Daiwa SMBC overlooked that its ex- General Manager ("A") of its Corporate Institutions Department, from May 2000 to March 2002, had twice traded stocks based on information from conversations with co-workers in the company by using his sister's account held with another brokerage.
In another case, the company limited access to the Strategic Advisory Department's (M&A) information system from other departments, but all employees within the department were able to access any information held in the system even if they were not directly involved in a project that used that information. The company's ex-Deputy General Manager ("B") of its Strategic Advisory Department (M&A) is thought to have used information in this system for insider trading, and Daiwa SMBC's information sharing was deemed to have lacked enough precautions.
Daiwa SMBC's compliance training, although held fourteen times from March 1999 to March 2002 for A and once in April 2001 upon joining the company for B, were carried out to enhance knowledge about compliance issues among employers but lacked sufficient information on preventing illegal behaviors.
Concerning the nomination of A to General Manager, Daiwa SMBC had prudently considered the strong recommendation from the department, his work contribution, and high evaluation from inside and outside the company. However A should not have nominated for General Manager given the fact that A had been trading through an account held with another brokerage firm without obtaining approval, which is against regulations. Soon after promotion to General Manager, A committed insider trades.
The above was found to be a violation of Article 43 (ii) of the Securities Exchange Law.
