Japan SESC files more charges against SMBC Nikko and executives

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Japan’s securities watchdog filed criminal charges against a former SMBC Nikko Securities Inc. deputy president, as the trading scandal engulfing the brokerage deepened in Tokyo.

The Securities and Exchange Surveillance Commission asked prosecutors to charge Toshihiro Sato with allegedly manipulating the price of a company’s shares in relation to block offers, it said in a statement Tuesday. The SESC also filed fresh charges against SMBC Nikko and three of the brokerage’s employees, it said.

SMBC Nikko said it sincerely apologizes for causing trouble and concern, and will cooperate with investigations and make efforts to regain trust.

Sato was arrested last month, becoming the highest-ranking executive to be embroiled in the scandal. He no longer works for SMBC Nikko. He originally hailed from the banking arm of the company’s parent, Sumitomo Mitsui Financial Group Inc.

The SESC filed fresh charges against Makoto Yamada, the former general manager of equity trading, Hitoshi Tamura, a manager of the equity solutions business, and Yuji Karino, a member of the equity trading team.

The new charges come after the SESC filed criminal complaints last month against seven SMBC Nikko employees and the company itself in relation to the affair.

Tokyo prosecutors then indicted five of those individuals and SMBC Nikko.

Some of the employees involved have denied wrongdoing, according to media reports.

The SESC’s filing of charges against Sato and others deals a fresh blow to the reputation of SMBC Nikko, the brokerage unit of Japan’s second-largest banking group. The saga has rocked Japan’s financial industry and hurt SMBC Nikko’s bottom line, with major institutional investors and others stopping doing business with the firm.

SMBC Nikko staff are alleged to have used the firm’s proprietary trading desk to put in large buy orders for certain stocks before the market close in Tokyo. Their alleged aim was to prop up prices before the brokerage sold large chunks of those companies’ shares outside the open market for clients.

Japan’s financial regulator sees no industry-wide issues relating to block offers for now, people familiar with the matter said, asking not to be identified discussing private information. Other brokerages carry out block offers in a way that minimizes potential problems, one of the people said.

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