• Kyodo

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The home of a former deputy head of the Osaka Securities Exchange was searched Friday over allegations that he manipulated the market for four years through 2000.

Osaka district prosecutors suspect 66-year-old Takuo Noguchi, who lives in Tokyo, repeatedly falsified stock option dealings through Osaka-based Japan Electronic Securities Co., which was affiliated with the OSE at the time, as well as through other firms, investigative sources said.

In an unusual move for investigators, the prosecutors and the Securities and Exchange Surveillance Commission also searched offices at the exchange after it closed in the afternoon.

The Osaka District Public Prosecutor’s Office plans to continue questioning Noguchi and indict him without arresting him.

According to investigative sources, Noguchi organized fake transactions between July 1997 and March 2000 to make the OSE’s options trading appear to be attracting more participants than the Tokyo Stock Exchange. The two markets started options trading of individual stocks simultaneously in July 1997.

This sort of deception would violate the market manipulation clause in the Securities and Exchange Law.

The fake transactions, valued at about 2.6 billion yen, were conducted via a company affiliated with the OSE and most of the buy and sell orders were coordinated to take place at the same time and price, the sources said.

The affiliated firm, set up in July 1997 and dissolved in 2000, conducted the deals through three securities companies, including Japan Electronic Securities, according to the sources.

A former Finance Ministry bureaucrat, Noguchi became a director of the OSE in 1993 and was promoted to vice chairman in 1999. He resigned in June 2000 after it was learned that he established 11 affiliated companies between 1997 and 1998 without the approval of the OSE’s board of directors.

Last spring, the OSE filed a complaint with the Osaka District Public Prosecutor’s Office against Noguchi on suspicion of breach of trust for causing an estimated 100 million yen in damages to the exchange and its affiliates, including commissions paid for the bogus transactions.

Sources at the OSE said Noguchi, and not the mild-mannered Kyoji Kitamura, who was OSE chairman at the time, wielded great influence within the organization. Younger employees who refused to take part in the fake transactions were demoted or moved to less important positions, the sources said.

A firm affiliated with the bourse was also searched.

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