Tokyo Stock Exchange has requested Ando Securities Co., Ltd. (hereafter "the Company") to submit a business improvement report pursuant to Rule 19 of the Trading Participant Regulations. The business improvement report shall include the following four items.
(1) With regard to managing corporate client information, etc. implementing a fundamental overhaul and
constructing an effective internal management system and framework.
・ Improving internal rules related to management of corporate client information and specifying clear work
distribution boundaries pertaining to the operation of such rules.
・ Strengthening systems and frameworks for trade monitoring pertaining to proprietary trading business.
・ Allocating personnel appropriately for the content of business operations.
(2) Efforts by the management at quickly gaining an understanding of an incident when it occurs, as well as
enriching and enhancing management supervision systems and frameworks through such as building systems
and frameworks to enable active improvement measures to be implemented swiftly.
(3) Taking necessary measures, such as conducting extensive and intensive training, so as to have employees
obtain knowledge regarding laws and regulations, etc. related to financial instruments transactions including
handling of corporate client information, and reinforcing the awareness of compliance with laws and regulations.
(4) Clarifying the locus of responsibility of executives, officers and employees with regard to this disciplinary
action.
Outline of Violation
Insufficiency in management of corporate client information, etc
On February 16, 2010, in the course of negotiations to conclude an underwriting agreement with a listed company, the Company obtained corporate client information that the listed company will conduct public offerings in March of the same year. The department manager responsible for management of corporate client information initially gave an instruction to prohibit proprietary trading of such issue. However, after gaining knowledge of outstanding proprietary shareholdings in the issue, the manager thought that holding such listed company's shares could result in suspicions of intentionally influencing price formation. As such, an instruction to sell the shares was given.
As a result, 2,500 shares were sold on the Company's proprietary account during the period from February 16 to 18, 2010 before such information was publicly announced.
The management of corporate client information, etc. pertaining to the above transactions was deemed to fall under the following situations.
(1) The methods of operation lacked clarity in procedures to prohibit proprietary trading for cases where
corporate client information is obtained. As such, internal rules of the Company concerning management of
corporate client information were deemed insufficient.
(2) The Company did not have internal rules pertaining to trade monitoring of proprietary trading businesses,
and in terms of operations, trade monitoring was conducted by the management department and the equities
department. However, with regard to this incident, the work distribution boundary between the management
and equities departments was not clear. As a result, proprietary trading was not monitored.
(3) The management headquarters manager (a board member responsible for affairs concerning management
including trade management pertaining to prevention of insider trading) and the management department
manager needed to inspect the effectiveness of trade monitoring in the above (2). However, such inspection
was not conducted. In addition, with the occurrence of this incident, despite recognizing the need to improve
the systems and frameworks for trade monitoring, the management headquarters manager (board member)
and the management department manager did not take appropriate measures to improve the situation.
(4) In this incident, the management manager gave the instruction to sell without first confirming laws pertaining
to insider trading. The equities manager, who received this instruction, was also in charge of proprietary trading
without a proper understanding of the internal rules related to the management of corporate client information,
etc. These and other instances were deemed as a problem in terms of awareness of compliance with laws and
regulations amongst executives, officers and employees.
(5) The occurrence of this incident was only reported up to the management headquarters manager (board
member). Other members of the management were unable to gain knowledge of this, and nothing was done to
examine how to specifically improve the situation.
The above business operation situation with regard to the management of corporate client information being handled at the Company was deemed to lack necessary and appropriate measures to prevent unfair transactions pertaining to corporate client information. Such situation was deemed to fall under Article 123, Paragraph 1, Item 5 of the Cabinet Office Ordinance on Financial Instruments Business, Etc.
