Nomura Head Watanabe to Resign
07/25/2012| 10:56pm US/Eastern
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TOKYO--The chief executive and chief operating officer of Nomura Holdings Inc. (>> Nomura Holdings Inc.) are stepping down to take responsibility for their company's involvement in a series of leaks of inside information.
CEO Kenichi Watanabe and COO Takumi Shibata are planning to resign following admissions that Nomura salespeople allegedly gave information on share offerings to customers before it was public, a person familiar with their thinking said Thursday. It's unclear when Nomura will make the announcement or who the successors for the top two posts will be.
The departures come as heads roll globally amid investment banking scandals -- most recently the CEO of U.K.'s Barclays PLC. In Japan, financial regulators have been bearing down in an investigation into insider trading that started in 2010, after a series of suspicious stock moves ahead of share offerings. Nomura, which was underwriter in three of those cases, last month said an internal probe found that its employees had little understanding of Japan's insider-trading rules and may have leaked information to clients before it became public. Nomura and 11 other major Japan-based brokers are due to give Japan's Financial Services Agency detailed reports on their internal controls next week.
The resignation also comes as Japan's biggest broker struggles to overcome deep dissatisfaction with its performance that has plagued it since its acquisition of the international operation of Lehman Brothers in 2008. Nomura has battled to turn a profit overseas, and was forced to drastically cut back on its overseas businesses last year.
The insider-trading scandal is weighing on Nomura's bottom line as well. Although Nomura hasn't been charged with wrongdoing, since Japanese insider-trading laws only allow prosecution of companies that have profited directly from the trades, customers have been pulling away from the broker.
The departure of the CEO comes amid wide expectations that Japan's securities industry watchdog will likely call for action against Nomura for lax compliance standards following its alleged involvement in insider trading cases linked to a Y540 billion ($6.913 billion) share issue by energy firm Inpex Corp. (>> INPEX Corp) in July 2010 and separate stock offerings by Mizuho Financial Group Inc. (8401.TO) and Tokyo Electric Power Co. (>> Tokyo Elec. Power) for which Nomura acted as underwriter.
To take responsibility for the failure in compliance, Nomura suspended business in its institutional equity sales department and the equity syndicate section of its syndicate department in early July. Nomura's executive officer in charge of institutional equity sales department and another executive officer in charge of compliance has stepped down, while the pay of senior executives including Mr. Watanabe has been cut.
Mr. Watanabe said at the time that he wasn't considering stepping down as he wanted to focus on improving the company's internal controls.
But following the broker's admission last month, Nomura has been dropped from underwriting deals for at least eight Japanese companies including the government-backed Japan Housing Finance Agency. Recently, Japan Airlines Co. dropped Nomura from its previous role as joint global coordinator of the carrier's expected $6 billion-plus initial public offering of shares, according to a person familiar with the matter.
Write to Atsuko Fukase at atsuko.fukase@dowjones.com
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