A Japanese securities industry group is probing brokerages on inappropriate bond selling practices amid surging investor demand for higher-yielding corporate debt.
The Japan Securities Dealers Association (JSDA), which helps oversee the sector, sent questionnaires to nine major local and foreign brokerages asking about bond selling irregularities, such as overstating to issuers how much demand there is for their debt, according to people familiar with the matter.
The probe marks a step toward ridding Japan’s primary bond market of opaque sales practices as rising interest rates in the nation boost investor appetite for debt with higher yields and companies rush to sell notes before borrowing costs climb further. Foreign participation in Japan’s corporate and municipal bond markets is also growing, putting pressure on domestic brokerages to conduct sales in a way that follows global norms.
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