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Apr-22-2008Nomura Employee Investigated for Insider Trading (Update4)(topic overview)
CONTENTS:
- The Nikkei newspaper had reported earlier that the employee, a Chinese national who had been employed at Nomura Securities' corporate information division, allegedly leaked information related to merger and acquisition deals and tender offers to two Chinese acquaintances, and used the leaked information to earn nearly 40 million yen ($387.7 million) in profits from stock trading. (More...)
- TOKYO, April 22 (Reuters) - Nomura Holdings (8604.T: Quote, Profile, Research ), Japan's largest brokerage, said the country's securities watchdog was investigating an employee on suspicion of insider trading, which a newspaper reported involved leaking details of merger deals. (More...)
- Speaking before a gathering of 600 company officials on March 28, Watanabe exhorted the firm to "aggressively take risks'' in pursuit of higher profits. (More...)
- The two people who received information used it to trade shares in more than 20 companies from 2006 to 2007, including a company targeted for acquisition by a large semiconductor component maker, the Yomiuri reported. (More...)
- "If the credit crisis winds up with no major financial companies going bankrupt, we would be lucky,'' said Yoku Ihara, head of equity research at Tokyo-based Retela Crea Securities Co. "The problem is very deeply rooted.'' (More...)
- Daiwa's net income dropped 51 percent in the year ended March 31 after the value of fixed-income securities fell, the company said in an April 4 preliminary earnings statement. (More...)
- Insider trading is illegal stock trading based on information not available to the public. (More...)
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The Nikkei newspaper had reported earlier that the employee, a Chinese national who had been employed at Nomura Securities' corporate information division, allegedly leaked information related to merger and acquisition deals and tender offers to two Chinese acquaintances, and used the leaked information to earn nearly 40 million yen ($387.7 million) in profits from stock trading. [1] The stock trading volume is thought to have amounted to hundreds of millions of yen, while the total profits are believed to be about 50 million yen, according to the sources. The commission suspects the employee asked his acquaintances to carry out the alleged trading to reduce the chances of being caught. In other insider-trading scandals involving securities firms, a former division chief and another employee at Daiwa Securities SMBC and a former section chief at Nomura Securities were indicted over an insider-trading scandal concerning takeover bids by Nichimen Corp., now Sojitz Corp., for acquiring its unit in 2002. They allegedly made profits of several million yen.[2]
TOKYO, April 22 (Reuters) - A Nomura Holdings (8604.T: Quote, Profile, Research ) group employee and two others are under investigation on suspicion of insider trading that earned them roughly 40 million yen ($387,600) in profit, the Nikkei business daily reported on Tuesday.[3] A Nomura employee and two others were suspected of making around 40 million yen ($390,000) in profit from trading on insider information, the Nikkei business daily reported, quoting sources familiar with the matter.[4]
TOKYO, April 22 (Reuters) - Nomura Holdings (8604.T: Quote, Profile, Research ), Japan's largest brokerage, said the country's securities watchdog was investigating an employee on suspicion of insider trading, which a newspaper reported involved leaking details of merger deals. [4] TOKYO -- Nomura Holdings Inc. said Tuesday it's under investigation by Japan's securities watchdog over alleged insider trading by an employee, news that knocked down the share price of Japan's largest brokerage.[5] TOKYO (Thomson Financial) - Japan's Securities and Exchange Surveillance Commission (SESC) has launched an investigation into alleged insider trading by an employee of Nomura Holdings Inc., a company spokesman confirmed on Tuesday.[1]
