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The TSE imposed a fine of JPY 3 million on Deutsche Securities Inc. ("Deutsche Securities") for the act of trading securities through a proprietary account based on corporate related information. The TSE also requested Deutsche Securities to submit a business improvement report that states that the company will (i) in light of the cause of the violation, implement a plan to establish the necessary internal management system suitable for preventing unfair trading based on corporate related information ;?ii?implement training for all executives and staff so they accurately understand and fully comply with the laws and internal procedures for handling corporate related information; and(iii)clarify the locus of responsibility.
Nature of Violation
The TSE has deemed that Deutsche Securities traded securities through a proprietary account based on corporate related information.
On October 18, 2006, a Relationship Manager in the Origination Department at Deutsche Securities Inc. ("DSI"), with respect to MSCBs scheduled to be issued by Company 'A' and subscribed to by an affiliate company of DSI, acquired undisclosed information that Company 'A' intended to cancel the issuance (hereinafter, the "Company Related Information") over the course of performing his duties, but failed to properly handle the Corporate Related Information, such as internally registering it as Company Related Information. On October 19, 2006, as the MSCB issuance was not made as originally planned, a DSI trader belonging to DSI's equity trade division wanted to tentatively unwind a short position in Company 'A' shares he had created for the purpose of hedging the affiliate company's subscription of the MSCBs, and consulted with a compliance officer in charge of the equity trade division on whether a buy-back of Company 'A' shares could be executed. Because he did not fully understand the laws and regulations relating to Company Related Information, the compliance officer approved the buy-back. As a result, DSI bought back Company 'A' shares on the Tokyo Stock Exchange 1st section and other markets based on the discretionary trading agreement between it and the affiliate company, prior to Company 'A' disclosing this Company Related Information to the public on October 19, 2006.
The above act is acknowledged to be an 'act of trading securities through a proprietary account based on corporate related information.' as defined in Item 10, Paragraph 4 of the ex-Ordinance of the Cabinet Office Concerning the Regulations, etc. of Conducts of Securities Companies based on Item 10, Paragraph 1 Article 42 of the ex-Securities and Exchange Law.
