Nomura to Brief on Information Leak as FSA Prepares Penalty

(Bloomberg) -- Nomura Holdings Inc. is poised to release the findings of an internal investigation into improper handling of stock market information as Japan’s financial regulator prepares to penalize the firm’s domestic brokerage unit.

Chief Executive Officer Koji Nagai and other Nomura officials are due to hold a press conference at 3 p.m. Japan time on Friday to discuss the results of the probe. The Financial Services Agency plans to issue a business improvement order against Nomura Securities Co. as soon as this month after the leak of information on changes to the composition of the Tokyo Stock Exchange market segments, a person with knowledge of the matter said.

Information “was handled improperly from the viewpoint of ensuring fair and sound markets in the course of communicating information at Nomura Securities,” the Tokyo-based firm said in a statement late Thursday. The incident has already prompted one client to say it will drop Nomura from a planned bond sale.

Read about the Osaka Gas decision to drop Nomura from its bond sale

Nomura Research Institute’s Sadakazu Osaki, who was on a Tokyo Stock Exchange panel considering changes to the market segments, leaked information within the securities firm that was later shared with investors, according to the Nikkei newspaper, which reported earlier on the agency’s planned action.

A business improvement order generally requires the subject to fix internal controls rather than pay fines. It would be the first such penalty for Nomura since 2012, when the FSA found that employees at Japan’s biggest brokerage leaked information on equity offerings that was subsequently used for insider trading. The firm’s chief executive officer at the time subsequently resigned.

While the FSA doesn’t see the latest incident as amounting to insider trading, it determined that it undermined trust in the market, the Nikkei reported. CEO Nagai plans to take a pay cut as a result of the incident, according to a separate Nikkei report on Friday.

Osaka Gas

Osaka Gas Co. plans to drop Nomura as an underwriter for a bond sale due to the report on the FSA’s move, according to a spokeswoman. The utility is planning sales of long-term bonds later this month, according to data compiled by Bloomberg.

Investors shrugged off the FSA news. Shares of Nomura rose 1% at 12:38 p.m. in Tokyo on Friday, while the benchmark Topix dropped slightly. Nomura Research Institute gained 0.7%. Nomura owns about 39% of NRI, according to the research institute.

Yasuhiro Komatsu, a spokesman at NRI, said the company hasn’t allowed Osaki to speak publicly since the incident. While the information he provided to Nomura Securities was all publicly available, his act was inappropriate, Komatsu said.

Japan Exchange Group Inc. is considering changes that involve cutting the number of stock sections to three from four, amid criticism that there are too many. The bourse operator released a report in March that detailed feedback from investors, companies and brokerages on ways to revamp the sections.

©2019 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.