TOKYO (Reuters) - Nomura Holdings (8604.T) will be ordered to bolster internal controls by Japan’s financial regulator on Friday, four people with knowledge of the matter said, the lightest possible sanction for its role in three insider trading cases.
The Financial Services Agency (FSA) will announce a so-called business improvement order on Friday, the sources said. Such an order requires Nomura to take various measures to bolster compliance, but does not directly impact its business.
The relatively light sanction moves Japan’s largest brokerage closer toward a resolution of a costly scandal that triggered the resignations of Chief Executive Kenichi Watanabe and his top lieutenant Takumi Shibata last week.
It was widely expected after the securities watchdog that handled the investigation recommended that level of sanction earlier in the week, stopping short of seeking a more damaging suspension of some operations for weeks or months.
Nomura has acknowledged that its employees leaked information on three share issues it underwrote in 2010: Mizuho Financial Group (8411.T), energy firm Inpex Corp (1605.T) and Tokyo Electric Power (9501.T).
At the end of June, Nomura published the results of an internal investigation that found breaches of basic investment banking safeguards and announced a raft of measures to prevent recurrence.
The FSA took into account Nomura’s steps towards addressing its problems, its voluntary suspension of institutional equity sales operations for a week and the CEO’s resignation in deciding on the sanction, the sources said.
The business improvement order will require Nomura to report periodically on its steps to improve internal controls.
In a statement earlier this week, Nomura apologised and said it had taken steps to keep information collected by its underwriting operation from leaking to its sales desk and investors.
Beyond the probe targeting Nomura, the FSA has not indicated when it will close out the investigation of insider trading practices in the Tokyo market.
Major brokerages face a deadline of Friday to report to the FSA on their compliance safeguards and whether they leaked information on planned share issuances to Japan Advisory, a hedge fund advisory linked to the Whitney Japan Fund.
The FSA could not be immediately reached for comment on Thursday.
Reporting by Noriyuki Hirata and Emi Emoto; Editing by Erica Billingham