Photo/Illutration The Tokyo head office of SMBC Nikko Securities Inc. on April 11 (Hikaru Yokoyama)

Tokyo prosecutors have indicted a former executive of SMBC Nikko Securities Inc. on suspicion of market manipulation.

Officials from the Tokyo District Public Prosecutors Office announced on April 13 the indictment of former Vice President Toshihiro Sato, 59, in breach of the Financial Instruments and Exchange Law.

Tokyo prosecutors brought the same charges against the major securities company and Makoto Yamada, 44, who headed the equity section in the equity department.

Six executives in total have now been indicted for alleged market manipulation involving 10 stocks over a series of financial scandals.

Prosecutors are expected to end their unusual, full-scale investigation into the major securities firm, which is known in the industry as one of the “market gatekeepers.”

Sato and Yamada denied any wrongdoing.

Based on the recommendation of the Securities and Exchange Surveillance Commission, the Financial Services Agency will consider taking administrative disciplinary measures against the company.

“We can’t deny the inadequacies of our internal governance, so we can’t avoid our responsibilities as a corporation,” an SMBC Nikko representative said.

According to the latest announcement by prosecutors, Yamada and other officers are believed to have placed a large volume of buy orders on five stocks listed on the First Section of the Tokyo Stock Exchange between October 2020 and April 2021 to ensure the share price of the stock remained stable.

Sato is suspected to have been involved in one of the stocks.

Prosecutors had brought the same charges against Yamada and four other executives over five other stocks in March.

They believe that Yamada was involved in all 10 stocks that were targeted for block trades.

In block trades, a large volume of stock owned by major shareholders is bought outside the market and sold to investors.

The share price for the transaction is determined by the closing price on the day the sale is to be made, and SMBC Nikko receives marginal gains.

Prosecutors suspect that the company propped up share prices to prevent the closing price from falling to keep shareholders from withdrawing from the sale to avoid damaging losses.

The company’s sales section, or the window for block trades, and its operation section, which trades stocks with the company’s funds and was directed by Yamada, shared information, including what would be required to prop up the stock prices, according to sources.

Sato and other superiors knew this and approved the move in advance, according to sources.

Two other officers accused by the surveillance commission were not indicted.

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