• Kyodo

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Prosecutors have questioned Takuo Noguchi former vice president of the Osaka Securities Exchange, in connection with alleged manipulation of the market between 1997 and 2000, investigative sources said Saturday.

Noguchi, 66, was questioned at his home and apparently admitted repeatedly falsifying stock options deals, telling investigators his actions were “aimed at activating the OSE market,” the sources said.

Noguchi is suspected of violating the market manipulation clause of the Securities and Exchange Law by organizing fake transactions between July 1997 and March 2000 to make OSE options trading appear to be attracting more participants than the Tokyo Stock Exchange, the sources said.

The two markets started options trading of individual stocks simultaneously in 1997.

On Friday, prosecutors searched the OSE building, Noguchi’s residence in Tokyo and Osaka-based Japan Electronic Securities Co., which was affiliated with the OSE at the time. It was the first time that Japanese investigators have searched a stock exchange building, according to the Financial Services Agency.

According to an OSE internal investigation, Noguchi described deals at a now-disbanded OSE affiliate that was at the center of the fake transactions as “market-making,” sources close to the case said.

“Once things got going, (the deals) would become unnecessary. I didn’t think they would be necessary for that long,” Noguchi was quoted as saying during the internal investigation.

He is believed to have made similar statements to prosecutors from the Osaka District Public Prosecutors Office.

Prosecutors suspect Noguchi believed his illegal actions would not be discovered if they successfully activated the market.

“Everyone paid commissions for market-making” to the now-disbanded OSE affiliate that was based in Tokyo, Noguchi said during the OSE’s internal probe, according to the sources.

Noguchi also said Japan Electronic Securities, through which the deals were allegedly placed, was established to “work in tandem” with the OSE, the sources said.

Noguchi, a former Finance Ministry bureaucrat, resigned as senior executive vice president of the OSE in June 2000 after it was learned that he had established 11 affiliate companies between 1997 and 1998 without the approval of the OSE’s board of directors.

Last spring, the OSE filed a complaint with Osaka prosecutors against Noguchi on suspicion of breach of trust for causing damage to the exchange and its affiliates.

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