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The TSE suspended stock brokerage trading on the TSE market for Maruhachi Securities Co., Ltd. ("Maruhachi Securities") from June 9 to June 11 due to the company's accepting and executing orders aimed at pegging stock prices. The TSE also requested Maruhachi Securities to submit a business improvement report that states that the company will (i) implement a plan to prevent a recurrence for the purpose of eliminating violations (including implementation of compliance training for all executives and staff); (ii)clarify the locus of responsibility for the violation; (iii)conduct a sweeping reform of internal audits; (iv)conduct a sweeping reform of the trading management system; and (v)explain the course of the administrative penalty to customers who purchased the shares at the improper public offering price accurately and sufficiently.
Nature of Violation
The TSE has deemed that Maruhachi Securities accepted and executed orders for stock price pegging as follows.
Over the course of business, the managing director and the executive officer of the retail business department ordered chiefs and directors of branch offices to solicit clients to purchase shares of the company, of which Maruhachi acted as a main underwriter at the initial public offering (hereafter 'IPO'), at the same price as the IPO price. These instructions were given with the intention of pegging the price of the stock at the IPO price or above for a period of time. Following these instructions, the chiefs and directors ordered the sales staff at each office to solicit clients to purchase the shares of the company at the IPO price, and accepted purchase orders from 103 clients and executed 33,200 shares on the exchange market.
The above act is acknowledged to be a violation of Paragraph 3 of Article 159 of the ex-Securities and Exchange Law.
