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Nomura Securities to be penalized for alleged information leak

Brokerage is suspected of passing on knowledge of bourse's restructuring

Nomura Securities' dealing room in Tokyo (Photo by Ken Kobayashi)

TOKYO -- Japan's Financial Services Agency has decided to issue a business improvement order to Nomura Securities pursuant to the Financial Instruments and Exchange Act.

The order is expected to demand that the brokerage fix an information control system that allegedly allowed market information to be leaked to investors and other parties.

The FSA will call on Nomura to strengthen internal controls and compliance systems to prevent a reoccurrence.

The FSA order could come this month.

It will be the first business improvement order issued against Nomura since 2012, when the FSA dealt the top Japanese brokerage an order to cease insider trading practices in public stock offerings of listed companies.

In the recent case, Sadakazu Osaki, a fellow at Nomura Research Institute, was a member of a TSE advisory panel looking at adjusting the listing criteria for each of the bourse's sections. In March, it was revealed that Osaki had leaked confidential panel information to Nomura Securities.

Nomura Securities reportedly conveyed this information to investors through their strategists and sales people. The information dealt with new capitalization requirements companies would have to meet to be listed in each section.

The TSE has four "sections" -- the first and second as well as the Mothers and Jasdaq markets. It would like to reorganize into three sections and at the same time deal with a number of companies in the top section that lack growth potential.

The FSA has determined that although Osaki's alleged act was not insider trading, it was nevertheless a legal violation that could undermine market reliability.

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