To whom it may concern,
March 21, 2012
Sumitomo Mitsui Trust Holdings, Inc. (Code: 8309 TSE, OSE and
Chuo Mitsui Asset Trust and Banking Company, Limited
Recommendation by the Securities and Exchange Surveillance
for the Issuance of an Order to Pay Administrative Monetary
Today, the Securities and Exchange Surveillance Commission
("SESC") has made a recommendation for the Prime Minister and
the Commissioner of the Financial Services Agency to issue an
order for the payment of administrative monetary penalty
against Chuo Mitsui Asset Trust and Banking Company, Limited
The SESC announced that CMAB, acting as an investment manager
of a fund, violated the Financial Instruments and Exchange
Act (insider trading) with respect to the sale and purchase
of shares in July 2010.
<Outline of Chuo Mitsui Asset Trust and Banking Company,
Chuo Mitsui Asset Trust and Banking Company, Limited
23-1, Shiba 3-chome, Minato-ku, Tokyo
Title and Name of Representative
President: Ken Sumida
Pension trust business and securities trust business
JPY 11.0 billion
We would like to apologize with the deepest sincerity for the
inconvenience and concern this has caused to all of our
customers and stakeholders.
The following are the facts underlying the recommendation for
an order for the payment of administrative monetary penalty,
and the implementation of preventative measures by Sumitomo
Mitsui Trust Bank, Limited ("New Trust Bank"), which is
planned to be formed in April 2012 as a result of the merger
among CMAB, The Chuo Mitsui Trust and Banking Company,
Limited ("CMTB"), and The Sumitomo Trust and Banking Company,
We will make every possible effort to strengthen our
management systems by strictly implementing the
countermeasures noted below so that we will be able to
recover your trust.
1. The Facts
(1) Transactions that gave rise to the recommendation
A fund manager ("Fund Manager") who is an employee of CMAB
sold 90 shares (JPY 43,630 thousand) of the INPEX CORPORATION
("INPEX") and sold short 120 shares (JPY 57,610 thousand) of
INPEX, on July 1 and 7, 2010, for the benefit of a fund for
foreign investors ("Fund") which CMAB managed in accordance
with a discretional investment contract. The SESC recognized
these transactions as constituting insider trading.
(2) Amount of the penalty
The recommendation states that CMAB, an investment manager of
the Fund, be required to pay JPY 50 thousand as penalty.
(3) Outline of the Fund
Mitsui Trust Japan Long Short Fund (an offshore fund)
Long and short of Japanese stocks based on the
CMAB (discretional investment company)
JPY 2.7 billion (as of the end of February 2012)
(4) Background of the transactions
On June 30, 2010, the Fund Manager received information from
a sales person of a securities company suggesting the
possibility of a public offering by INPEX, however, the Fund
Manager neglected to report this information to his
supervisor. As a result, the information was not managed as
On July 1, 2010, the Fund Manager sold 90 shares (JPY 43,630
thousand) of INPEX and sold short 60 shares (JPY 29,082
thousand) of INPEX for the Fund.
On July 7, 2010, the Fund Manager sold short 60 shares (JPY
28,528 thousand) of INPEX for the Fund.
CMAB has a company regulation which prohibits fund managers
with knowledge of insider information from entering into the
sale and purchase of related securities until such
information becomes public. The aforementioned inappropriate
management of information and the consequent sales of INPEX
shares violated this company regulation.
1 The method by which CMAB aims to achieve a stable
profit through a combination of sales and purchases based on
the analysis of individual stocks.
2. Cause and Preventative Measures
When the aforementioned transactions occurred in 2010, CMAB
already had the Compliance Department, which is responsible
for compliance related matters acting in the lead role
towards achieving total compliance by all directors and
employees. Unfortunately, however, we regret to conclude that
the implementation of such compliance measures was not
perfect and resulted in this incident.
After the management integration with STB on April 1, 2011,
we have been continuing to work on strengthening our
compliance measures. The New Trust Bank, to be established on
April 1, 2012, will further strengthen compliance related
measures. Considering the facts
that caused the recommendation, the New Trust Bank will
implement additional measures to strengthen its compliance
structure sufficient to prevent a similar recurrence,
including an absolute prohibition against meetings between
fund managers and other fund management related staff and
securities company sales staff (please see attached).
