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On July 18, 2002, Nikko Salomon Smith Barney placed a series of limit and market orders to purchase several issues listed on TSE for the purpose of raising closing prices of those issues at the TSE. As a result, the prices of those issues did rise.
Beforehand, Nikko Salomon Smith Barney had had a contract with the institutional investor who intended to release its significant amount of stock portfolio by contributing it into the exchange traded fund (''ETF''). According to the contract, Nikko Salomon Smith Barney was to compose the ETF by purchasing the institutional investor's portfolio as a whole and acquiring the rest of the ETF basket from the market. It was agreed between Nikko Salomon Smith Barney and institutional investor that the value of the newly acquired part would be calculated by the closing prices of the specified date instead of the actual purchase prices of Nikko Salomon Smith Barney. Thus the contract meant to Nikko Salomon Smith Barney that the higher the closing prices of the TSE, the more profit it would have from this transaction.
The acts above are found to be ''acts of conducting a series of securities transactions intended to create artificial market prices which do not reflect actual states of markets'' stipulated in the Article 4 (iii) of the Ordinance of the Cabinet Office Concerning the Regulations, etc. of Conducts of Securities Companies, and thus to have violated the Article 42 (1) (ix) of the Law as applied by the Article 14 (1) of the Law on Foreign Securities Firms.
Financial Services Agency suspended Nikko Salomon Smith Barney securities from all the stock trading on its Tokyo Branch's own account from March 19 to April 16, 2003 except the execution of transactions contracted on or before March 18.
