Administrative penalties recommended for SMBC Nikko

The Yomiuri Shimbun
The headquaters of Sumitomo Mitui Financial Group Inc. in Tokyo

TOKYO (Jiji Press) — The Securities and Exchange Surveillance Commission said Wednesday that SMBC Nikko Securities Inc. should face administrative penalties over its involvement in stock price manipulation.

The Sumitomo Mitsui Financial Group Inc. unit engaged in fraudulent trading, the commission said.

The Financial Services Agency is expected to order SMBC Nikko to take comprehensive steps aimed at preventing any recurrence and halt the transactions involved in the incident for a certain period.

The agency also plans to order Sumitomo Mitsui Financial to step up oversight of its subsidiaries.

It is also expected to comment on management’s responsibility in the case.

The commission noted inadequacies in SMBC Nikko’s oversight of its trading and law compliance. The company “lacked awareness of its role as a market gatekeeper,” it said.

SMBC Nikko and six of its former executives have been indicted on charges of using the company’s own funds to sustain the prices of certain stocks in connection with so-called block offer trades.

In block offer trades, securities firms buy large amounts of shares from major shareholders and sell them to investors outside the market.

The commission also said that SMBC Nikko gained undisclosed information on clients from Sumitomo Mitsui Banking Corp., another Sumitomo Mitsui Financial unit, on numerous occasions without their consent.

It recommended penalties against SMBC Nikko for violating firewall regulations that restrict the sharing of customer information between banks and securities firms within the same financial group.

Sumitomo Mitsui Financial and SMBC Nikko released statements saying that they will make full efforts to regain trust.