Sumitomo Mitsui Trust Holdings, Inc. has already established
a special investigation committee which includes members from
not only within the company but also outside experts, and has
arranged for an additional investigation to fully understand
this matter and evaluate the measures that will be
implemented by the New Trust Bank. The New Trust
Bank will also clarify the responsibilities of management,
take strict disciplinary action against those who were
involved in this matter and continuously examine and enhance
our compliance measures.
For further information, please contact:
IR Office, Sumitomo Mitsui Trust Holdings, Inc. Telephone:
+81-3-3286-8354, Fax: +81-3-3286-4654
Measures to prevent recurrence in the New Trust Bank
The New Trust Bank will implement the following additional
measures, which are based on,
and improvements of, the compliance measures of STB.
1. Enhancement and revision of organization
(1) Strengthen the check and balance function by the middle
office in fund management operation
The New Trust Bank will establish the Fiduciary Risk
Management Department as the department in charge of the
middle office administration function for fund management
operations, including transaction monitoring. This department
will be independent from the fund management division and
will be under the direct control of the director who is in
charge of the Compliance Department and supervises the
compliance matters within the whole group. In this way, both
the Fiduciary Risk Management Department and the Compliance
Department will have multilayered control over compliance
matters related to the fund management division, which will
greatly enhance the compliance measures within the New Trust
In addition, the New Trust Bank will post staff from the
Compliance Department to each business division, including
the fund management division, in order to strengthen the
supervision by the Compliance Department.
(2) Conduct internal inspections specialized in insider
The Internal Audit Department, which is under the direct
control of the President of the New Trust Bank, will conduct
regular internal inspections of the fund management division
specialized in preventing insider trading.
In addition to the above, the New Trust Bank will make
necessary revisions to the announced officers of the New
Trust Bank to be assigned as of April 1, 2012 in order to
strengthen the control over the fund management division.
2. Stricter business operation
(1) Prohibition against meeting between fund managers and
sales persons of securities companies
The New Trust Bank will comprehensively prohibit fund
managers from meeting sales persons of securities companies.
The exception to this prohibition is only where the general
manager of the department has determined that there are
compelling reasons for such a meeting under the condition
that the meeting should be held in our office accompanied by
at least one other member of the New Trust Bank and that a
record of such meeting shall be reported to, and stored with,
the Fiduciary Risk Management Department.
(2) Stricter rule with respect to the handling of information
received from outside the company
In deciding whether certain information should be treated as
insider information and whether the management of such
information is necessary, the current STB rules will be
applied to the New Trust Bank, which require mandatory
consultation with a person in charge of compliance or the
Compliance Department. In addition, we will clearly implement
detailed information management rules depending on the
content and the source of such information the fund managers
may possibly receive in order to enhance information control
(3) Monitoring of all unusual transactions including sales
and purchases conducted within a short period and high volume
sale and purchase transactions of securities
The New Trust Bank will further enhance the current STB
compliance measures to establish a new monitoring system for
all transactions by the Fiduciary Risk Management Department,
which is independent from the fund management division.
(4) Recording of all phone calls of fund managers with
outside third parties and enhancement of the inspection
By following the current STB rules, The New Trust Bank will
record all telephone calls of fund managers and establish an
inspection system of such recordings by the Fiduciary Risk
Management Department, which is independent from the fund
(5) Prohibition of personal sale and purchase of securities
by fund managers
Although CMAB strictly restricts the personal sale and
purchase of issued shares, the New Trust Bank will follow the
current STB management system and prohibit fund managers from
the personal sale and purchase of issued shares.
(6) Enhancement of compliance training, etc.
The New Trust Bank will enhance the compliance training for
the fund management division, both in quality and in
quantity, including quarterly training for the purpose of
preventing the insider trading. In addition, all members of
the fund management division will be required to submit
written oaths confirming that they understand the above rules
and will comply with same.
This press release was issued by Sumitomo Mitsui Trust Holdings Inc. and was initially posted at http://www.smth.jp/en/news/2012/E120321-2.pdf . It was distributed, unedited and unaltered, by noodls on 2012-03-22 11:44:31 AM. The issuer is solely responsible for the accuracy of the information contained therein.