Japan’s financial regulator plans to introduce steeper fines for insider trading in the wake of scandals engulfing Nomura Securities and other brokerages, toughening regulations that critics have called too lax by global standards.
Financial services minister Tadahiro Matsushita on Wednesday instructed an advisory panel of scholars and experts to review current regulations and propose new rules, including penalising those who pass on insider information.
Under current rules, those who trade on insider information are subject to penalties but those who solely pass on tips go unpunished, which some blame for making insider trading relatively easy here.
The government hopes to submit a bill to introduce tougher rules in parliament next year.
The country’s market watchdog, the Securities Exchange and Surveillance Commission (SESC), has been conducting an industry-wide investigation aimed at stamping out insider trading ahead of public share offerings, a problem that had gone unchecked in Japan for years.
Nomura, Japan’s leading brokerage, has acknowledged it was the source of leaks on planned share offerings by energy firm Inpex, Mizuho Financial Group and Tokyo Electric Power in 2010. In all three cases, employees in its institutional sales department provided the tip-offs.
The scandal has seen Nomura dropped as an underwriter for planned bond offerings, and the brokerage is cutting top executives’ pay and temporarily shutting an equity sales desk in a bid to resolve the investigation.
Critics say Japan sets fines that are too small to act as a deterrent against insider trading compared with the United States.
In Japan, fines are designed mainly to forfeit ill-gotten profits, and in cases where investment funds commit insider trading for clients’ accounts, fines are calculated based on fees the funds receive from the clients.
Late last month, the Financial Services Agency slapped fines of 130,000 yen ($1,600) on a fund management arm of Sumitomo Mitsui Trust Holdings Inc for insider trading related to the public share offerings of Mizuho and Inpex in 2010.