Financial watchdog may punish SMBC Nikko for alleged market rigging

© Kyodo News

Japan's financial watchdog may take punitive action against alleged market manipulation by major Japanese brokerage SMBC Nikko Securities Inc., Shunichi Suzuki, minister in charge of financial services, said Friday.

"As the Financial Services Agency, we will take strict measures if necessary, depending on developments in the investigation," Suzuki, who is also finance minister, said.

The brokerage's deputy president, Toshihiro Sato, who supervises its equity department, was arrested on Thursday for allegedly placing large buy orders for an individual stock on April 8, 2021, to stabilize the price before selling it in violation of the financial instruments and exchange law, according to prosecutors.

Prosecutors the same day indicted five other executives of the company, believing they systematically conducted similar transactions between December 2019 and November 2020. They also charged the company itself.

The arrests and indictments were "extremely regrettable," Suzuki said.

"Securities houses and their executives are those who must dedicate themselves to securing fair transactions in the market," he said. "This case of alleged organized unfair deals is far from this, and could shake the trust in the market."

As punitive measures, the FSA can issue a business improvement order to urge the company to clarify the responsibilities of the management as well as rebuild its governance system.

In 2012, the FSA issued the order to SMBC Nikko after a former corporate officer at the brokerage was indicted over an insider trading scandal.