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The Financial Services Agency indicated Wednesday it is leaning toward rejecting financier Yoshiaki Murakami’s application to acquire a more than 20 percent stake in the Osaka Securities Exchange Co., due to a conflict of interest.

Noting that Murakami’s fund also invests in other stocks listed on the bourse, an agency official said in a public hearing that the soundness of the OSE’s operations could be adversely affected if his company acquires a greater stake in the OSE.

If the agency gave its approval, Murakami’s fund might decide to acquire a 50 percent stake in the OSE, effectively taking control of the bourse’s management, the agency official said.

Murakami has been critical of OSE management and has demanded it pay better dividends. He has also criticized the OSE’s decision in May to suspend new listings on its Hercules market for startups due to computer problems.

“We’d like to increase the stakes of the general shareholders in the OSE to drastically change its management,” Murakami said recently.

The FSA may make its final decision on the application next month. If the financial watchdog rejects it, Murakami will probably take countermeasures, including an administrative lawsuit.

Murakami, an ex-official of the former Ministry of International Trade and Industry, founded the Tokyo-based investment management company M&A Consulting Inc., which focuses on cash-rich but underperforming companies. He is a well-known advocate of shareholder rights.

The FSA calls a hearing when it considers an application inappropriate, and is inclined to reject Murakami’s application at this point, sources said.

At the hearing, the FSA briefed Murakami on its decision-making criteria and rationale. It then heard Murakami’s argument and asked him about the purpose of his plan and how he intends to be involved in the bourse’s operations.

The Securities and Exchange Law requires that a general shareholder get FSA approval when acquiring a stake of 20 percent or more in a stock exchange, in order to protect the public interest.

Approval is granted if the applicant meets three conditions: the party will not hamper the operations of the exchange, understands its public role and has social credibility. The FSA official said Murakami meets the last two conditions.

The Murakami fund is the OSE’s top shareholder and had a stake of some 10 percent as of late March, accumulated in group funds and other related concerns. He filed for FSA approval to boost his stake to more than 20 percent in June.

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