The Tokyo Stock Exchange has decided not to delist Nikko Cordial Corp., the nation’s third-largest brokerage, from the Tokyo bourse despite its false reporting of earnings. The TSE’s explanation — that the brokerage’s misconduct was “not black enough” — makes the public wonder whether the exchange is strict enough in overseeing the behavior of listed companies. The decision may have left many uncomfortable in light of the fact that Nikko Cordial is in a position to give guidance to companies seeking a stock market listing. If the exchange’s power and rules are insufficient, changes should be made.

In December, Nikko Cordial admitted falsifying its financial report for the business year ended March 2005. Through illegal manipulation of transactions among affiliates, it had padded recurring profits by 18.7 billion yen. The Financial Services Agency fined the firm 500 million yen, the largest fine it has ever imposed.

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