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Japan's securities watchdog recommends punishment for SMBC Nikko

Stock Markets Sep 28, 2022 04:42AM ET
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© Reuters. FILE PHOTO: SMBC Nikko Securities' logo is pictured at its headquarters in Tokyo, Japan December 5, 2017. Picture taken December 5, 2017. REUTERS/Kim Kyung-Hoon
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By Makiko Yamazaki

TOKYO (Reuters) -Japan's securities watchdog on Wednesday recommended punishment of SMBC Nikko Securities, the brokerage unit of Sumitomo Mitsui (NYSE:SMFG) Financial Group Inc (SMFG), over alleged market manipulation that led to the indictment of former executives.

The Securities and Exchange Surveillance Commission recommended that the Financial Service Agency impose an administrative punishment on Nikko after it found insufficient compliance had allowed the misconduct.

Such measures could typically entail temporary business suspensions or orders to improve internal controls, among other things.

The watchdog also said it separately found SMBC Nikko Securities and SMFG's banking unit had shared customer information in violation of firewall rules restricting such information sharing across banking and securities units within the same financial group.

The latest finding could affect ongoing discussions to deregulate the firewall rules, modelled on the now defunct U.S. Glass Steagall Act and designed to prevent abuse of banks' dominant bargaining position.

The rules were partially relaxed this year thanks to lobbying from the banking industry, which argues that such rules are outdated and hurts their global competitiveness.

The watchdog said SMBC Nikko and SMFG's main banking unit shared confidential information of several corporate clients without their consent on potential deals including tender offers and mergers.

With regards to the market manipulation, Nikko Securities and six former executives have been indicted on charges for its purchase of 10 individual stocks on the market, allegedly to push up their prices and ensure block trade deals in them did not fall through.

The company has said the revenue impact from the market manipulation was about 10 billion yen ($69.09 million) for the last financial year and likely to double in the current year through March as some institutional investors and companies suspended businesses.

SMFG and Nikko Securities issued a joint statement saying that they would take the recommendations seriously and make efforts to regain public trust.

($1 = 144.7300 yen)

Japan's securities watchdog recommends punishment for SMBC Nikko

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