[By Larry Goldfarb]

Nomura Holdings Inc. was fined $3.8 million, the biggest penalty by the Japan Securities Dealers Association against any firm in 12 years, after employees leaked information on clients’ plans.  The Association said that The Nomura Securities Co. domestic brokerage unit lacked internal controls to safeguard information on share sales it managed in 2010, the self-regulatory group for brokers said in a statement on its website today. The fine follows an Aug. 3 order by regulators that Tokyo-based Nomura, Japan’s biggest brokerage, improve compliance.

Japanese politicians have urged that rules barring the government from imposing fines against companies that leak information be toughened. The Financial Services Agency is preparing legislation that would establish penalties for tipsters and impose stricter punishment for insider trading.

• Nomura said in June that employees provided information on offerings it arranged for Mizuho Financial Group Inc., Inpex Corp. and Tokyo Electric Power Co. to traders who sold the stocks before the deals were announced in 2010.
• The revelations tarnished Nomura’s reputation and led it to lose underwriting deals. Chief Executive Officer Kenichi Watanabe and Chief Operating Officer Takumi Shibata resigned in the wake of the scandal. Koji Nagai, who replaced Watanabe as CEO on Aug. 1, has vowed to avoid a repeat of the leaks.
• Nomura’s fine exceeds the 200 million yen the dealers’ association imposed on SMBC Nikko Securities Inc. in June and was the biggest since Minami Securities was docked 500 million yen in 2000. SMBC Nikko, a unit of Japan’s second-biggest bank by market value, was found to have solicited clients by giving them confidential information on a public offering.

The dealers’ group is made up of more than 500 securities firms and other financial institutions operating in Japan, according to its website.

“Imposing a fine is a reminder that you will be penalized if you breach rules, so it works as a deterrent,” Waseda University’s Saga said.

For further information, please read [Traders Magazine, 10/16/12]