Japan Accelerates Insider Trading Probe
07/05/2012| 11:05pm US/Eastern
--Regulators ask brokerages to reveal dealings with Japan Advisory LLC
--Lawmakers review list of firms whose shares saw spikes in trading ahead of share offerings
TOKYO--Japanese financial regulators are pressing 12 big brokerages here to reveal their dealings with an investment adviser recently sanctioned for alleged insider trading, banking minister Tadahiro Matsushita said Friday.
Regulators are asking brokers "whether they gave information" to Japan Advisory LLC, Mr. Matsushita said at a press briefing.
Japan Advisory provides services to New York-based hedge fund J.H. Whitney Investment Management LLC, according to filings with the U.S. Securities and Exchange Commission. Its license was pulled last week for alleged insider trading ahead of a share offering of Nippon Sheet Glass Co. in 2010.
The question on Japan Advisory is part of requests Japan's Financial Services Agency put to 12 major brokerages this week, asking them to submit reports on their insider information controls. The group includes Japan's biggest securities houses, Nomura Holdings Inc. and Daiwa Securities Group Inc., as well as the Japanese units of western banks like Goldman Sachs Group Inc. and JP Morgan Chase & Co.
The move comes as Japan's crackdown on suspected insider trading in the markets accelerates, with ruling-party lawmakers reviewing a list of 25 firms whose shares saw a spike in trading volume ahead of share offerings.
Regulators have been investigating a series of such cases since 2010, and in recent weeks have started doling out penalties to firms for allegedly trading on inside information.
Although Japan's insider-trading laws don't let regulators penalize companies and people for insider trading unless they actually profit from trade, a number of brokers have recently said their employees leaked information about equity offerings their companies were underwriting, according to people familiar with the brokers.
Nomura last week publicly admitted its sales people leaked information on upcoming share offerings, and announced executive pay cuts and voluntary suspensions of some business to take responsibility.
A special group of Japan's ruling Democratic Party of Japan, meanwhile, is reviewing a list, provided by the Tokyo Stock Exchange, of stocks that saw a sharp rise in trading volume ahead of share-offering announcements, including blue-chip firms like All Nippon Airways Co.
Also included are five companies that announced share issuances this year, such as Mazda Motor Corp. and medical company Nipro Corp.
The data, which do not necessarily imply leaks of insider information, compare trading volume right before the share announcements with the average volumes for the month previous. The data also show who the underwriters of each deal were, as well as how the share volume and price moved in the weeks before the announcement of the share offerings. -Toko Sekiguchi contributed to this article
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(An earlier version of this item misstated that the review is looking at trading before this week's announcement, not an announcement by ANA in 2009.)