A spokesman at Nomura Holdings declined to give further details, while a spokesman at the regulator, the Securities and Exchange Surveillance Commission, also declined to comment. Insider trading cases raised questions about the effectiveness of information management at brokerages, analysts said, but they saw limited ongoing impact on Nomura's business and stock price. "Clients can't really avoid Nomura as it's by far the biggest M&A; broker in Japan," said Tatsuo Majima, an analyst at Deutsche Securities. "Some companies with strict compliance rules may reduce dealings with Nomura, but that won't lead to any prominent decline in its businesses or earnings." A senior government official warned such scandals affected confidence in the brokerage sector, but Credit Suisse analyst Azuma Ohno also said he saw little lingering effect.[4]
TOKYO, April 22 (Reuters) - Japan's securities watchdog is investigating an employee of Nomura Holdings (8604.T: Quote, Profile, Research ) on suspicion of insider trading, Japan's largest brokerage said on Tuesday.[6]
The commission believes the case may prove to be a large-scale insider-trading scandal. It is set to launch an investigation Tuesday into the three suspects on suspicion they violated the Financial Instruments and Exchange Law. The alleged insider trading is believed to involve a larger amount of money than any other such scandal involving an employee of a securities firm.[2] A spokesman for the Securities and Exchange Surveillance Commission wasn't available to comment. "It's always bad if a securities firm employee uses inside information for personal gain,'' Yoshimi Watanabe, the minister for financial services, said at a regular press briefing. "We'll have to deal with this strictly.''[7] An employee of Nomura Securities Co. is suspected of having leaked unpublished information on corporate mergers and acquisitions the firm dealt with to two acquaintances, according to sources close to the Securities and Exchange Surveillance Commission.[2] According to the sources, the male employee, a 30-year-old Chinese national, worked for a division that deals with corporate mergers and acquisitions at the Chuo Ward, Tokyo-based headquarters of Nomura Securities until the end of 2007, then was transferred to a Hong Kong-based subsidiary of the firm. The employee allegedly obtained information on M&A; deals while working at the division in 2006 and 2007, and leaked the information to a Chinese acquaintance in his 30s who works at a machine component maker in Japan and the acquaintance's younger brother in his 20s.[2] The Nikkei reported Tuesday that the employee, a member of Nomura Securities' corporate information division, is suspected of leaking confidential information on mergers, acquisitions and tender officers to the two others.[8] An employee at Nomura Securities Co., the brokerage unit of Nomura Holdings, is under investigation for allegedly leaking information on mergers and acquisitions, the Yomiuri newspaper reported, without saying where it got the information.[9]
The employee, in Nomura's mergers and acquisitions department, leaked information about deals the firm worked on to two people, the Yomiuri newspaper reported.[7]
The reports said the suspects appear to have been involved in trading of more than 20 companies for which Nomura's corporate information division handled mergers, acquisitions and tender offer deals.[8]
Nomura advised on 24 Japanese mergers and acquisitions worth a combined $6.7 billion in the three months ended March 31, down from 41 deals worth $9.9 billion a year earlier, Bloomberg data shows.[10] Nomura ranked first among financial advisers on Japanese mergers and acquisitions last year, advising on 147 transactions totaling $28.9 billion, according to data compiled by Bloomberg. The company has slipped to third place this year behind UBS AG and Goldman Sachs Group Inc., Bloomberg data shows.[7]
As the prices of coal and other materials are rising, the company's costs are likely to increase by 1 trillion yen ($9.68 billion), the Nikkei said. "We didn't expect steelmakers to seek a price increase by this degree,'' Mitsuo Shimizu, an analyst at Cosmo Securities Co. in Tokyo, said in an interview with Bloomberg Television. "This would help companies narrow a possible profit decline this year.''[9] Net income fell 89 percent to 3.8 billion yen ($37 million) in the three months ended March 31, according to the median estimate of six analysts surveyed by Bloomberg. Two of them predicted a 10 billion yen loss as trading income and investment-banking fees slumped. Watanabe, who took over from Nobuyuki Koga this month, must contend with crumbling trading and investment banking profits after a failed U.S. expansion led to at least $1.4 billion of losses. "He has to scrutinize all existing operations in Japan and overseas in a very short period, shut down the inefficient and weak ones, and inject capital into more lucrative businesses that Wall Street banks have backed away from,'' said Azuma Ohno, a Credit Suisse Group analyst in Tokyo.