The Financial Services Agency is expected to slap administrative penalties on the Japan Post Holdings Co. group by the end of this month over inappropriate insurance sales practices by Japan Post Insurance Co. and Japan Post Co., sources have said.

On Friday, the FSA informed the Japan Post Holdings units of the results of its on-site inspections and urged them to report on the problem, according to sources familiar with the situation.

Japan Post Insurance and Japan Post Co. are expected to release reports on their in-house investigations shortly. Based on the reports, the FSA will announce punishments on the two firms aimed at preventing any recurrence of the wrongdoing and clarifying the responsibility of management.

The insurance sales irregularities by the two firms are seen to have placed policyholders at a disadvantage in some 183,000 contracts. Insurance business law violations are suspected for 1,400 of them. Some 26,000 policyholders are seeking refunds of overpaid insurance premiums or calling for other measures to be taken to address the disadvantage.

Japan Post Insurance and Japan Post Co. have refrained from insurance marketing activities since the scandal broke. On top of the in-house probes, a special investigation committee comprising external lawyers, set up by the parent holding company and the two units, is investigating the case.

In its on-site inspections, launched in September, the FSA examined to what extent executives and other senior officials were aware of the questionable sales practices. It suspects that tough sales quotas and a lack of governance were behind the malpractices.

The FSA is believed to be considering severe actions against the group, such as issuing a partial business suspension order or business improvement order, informed sources said. The problem could lead to the resignation of top managers, according to industry sources.

Separately, the Ministry of Internal Affairs and Communications on Friday ordered Japan Post Holdings and Japan Post Co. to report by the end of this month the cause of the malpractices and preventive measures.

The ministry will consider taking administrative actions against them based on the reports.

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