THE ASAHI SHIMBUN
June 24, 2022 at 15:06 JST
The headquarters of SMBC Nikko Securities Inc. in Tokyo’s Chiyoda Ward (Chihaya Inagaki)
A committee set up by SMBC Nikko Securities Inc. to investigate alleged market manipulation within the company is condemning executives for “unjust acts” that were “intended” to prop up stock prices before the market closed.
In its official report published on June 24, committee members said they found “insufficient crisis awareness and the dysfunctional governance system" in the company as the reasons behind the alleged offenses.
Analysts said that because the committee members strongly criticized the company’s corporate culture in the report, the firm’s management will inevitably be held accountable for the scandal.
The Tokyo District Public Prosecutors Office has indicted six company executives as well as the company itself for violating the Financial Instruments and Exchange Law by manipulating the market.
The six people include the company’s former vice president and a former head of the equity section.
Prosecutors believe that between 2019 and 2021, they placed a large volume of buy orders on the stocks of 10 companies that were listed on the then First Section of the Tokyo Stock Exchange.
They did so with the company’s own funds to stabilize the stocks’ closing prices.
The stocks were targeted for block trades, where a large volume of stock owned by major shareholders is bought by securities companies and then sold to investors outside the market.
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.
The six executives, including the former vice president, denied any wrongdoing.
However, the committee members declared in the report that the buy orders were “intended to prevent the closing price from falling which could lead sellers of the stocks (major shareholders) to cancel the transactions.”
They said that these were “acts that could give rise to doubts that (the former executives) artificially manipulated prices (of the stocks)” and characterized them as “inappropriate and unjust acts that go against security firms’ roles and responsibilities in the market.”
The investigation by the committee found that Yuichiro Kondo, the president of the company, received an email from the vice president that referred to supporting the prices of stocks targeted for block trades by buying them in the event their prices fall.
However, the committee members did not conclude that the president was clearly aware of the market manipulation.
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