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1. Contents of the SESC’s Recommendation
Pursuant to Article 20(1) of the Act for Establishment of the Financial Services Agency (“FSA”), on December 2, 2013, the Securities and Exchange Surveillance Commission made a recommendation to the Prime Minister and the Commissioner of the FSA that an administrative monetary penalty payment order be issued in regard to an insider trading by Finnowave Investments, Inc. (“FWI”). This recommendation is based on the findings of the investigation into the insider trading, whereby the following violations of laws and ordinances were identified.
2. Summary of the Findings regarding Violations of the Laws and Ordinances
FWI was empowered to manage the fund assets of a Cayman domiciled company investment trust, HADOH Fund Ltd., based on the discretionary investment management agreement. And a fund manager at FWI was in charge of investment management of the assets of the fund.
Until July 2, 2010, the fund manager was tipped by an employee A of a securities company material information that the executive decision-making body of INPEX Corporation (“INPEX”) made a decision to launch a follow-on public offering of its shares, which at first another employee B and other employees of the securities company learnt through the negotiation of the underwriting agreement, and which later A learnt in the course of A’s duties.
From July 7 to July 8, 2010, prior to the publication of the material information on July 8, 2010, the fund manager sold a total of 500 shares of INPEX for 239,499,500 yen on the discretionary investment management agreement.
It was concluded that the conduct of FWI above was “a person has conducted, on his/her own accounts, Purchase, Sale and others, set forth in Article 166(1) in violation of the provisions of the Article(1) or (3)” as stipulated under Article 175(1) of the Financial Instruments and Exchange Act (“FIEA”).
3. Calculation of the Amount of the Administrative Monetary Penalty
The amount of the Administrative Monetary Penalty Applicable to the violation above pursuant to the FIEA is 170,000 yen.
Details of the calculation are presented in the Attachment.
4. Others
This matter was reported to the SESC by the securities company mentioned in Section 2 above as it was found in the course of its voluntary examination. The securities company has thereafter continued to cooperate with the SESC in the investigation.
Attachment
- Method of Calculation of the Amount of the Administrative Monetary Penalty
(1) Pursuant to Article 175(1)(iii) of the FIEA and Article 1-21(1)(i) of the Cabinet Office Ordinance on Administrative Monetary Penalty Provided for in Chapter VI-II of the FIEA, a person who has, for the purpose of investing assets under management, engaged in transactions specified under Article 175(1)(iii) of the FIEA (“Violator") may be ordered to pay an administrative monetary penalty in the amount calculated as follows: (a) The total amount of money or other property paid or payable to the Violator as remuneration for the investment of the assets under management for the month in which the said transactions were executed (b) is multiplied by the highest value reached by the total amount of the issue included in the assets under management that was transacted during the period between the day on which the said transactions were executed and the last day of the month in which the said transactions were executed and (c) is then divided by the total value of the assets under management as of the last day of the month in which the said transactions were executed.
(a) 46,929,039 yen × (b) 147,600,000 ÷ (c) 38,529,995,214 = 179,774 yen
(2) Pursuant to the provisions of Article 176(2) of the FIEA, the fraction less than ten thousand yen contained in (1) above shall be rounded down.
