The Diet on Friday named seven corporate customers of Yamaichi Securities Co. that were involved in dubious "tobashi" dealings that led to the 100-year-old brokerage's failure last month.
The seven companies were the final buyers of the securities that Yamaichi shuffled from one corporate client to another, according to documents released by the House of Representatives Budget Committee. The documents are based on papers Yamaichi submitted earlier to the committee.
Since the securities' market prices were far below the prices at which the clients had purchased the stocks, Yamaichi decided to buy them from the clients at prices far above the market prices. The stocks totaled 170.9 billion yen and caused the brokerage heavy losses. Yamaichi announced Nov. 24 that it planned to close after illegally hiding more than 200 billion yen in losses.
Shin Nichi Ka EMC topped the list of tobashi clients. Yamaichi paid 57.1 billion yen for the firm's securities holdings. The list also included Yusen Accounting and Finance, Tokyu Department Store, Kanematsu General Finance, Itochu General Finance, Nihon Noyaku and Mainichi-no Shokutaku Center.
Tobashi, or shuffling, is an arrangement, which in itself is not illegal, that entails the sales of loss-carrying securities from one client company to another with different accounting terms to conceal investment losses in a firm's financial reports, with the ultimate hope that the market price will eventually rise. The losses, however, often increase at every sale.
But if the brokerage buys the securities as a way to compensate for the final clients' losses, this is punishable under the Securities and Exchange Law.