Japanese prosecutors have arrested a former executive of SMBC Nikko Securities on suspicion of involvement in an insider-trading ring, in a widening crackdown that has engulfed several leading financial institutions, including JPMorgan, Nomura and Sumitomo Mitsui Trust Bank.
The Yokohama District Prosecutors Office arrested Hiroyoshi Yoshioka, 50, a former executive of SMBC Nikko Securities and ex-SMBC banker, along with three others suspected of insider trading in the shares of transport company Vantec, before the announcement of a takeover bid by Hitachi Transport System.
The arrests highlight the regulators’ determination to crack down on insider trading. They follow regulatory action against banks that leaked inside information to benefit their clients.
Nomura, which admitted it was the source for three insider-trading cases, has been dropped from managing the government’s sale of shares in Japan Tobacco, which is one of the largest new share issues this year.
This is the first time that an executive of a securities company in Japan has been arrested in an insider-trading case. It is also highly unusual, since Yoshioka has not been accused of profiting financially from the insider trading.
Under Japanese law, providing inside information in itself is not a crime unless there is some kind of financial profit received.
The Securities and Exchange Surveillance Commission, the regulator, declined to say whether Yoshioka had benefited from the trades or received kickbacks but said that he was involved in several other trades made by the officials of the financial group, on the basis of inside information. “Considering the degree of Yoshioka’s involvement [in the trades] we decided that he is also a suspect in the criminal case,” the SESC said.
“The FSA [Financial Services Agency] is clearly sending a message that there is no rock that won’t be turned in their pursuit of insider trading,” said Christopher Wells, a partner at law firm White & Case in Tokyo. “They have raised the bar considerably. This means that an executive at any level could be arrested.”
Yoshioka was an executive at SMBC Nikko in charge of investment banking when the bank was acting as financial adviser to Hitachi Transport System on its bid for Vantec last year.
Prosecutors also arrested a fourth person whose account was allegedly used to make the trades.
The group bought Vantec shares, which were trading at about Y120,000 before the takeover announcement, for a total sum of Y2.4m ($30,000)
After the deal was made public, Vantec’s shares rose to as much as Y240,000, the SESC said.
SMBC Nikko apologised for the concern and inconvenience it had caused. “We will continue to cooperate fully with the authority in respect of the investigation… and will continue to strive to enhance our internal controls,” the bank said in a statement. -By Michiyo Nakamoto