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The Financial Services Agency announced Wednesday it has rejected financier Yoshiaki Murakami’s application to acquire a more than 20 percent stake in Osaka Securities Exchange Co.

The financial watchdog made the decision after a public hearing Aug. 17, during which its officials said that because Murakami’s fund invests in OSE-listed issues, his acquisition of a greater stake in the operator could adversely affect the bourse’s operation.

Industry insiders said the FSA’s rejection of the application may prompt Murakami, once an official at the former Ministry of International Trade and Industry who is well known for advocating shareholder rights, to take countermeasures, including an administrative lawsuit.

But while Murakami slammed the FSA’s decision, saying its grounds were unclear, he added that he had yet to determine his next course of action.

The FSA calls a hearing when an application is considered inappropriate, and is inclined to reject it at that stage, according to sources.

FSA officials said they had been concerned that there might be a conflict of interest between the activities of the Murakami fund and the operations of the bourse, which include monitoring market transactions and screening listed firms.

These concerns could not be dispelled at the hearing, nor were there legal measures to ensure a conflict of interest could be averted, the officials added.

The Murakami fund is already the Osaka bourse’s top shareholder, with a stake of about 10 percent as of late March through its group funds and other related concerns. In June, Murakami filed for FSA approval, as required under the Securities and Exchange Law, to boost his stake to more than 20 percent.

But as Murakami has occasionally said his investment in the OSE is not very attractive, exchange officials wonder what he really wants to accomplish by raising his stake.

Later Wednesday, bourse officials said they had no comment regarding the FSA decision, noting it was an issue between Murakami and the financial watchdog.

“We will continue to strive to secure fair and transparent market management and ensure that investors are protected,” one official said.

Murakami has been critical of OSE management, which operates the nation’s second-largest bourse, and has demanded it boost dividends.

He criticized the OSE’s decision in May to suspend new listings on the exchange’s Hercules market for startups due to computer system problems.

Murakami is basing his demand for higher dividends on the OSE’s internal reserve of more than 20 billion yen. A study panel at the exchange plans to hear his opinion when it meets later this month.

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