Japan’s Securities and Exchange Surveillance Commission has recommended punishment for SMBC Nikko Securities, the brokerage unit of Sumitomo Mitsui Financial Group (SMFG), over alleged market manipulation that led to the indictment of former executives.
The watchdog recommended that the Financial Service Agency impose an administrative punishment on Nikko after it found the misconduct had been enabled by insufficient compliance.
Exactly what the punishment will entail remains to be seen, but possible measures include temporary business suspensions or orders to improve internal controls.
SMBC Nikko Securities and SMFG’s banking unit were also found to have shared customer information in violation of firewall rules restricting such information being shared across units within the same financial group.
The watchdog said SMBC Nikko and SMFG’s main banking unit shared confidential information about several corporate clients without their consent, influencing potential deals including tender offers and mergers.
Nikko Securities and six former executives have been indicted on market manipulation charges for its purchase of 10 individual stocks, allegedly to push up their prices and ensure block trade deals in them did not collapse.
The company has said the revenue impact from the market manipulation was about 10 billion yen ($69.09 million) for the last financial year and likely to double in the current year through March as some institutional investors and companies suspended businesses.
SMFG and Nikko Securities issued a joint statement saying that they would take the recommendations seriously and promising to regain public trust.