In connection with corporate bonds redeemable with shares (''Reference Shares'') of another company different from the bond issuer company, or the exchangeable bonds (the ''EB''), such another company being a listed company, a trader at the Japanese Equity Derivatives Department of Societe Generale, in the course of business, placed a series of limit sell orders at 782 yen in a large quantity of the Reference Shares. This caused the price of the Reference Shares to fall down to 782 yen from the immediately preceding transaction price of 783 yen effected at the market, and created a situation in which the closing price of the Reference Shares would not have become equal to or higher than 783 yen unless all of such sell-ordered shares would have been sold between 14:58 and the end of the day's trading on November 14, 2001. This was the date on which the redemption of the EB was to be determined, either in cash or with the Reference Shares, depending upon the day's closing price of the Reference Shares, with the intention of putting the closing price at the level (lower than 783 yen) resulting in the EB redemption with shares. This action was in order to enable the parent company of Societe Generale to avoid position risks that would arise in case of the cash redemption in lieu of physical delivery of the Reference Shares that the parent company had held in preparation of the share redemption.
As the result, the price of the Reference Shares in fact closed at 781 yen, and the EB's share redemption was fixed.
The acts above are found to fall under 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 Societe Generale from all the stock trading on its own account from December 8 to 19, 2003 except the execution of transactions contracted on or before December 5.
