Shares of Nomura rose 3.9 percent to 294 yen, the highest since May 2, at the close of trading in Tokyo before the announcement, while the Nikkei 225 Stock Average gained 1.5 percent. The brokerage has lost 26 percent in the past year.
The government’s probe has extended to Nomura’s closest domestic rival, Daiwa Securities Group Inc., according to two people with knowledge of the situation. A Daiwa employee leaked insider information on Nippon Sheet Glass Co.’s 2010 public share offering to a hedge fund, the people said, asking not to be identified before a public announcement.
The Securities and Exchange Surveillance Commission yesterday recommended Japan Advisory Ltd., a hedge fund advisory firm, pay a fine of 375,183 yen ($4,720) for trades related to the Nippon Sheet offering. Daiwa will start an internal probe into the Japan Advisory trades and strengthen its controls, the brokerage said in a statement to the Tokyo Stock Exchange.
A panel of lawyers hired by Nomura for its internal investigation identified problems in the firm’s sales structure, working conditions and compliance, according to the brokerage’s report. Sales staff were given “excessive inclinations in the drive for profits,” it said.
Minoru Hatada, who was in charge of the institutional equity sales department at the time of the incidents, will step down, as will Hiroshi Tanaka, who was head of compliance. Other employees “shall be severely penalized,” Nomura said in its proposed list of changes.
The brokerage plans to make it mandatory for institutional equity sales staff to use mobile phones with recording capability, and their taped conversations will be stored for two years instead of two weeks. Guidelines on entertainment and meeting expenses will also be issued, and Nomura will review whether there is an “excessive concentration” among the recipients, it said.
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