[10] The figures suggest a loss of 14.3 billion yen in the fourth quarter, Daiwa's first in five years. Nomura's trading profit fell by more than 23 billion yen from a year earlier in the quarter and investment banking fees declined by at least 11 billion yen, according to an April 1 report by Natsumu Tsujino, a Tokyo-based analyst at JPMorgan Chase & Co. Tsujino said Nomura probably lost money on investments using its own money. "As the fourth quarter saw great financial market volatility, it's possible that Nomura, which tends to have relatively large trading positions, ended with worse-than- expected trading results,'' Tatsuo Majima, a Tokyo-based analyst at Deutsche Securities Inc., said in an April 14 report to clients.[10]
April 21 (Bloomberg) -- Nomura Holdings Inc., Japan's largest securities firm, may report little or no profit for the fourth quarter, underscoring the challenge facing new Chief Executive Officer Kenichi Watanabe as global credit-market losses cripple revenue.[10] Smaller rival Mizuho Financial Group Inc. lost 1 percent, while Nomura Holdings Inc., Japan's largest securities firm, fell 1.5 percent.[9]
April 22 (Bloomberg) -- Nomura Holdings Inc., Japan's largest investment bank, said the country's securities industry watchdog is investigating one of the company's workers over insider-trading allegations.[7]
Speaking before a gathering of 600 company officials on March 28, Watanabe exhorted the firm to "aggressively take risks'' in pursuit of higher profits. He said the market rout that led to at least $245 billion of losses at securities firms worldwide won't deter Nomura from expanding abroad. [10] Local rivals Daiwa and Mizuho Securities Co. have already disclosed the damage caused in the fiscal fourth quarter by the credit market rout. Mizuho Securities lost 220 billion yen in the period because of soured mortgage investments, its parent company, Mizuho Financial Group Inc., announced April 11.[10] Nomura, which will report earnings on April 25, held 170 billion yen of securities tied to U.S. commercial loans at the end of 2007.[10]
The securities watchdog could not be reached for comment. According to a Nikkei report, a 30-year-old Chinese employee and two others allegedly used insider information to execute stock trades that earned them about 40 million yen (US$387,000; 243,000).[11] The SESC will investigate how the employee obtained the information that was used for the stock trades and will also examine the efficiency of Nomura Securities' internal management structure, the Nikkei said.[1]
Nomura has acknowledged the SESC investigation and says it will cooperate fully. The Commission is expected to investigate both the methods used by the employee to obtain the insider information as well as Nomura Securities' internal management structure.[8]
Nomura stock fell 3.8 percent to 1,640 yen after the investigation was revealed, underperforming a weak securities sector that fell 3.5 percent.[4]
Smaller rival Daiwa Securities Group Inc. has dropped 32 percent. Koga shut Nomura's U.S. mortgage business, closed its Chicago office and gave up the role of primary Treasury dealer, which obligated it to bid at Federal Reserve auctions.[10] Competitor Daiwa Securities SMBC Co., the nation's second-largest investment bank, was forced to suspend some operations for a day after two former bankers were indicted for illegal trading in 2003. "Clients might possibly leave Nomura, as overseas institutional investors in particular are strict about this kind of behavior,'' said Shoichi Arisawa, an Osaka-based manager at Iwai Securities Co. "It's bad for Nomura to hurt the reputation of its advisory business, which is otherwise promising.''[7]
Nomura fell 3.5 percent to 1,645 yen in Tokyo trading as of 12:40 p.m., while the benchmark Topix index declined 1.1 percent. "Nomura deeply regrets this,'' company spokesman Michiyori Fujiwara said in Tokyo, where the firm is based.[7] The sources said the acquaintances are suspected of using the insider information to make profits of about 50 million yen through share trading.[2] The two made a 50 million yen ($485,000) profit from trading on the information, the newspaper said, without saying where it got the information.[7]
