Fraudulent Stock Trading: Such Acts Trample on Professional Ethics

Editorial

15:44 JST, October 24, 2024

Did two people forget that they were engaged in work with a high public interest? One cannot help but be shocked by a string of fraudulent acts that trample on professional ethics.

The Securities and Exchange Surveillance Commission has launched a compulsory investigation on suspicion of violations of the Financial Instruments and Exchange Law, alleging that a Tokyo Stock Exchange employee has engaged in insider trading. The commission also intends to consider referring him to the special investigation squad of the Tokyo District Public Prosecutors Office.

The employee belonged to the TSE department responsible for timely disclosure, which handles important information about listed companies. He is suspected of having obtained undisclosed information on a takeover bid and then encouraging a relative to trade stocks. The relative is alleged to have profited from the stock transactions.

In a separate case, a judge on temporary assignment from the Supreme Court to the Financial Services Agency is also suspected of insider trading. He was in a position to review the documents of companies planning a takeover bid, and is believed to have traded shares based on this and other information.

The law prohibits insider trading, where a person who has knowledge of a takeover bid or merger and acquisition for a listed company trades shares of the company before the information is made public.

With about 4,000 listed companies, the TSE is the foundation that supports Japan’s economy and its financial and capital markets. The FSA oversees the financial markets. Of course, employees of both the TSE and the FSA are required to maintain a high level of professional ethics.

Both men should have been well-versed in finance and legislation. It would be impossible for them not to know the rules. One cannot help thinking that they intentionally committed illegal acts for the benefit of themselves or their relatives.

Since January this year, there has been an expansion of the Nippon Individual Savings Account (NISA), an investment program that offers tax exemptions on gains from small investments. Foreign investment in Japan is also thriving, and the stock market has reached a historically high level.

The scandals can be called serious in that they could shake public confidence in the Japanese market. The authorities concerned must clarify their motives and the backgrounds of the incidents and work to prevent a recurrence.

During the COVID-19 pandemic, two young career-track bureaucrats from the Economy, Trade and Industry Ministry were arrested for defrauding the government of a total of about ¥15.5 million, mainly via a subsidy program intended to help business owners and others continue their work. The two suspected of insider trading this time are also said to be in their 20s or 30s.

If more and more people are losing sight of their pride in and responsibility for working for the public good and are instead focusing only on getting money easily, then the situation is serious.

Government offices and companies need to ensure compliance with laws and regulations through such means as training sessions. Programs to raise awareness of the importance of professionalism and to instill a sense of responsibility, among other steps, could also play an important role.

(From The Yomiuri Shimbun, Oct. 24, 2024)