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October 7, 2022

Japanese regulator fines Sumitomo Mitsui for lapses at securities arm

Japan’s Securities and Exchange Surveillance Commission has fined Sumitomo Mitsui Financial Group (SMFG) and its banking and securities arm over breach of firewall rules.

The Japanese financial regulator has asked SMFG to draw a plan to improve its compliance.   

It has also directed the firm to suspend its block trade deals for three months.

The direction was given after the regulator found that SMFG’s securities unit SMBC Nikko Securities was involved in manipulation of stock market operations.

During its investigation of the market manipulation case, the regulator also found that SMFG’s securities and banking units passed confidential data of various corporate customers without their knowledge.

The data were related to possible deals such as tender offers and mergers.

As per the charges, SMBC Nikko and six of its ex-officials manipulated the market over the trading of 10 individual stocks.

The manipulation was aimed at allegedly increasing the stock prices and facilitate block trade transactions smoothly.

SMBC Nikko has stopped its block trade activities before the misconduct. The firm’s block trade business represent nearly 5% of its annual trading revenue, reported Reuters.

In a statement, SMFG said: “SMFG and SMBC take this incident very seriously and will continue to take all the necessary measures to make improvement and prevent recurrence on a company-wide basis to restore the trust of customers and other parties concerned.”

Japan’s top three financial groups have been making appeals to the government to ease the firewall rules, which were launched in 1993 to ensure that banks do not take advantage of their bargaining capability. However, the opposers of these rules say that they are obsolete and hamper companies’ global competitiveness.

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