The employee and his accomplices are reported to have gained nearly 40 million yen (US$387,000) using the leaked information.[8]
Most of the M&A; deals were carried out through takeover bids or stock swaps, and the two allegedly bought shares of companies to be acquired based on the information provided by the employee.[8] The two suspects are thought to have sold the shares after the M&A; deals were announced and the share prices climbed. In takeover bids, an acquiring company normally offers to buy shares at a price higher than the market rate to encourage shareholders to sell their shares.[2]
The paper cites SESC sources as saying the employee allegedly obtained information on M&A; deals while working at the division in 2006 and 2007, and leaked the information to a Chinese acquaintance and the acquaintance's younger brother.[8] The information, including the names of firms set to make M&A; deals and the time the deals would happen, was passed along before it was officially announced on the Web site of the Tokyo Stock Exchange or in other media.[8]
The corporate information division is a core section tasked with providing consulting services for M&A; transactions and other deals.[1]
The two people who received information used it to trade shares in more than 20 companies from 2006 to 2007, including a company targeted for acquisition by a large semiconductor component maker, the Yomiuri reported. "It is deplorable that such an incident should take place,'' Japan's Chief Cabinet Secretary Nobutaka Machimura said at a regular press briefing in Tokyo. [7] U.S.-traded receipts of Mitsubishi UFJ Financial Group Inc., Japan's largest publicly traded bank, retreated 1.7 percent from the closing share price in Tokyo yesterday.[9]
April 22 (Bloomberg) -- Japan's stock futures fell after worse-than-expected earnings at banks renewed concern the turmoil in the global financial market isn't yet over.[9] The firm underwrote 11 stock sales worth a combined 232.8 billion yen during the quarter, down from 492.8 billion yen a year earlier, according to data compiled by Bloomberg.[10] The Tokyo-based firm lost 146 billion yen on investments in U.S. mortgage securities in the nine months ended Sept. 30.[10]
"If the credit crisis winds up with no major financial companies going bankrupt, we would be lucky,'' said Yoku Ihara, head of equity research at Tokyo-based Retela Crea Securities Co. "The problem is very deeply rooted.'' [9] Nomura said Tuesday it was fully cooperating with the Securities and Exchange Surveillance Commission, calling the allegations "extremely regrettable."[11] Japan's Securities and Exchange Surveillance Commission (SESC) is conducting the probe, the paper said.[8]
Daiwa's net income dropped 51 percent in the year ended March 31 after the value of fixed-income securities fell, the company said in an April 4 preliminary earnings statement. [10]
The Bank of New York Japan ADR Index, which tracks American depositary receipts of Japanese companies, gained 1.2 percent.[9] Analysts said that while in the short term the news might damage the brokerage's reputation, it isn't likely to weigh on Nomura shares for long because the scale of the wrongdoing and the amount of money involved don't appear to be large.[5] The 30-year-old worker being investigated was recently transferred to Nomura's Hong Kong unit, the Yomiuri said, without naming the employee or any of the companies involved.[7]
Insider trading is illegal stock trading based on information not available to the public. [11] Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms.[6]
SOURCES
1. Japan's Nomura confirms investigation into alleged insider trading by employee - Forbes.com
2. Nomura employee eyed over insider trading : National : DAILY YOMIURI ONLINE (The Daily Yomiuri)
3. Nomura employee under probe for insider trading -Nikkei | Markets | Markets News | Reuters
4. UPDATE 2-Nomura in insider trading probe, stock suffers | Markets | Markets News | Reuters
5. Free Preview - WSJ.com
6. Nomura says employee under probe for insider trading | Industries | Financial Services & Real Estate | Reuters
7. Bloomberg.com: Worldwide
8. Nomura Securities Employee Probed For Insider Trading [] - RTTNews, Today's Top Stories, Global Newswires, ToDay's Top News,Global Business news .
9. Bloomberg.com: Worldwide
10. Bloomberg.com: Japan
11. Japans Nomura employee under investigation over alleged insider trading - International Herald Tribune
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