Kokusai Securities Co. said Tuesday that three of its executives will resign today over a violation of the Securities and Exchange Law that led to the second-tier brokerage being ordered to suspend operations.
The three were named as Chairman Yoshitaka Matsutani, Vice President Morio Kubo and Senior Managing Director Giichi Katakura, who was head of the Osaka branch when the illegal deals occurred, company officials said.
Nobuo Nakazawa, Kokusai Securities president, will remain in office to carry out reforms in the wake of the scandal, the officials said.
The reshuffle was decided at an extraordinary board meeting Monday night.
On Monday, the Financial Services Agency ordered Kokusai Securities to suspend operations for three days beginning July 4 after it learned that workers at its Osaka and Oita branches offered special profits to certain customers in an inappropriate manner and attempted to conceal evidence relating to the deals.
The FSA also ordered the brokerage to reorganize its management because senior executives were involved in the illegal transactions and the company received a similar administrative punishment in 1999.
The scandal reveals how deeply rooted illegal practices are in the industry.
“I believe our sales personnel found it difficult to attract individual investors,” Nakazawa said during a news conference Tuesday evening. “It is hard to discover (and correct) the human factor.”
Nakazawa said the firm is now designing a sales system that will not rely on sales personnel soliciting customers.
Concerning his decision not to resign, Nakazawa said, “I decided that I can’t just run away . . . it would be cowardly.”
Hakuo Yanagisawa, minister in charge of financial affairs, said earlier Tuesday that he will order Kokusai to improve its internal inspection system to prevent illegal operations from recurring.
He told a regular news conference that Kokusai’s behavior was “egregious” and that he has a “strong feeling of indignation” over the firm’s actions.
“I will order the brokerage to seriously consider what to do in order to prevent a recurrence,” he said.
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