US financial firm fined for insider trading in Japan

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Baltimore News.Net
Friday 8th June, 2012

TOKYO - Financial regulator of Japan, the Securities and Exchange Surveillance Commission (SESC) has proposed a fine of 14.68 million yen ($185,350) against First New York Securities for alleged insider trading, as part of a widening investigation into suspicious activities ahead of a series of public share sales.

The regulator on Friday said the proposed fine is for the alleged involvement of First New York Securities in an insider trading case in 2010 with Tokyo Electric Power Co. (TEPCO), Japan's largest utility and the operator of the ravaged Fukushima Daiichi nuclear power plant.

First New York Securities (FNYS) is the first foreign company to be charged with such a fine in the investigation, and it is also the largest fine the SESC has proposed. Until now, convictions for insider trading have been rare in Japan, while fines have been as low as $1,500.

Striving to eliminate the widespread insider trading in Japan, the SESC investigation also marks the third case that has been connected to Nomura Holdings, which is Japan's largest brokerage firm.

Nomura was the lead underwriter on TEPCO's stock offering that was valued at $6 billion. In all three cases against the firm, employees have been found to have leaked the information.

The offering by Tepco was announced in September 2010 and had been preceded by a sharp sell-off in the company's shares, a pattern that has been repeated elsewhere in Japan, raising concerns of rampant leaks of inside information before major share sales.

In a statement, the regulator said a trader at First New York Securities had learned of Tepco's offering through a securities consultancy, whose source was an employee at the offering's lead underwriter.

First New York Securities could not immediately be reached for comment.

The New York headquartered firm employs over 200 traders, according to its Web site.

Though the regulator did not name the underwriter, but in a statement, Japan's largest brokerage firm, Nomura, acknowledged its involvement and said it was cooperating fully in investigations.

"Nomura expresses its regret concerning the findings that non-public information was received from Nomura employees in such cases and we sincerely apologize for the trouble this has caused," Nomura said in a statement.

Nomura hopes to release the report of an internal investigation before month end.

JPMorgan Chase is the second of the two underwriters for the sale, though its name has not been mentioned by the regulator, it is as yet unclear if it too will face any fines.

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