Japan securities watchdog seeks prosecution of SMFC unit over market manipulation

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Japan securities watchdog seeks prosecution of SMFC unit over market manipulation

SMBC Nikko Securities'Nikko Securities' logo is pictured at its Tokyo headquarters.

TOKYO Reuters-Japanese securities watchdog has recommended the prosecution of SMBC Nikko SecuritiesNikko Securities, a brokerage unit of Sumitomo Mitsui Financial Group Inc SMFG, over 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 involve temporary business suspensions or orders to improve internal controls, amongst other things.

The watchdog said Nikko Securities and SMFG's banking unit shared customer information in violation of firewall rules that restricts such information sharing across banking and securities units within the same financial group.

Nikko Securities and six former executives have been indicted on market manipulation charges for the purchase of 10 individual stocks on the market, allegedly to push up their prices and make sure block trade deals don't fall through.

The revenue impact of the market manipulation was about 10 billion yen $69.09 million for the last financial year and is likely to double in the current year through March, as institutional investors and companies stopped businesses, according to the company.

In a joint statement, SMFG and Nikko Securities said they would take the recommendations seriously and make efforts to regain public trust.