JP Morgan Cited in Japanese Insider Trading Probe


If JP Morgan Chase didn’t have enough problems, it is reportedly involved in an insider trading probe in Japan.  Yesterday the U.S. broker dealer was identified as the source of a leak of confidential information regarding a planned share offering by Nippon Sheet Glass in 2010.

In a statement, JPMorgan Securities Japan Co., the lead underwriter for the Nippon Sheet Glass deal along with Daiwa Securities, said it hasn’t received any indication from authorities suggesting its involvement in the insider trading case “either by the company as a whole or by any department as a whole.”

Daiwa has said that its internal controls were sound and that there was no evidence anyone at the brokerage had been involved in any wrong-doing.

The Nippon Sheet Glass case is one of three such cases under investigation by the Securities and Exchange Surveillance Commission (SESC), which regulates Japanese financial markets.   In addition to J.P. Morgan, the SESC is also probing Japan’s largest brokerage, Nomura Securities Co.  Nomura allegedly leaked insider information on sales of Inpex Corp. and Mizuho Financial Group Inc.

Although the SESC has increased its insider trading investigations, the penalties involved are token amounts.

Tokyo-based asset manager Asuka Asset Management allegedly gained Y60.5 million, or about $760,000, from insider trading on Nippon Sheet Glass.  However, the SESC recommended a fine of only Y130,000 or about $1,600, reportedly because of the small amount of fees earned from its clients on the trades.  We doubt the U.S. SEC would be so circumspect.

The SESC also said yesterday it has asked financial regulators to fine Sumitomo Mitsui Trust Bank for alleged insider trading in connection with a share offering by Mizuho Financial Group Inc.  The SESC said a manager at Sumitomo Mitsui Trust Bank–known as Chuo Mitsui Asset Trust before an April merger–acquired advance information on a share offering by Mizuho Financial from one of four brokers that underwrote the offering.  However, the SESC asked financial regulators to fine Sumitomo Mitsui Trust Bank only Y80,000, or approximately $1000.

While JP Morgan can ill afford more adverse publicity, it is unlikely that its pocketbook would be strained if it comes to penalties.  Nevertheless, the SESC’s increased activity reflects greater vigilance on insider trading by securities regulators globally.


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