by Inpex Corp., Tokyo Electric Power Co. and Mizuho Financial Group Inc.
Nomura decided to extend the probe because the SESC is still investigating and because the Financial Services Agency on Tuesday requested that Nomura and 11 other major brokerages re-examine their information management and legal compliance systems.
Nomura released the panel’s report on June 29 and punished senior officials and executives, including CEO Kenichi Watanabe.
Watanabe said that Nomura would terminate the probe by the external lawyers, who were contracted to investigate the three known cases. But critics called for a deeper investigation because the report said the illegal disclosure of sensitive information about new share offerings was common practice among some Nomura employees.
FSA pushes fines
The Financial Services Agency has asked an advisory panel to consider toughening fines for insider trading.
Following a series of scams that took advantage of equity finance plans, the Financial System Council will consider increasing existing penalties and widening the scope of those subject to them, the agency said Wednesday.
The FSA aims to submit a bill to revise the Financial Instruments and Exchange Law to the Diet next year to introduce more Draconian regulations.
However, it is uncertain whether the harsher penalties sought by the agency will be introduced, given the numerous hurdles that still need to be cleared.
At present, fines imposed on institutional investors who engage in insider trading are calculated based on their commission from clients, rather than profits illegally earned on investment funds they manage on behalf of the clients. The fines are therefore seen as minor compared with the amount of illegal profits reaped.
The council, an advisory panel to the prime minister, will consider determining future fines according to the size of illegal profits earned on clients’ assets. However, some experts say such a step should be avoided because the funds belong to the clients.
Directly punishing those who leak confidential information to investors in insider trading case also has been proposed, a measure incorporated in current U.S. and EU legislation.
All five insider trading scandals that broke since March involved data leaked by officials of brokerages that lead-managed new share offerings.
But introducing such a measure may not be so easy, as large new offerings involve many people working for various organizations. Critics allege that if the new rules are overly strict, they could hinder necessary exchanges of information.