The TSE censured Tachibana Securities Co., Ltd. (“Tachibana Securities”) for the act of accepting orders without providing best execution policy. The TSE also requested Tachibana Securities to submit a business improvement report that includes (?) an investigation into the cause of the violation, creation of a plan to prevent a recurrence, and development of a system for legal compliance and the check of such - including internal checks and balances; ???raising of legal compliance awareness among directors and employees by conducting necessary compliance training; and???clarification of locus of responsibility for the violation, in light of this warning.
Nature of Violation
An act of accepting orders without providing documents that explain the company’s best execution policy
From 1 April 2005 to 31 August 2007, Tachibana Securities accepted orders for equity trades from its internet trading customers without providing them documents explaining the company’s best execution policy, as the result of an insufficient internal management system to comply with the best execution rule.
Without knowing that the “monthly report” distributed to customers with deposits at the company was not distributed to internet customers, when a decision was made regarding the company’s response to best execution responsibility, the executive officer who was in charge of internal auditing decided to describe the company’s best execution policy in the monthly report and send this out to these customers.
The director and supervisor in charge of the internet trading division mistakenly thought that they didn’t have to send the best execution policy to internet trading customers because these customers chose the execution market by themselves when making orders.
Afterwards, the chief realized the necessity of sending out the best execution policy by e-mail to internet trading customers. Despite the fact that the distribution of best execution policy by e-mail required prior permission from the internet customers, he sent the policy by e-mail to the customers without permission The senior managing director responsible for internal control oversight and director for audit approved the above-mentioned conduct as a result of insufficient internal review. Furthermore, the conduct was discussed in the joint executive meeting which management attended, and was approved without any objection.
The above is acknowledged to be an ‘act of accepting orders without providing best execution policy. ’ as defined in Paragraph 4 of Article 43-2 of the ex-Securities and Exchange Law.
