Sakura Friend has been conducting business as recognized to have an insufficient internal control of undisclosed corporate information from the viewpoint of preventing unfair trade. This state has been demonstrated by some cases in which one of the proprietary traders accepted a listed company's purchase order for its treasury shares, despite the circumstances where Sakura Friend, through the act of accepting and executing these orders, came to know such undisclosed material information as the substance of each specific decision made by the company to purchase treasury shares. The state of Sakura Friend's insufficient internal control has also been recognized in one particular case which happened on July 12, 2000, where the same trader, while knowing the information pertaining to the same listed company, executed an order to purchase the company's shares for Sakura Friend's own account.
The aforementioned state of Sakura Friend's controlling undisclosed corporate information falls upon Item (4) of Article 10 of the Ordinance of Cabinet Office Concerning Regulation of Conducts of Securities Company based upon Item (2) of Article 43 of the Securities and Exchange Law.
