Alleged stock manipulation at SMBC Nikko may have been organizational

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The alleged stock manipulation at SMBC Nikko Securities Inc. involved multiple sections, suggesting the misconduct was organizational, investigative sources said on Saturday, after four company employees were arrested.

The four employees, including the head of the company’s equity department, are suspected of trying to prevent a decline in the share price of five individual stocks on the first section of the Tokyo Stock Exchange through actions such as the placing buy orders from December 2019 to November 2020, the sources said.

SMBC Nikko Chairman Yuichiro Kondo apologized for the alleged misconduct, saying, “I deeply regret that we as a securities company caused an incident that could have shaken market confidence.”

“I deeply apologize to investors and market participants,” Kondo said at a news conference in Tokyo. He admitted that the internal management system had been insufficient to prevent illegal behavior, but denied that he would resign from his post.

“My responsibility is to first recognize and grasp the situation accurately, take steps for improvement and make every effort to regain trust,” he said.

The four suspects are believed to have been involved in transactions known as “block deals”, which are used when large shareholders sell a significant portion of their stake in a company.

Securities houses often pick up these stocks after trading hours and invite interested investors to buy them. The difference between the purchase price and the sale price becomes a profit.

Prosecutors raided the Tokyo headquarters of SMBC Nikko Securities on Friday on suspicion of stock manipulation. | KYODO

According to the sources, SMBC Nikko’s global financial products and solutions section responds first to requests from institutional investors and corporate entities when they want to sell stakes through bulk offerings.

Next, the section will arrange a set of procedures with the stock trading section, such as setting trading days and discounts for trades.

But in this case, the stock trading section is suspected of not only being involved in such arrangements, but also in the manipulation of stocks, such as buying stocks with internal funds and trying to maintain the stock price, the sources said.

The Japanese securities firm set up a commission of inquiry made up of three lawyers to investigate the incident, Kondo said.

The suspects are Trevor Hill, 51, head of the company’s equity department, Alexandre Avakiants, 44, deputy head of equity, Makoto Yamada, 44, head of the equity trading section, and Shinichiro Okazaki, 56. , who directed the actions. product solutions section, the predecessor of the global financial products and solutions section.

The four denied the allegations under voluntary questioning, saying the moves were legitimate transactions and had no intention of supporting stock prices, the sources said.

Manipulating stocks in violation of the Financial Instruments and Exchanges Act is punishable by up to 10 years in prison or fines of up to 10 million yen ($87,160), or both.

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