[ by Howard Haykin ]

And the Bank's Efforts to Deflect its Possible Complicity is Regrettable.

Nomura, Japan's largest bank and brokerage firm, has lost face so many times this year over cases involving customers trading on insider information they got from firm personnel, that Nomura has become an embarrassment to the industry. 

Well, guess what - Nomura faces more legal problems.  On Friday, Nomura said it was likely involved in a new insider trading case, months after CEO Kenichi Watanabe resigned following similar allegations.

Earlier Acknowledgment. This year, Nomura disclosed that its employees leaked information on at least 3 public offerings in 2010 to favored fund managers.  Since then, the firm has been engulfed in an insider trading investigation. 

Latest Case. The latest case relates to activities by hedge fund Japan Advisory, which is subject to a fine recommended by Japanese authorities.  According to Nomura, Japan Advisory might have traded ahead of the 2011 IPO of Japanese chipmaker Elpida.  Nomura, the underwriter for the offering, said it had discontinued issuing research reports on that stock prior to the deal. Nomura management surmises that:

"Our client was able to infer non-public, corporate-related information from documents provided by Nomura."  

So, the Japanese bank deflects responsible, pointing out that its institutional customers are quite perceptive and attuned the smallest changes in the firm's protocol.   

That statement sounds far-fetched and it's unfortunate that Nomura (in our opinion) resorted to such a proclamation of defense.  Nomura added that it continued to cooperate with authorities' investigations.

Where Nomura Goes From Here. At this time, Nomura is paring back its global operations and is trying to rebuild its business.  It announced miniscule profits for the quarter ended 9/30/12, and has announced a $1 billion cost reduction plan, including proposed layoffs in the North American and European operations.

The strategic shift is being implemented by new CEO Koji Naga, and represents a reversal of the bank's international ambitions.  The bank had bought the Asian and European units of Lehman Brothers after its American rival collapsed. 

[ Dealbook, 11/2/12 ]