Short-selling in breach of Securities & Exchange Law
During the period between April 2001 and February 2002, Dresdner Kleinwort Wasserstein (Japan) Ltd., Tokyo Branch ("the Branch") placed a number of its customers' short-selling orders without legally required confirmation to the customers and disclosure to the stock exchange that the orders are short-selling.
During the period between December 2001 and February 2002, the Branch placed a number of short-selling orders on its own account without legally required disclosure to the stock exchange that the orders are short-selling. In addition, the Branch was found to have placed short-selling orders at the lower prices than the latest executed and published ones.
The acts above are found to violate the Article 26-3 (1), (2), (6) and the Article 26-4 (1) of the Cabinet Order (Securities & Exchange Law) and Article 162 (1) (i) of the Securities & Exchange Law, both of which regulate short-selling.
2. Securities business without prior authorization and non-securities businesses without prior approval of or notification to the FSA.
The Branch conducted the following securities business without legally required prior authorization and non-securities businesses without legally required prior approval of or notification to the FSA;
- Intermediation of trade in over-the-counter derivatives contract on a security.
- Intermediation of credit derivative transactions.
- Intermediation of cash lending/borrowing.
- Intermediation of sale or purchase of monetary credit.
- Intermediation of trade other than one relating to securities
The FSA issued the following orders to the Branch:
- Suspend business operation
- Suspend commissioned sales and purchases of stocks on behalf of affiliated companies for 10 business days between June 17, 2002 and June 28, 2002.
- Suspend the businesses listed in 2.(1), which were conducted without prior authorization, approval or notification, for 5 business days between June 17, 2002 and June 21, 2002.
- Improve its compliance with the law
- Strengthen the internal control system, secure strict compliance by the directors and staff, make preventive measures against recurrence of the above mentioned violations, and clarify locus of responsibility.
- Work out concrete measures to root out short-selling in breach of the Law including a target date, and to impose stricter internal penalty to a staff and his/her supervisor in the Branch.
- Quarterly submit a written report to the FSA on the implementation of the (1) and (2) measures above.
