* Firm likely to be ordered to improve business practices
* Move part of wider probe into pension client entertainment
TOKYO Dec 4 (Reuters) - Japan's securities watchdog will recommend that a Tokyo-based unit of Deutsche Bank be sanctioned for excessive entertainment of pension fund executives, sources with knowledge of the matter said on Wednesday.
The Securities Exchange and Surveillance Commission (SESC) has been investigating entertainment by Deutsche Securities because the clients involved managed part of the Japanese national pension scheme, Reuters reported in September. As such, the executives are subject to anti-bribery statutes.
The watchdog found that Deutsche Securities employees spent a total of between 6 million and 9 million yen ($58,600 to $87,900) to entertain officials of three pension funds between 2010 and 2012 in return for them investing in financial products, the Nikkei newspaper reported earlier on Wednesday.
A spokesman for Deutsche Securities in Tokyo declined to comment.
The probe is part of a wider investigation into the wining and dining of pension fund executives triggered by a 2012 scandal in which Tokyo-based money manager AIJ Investment Advisors was found to have defrauded pensioners out of more than $1 billion.
Lavish entertainment was one of the tools AIJ used to attract investment from dozens of employee pension funds partially invested in the national pension scheme, regulators found in that case.
The SESC is planning to apply a clause in the financial instruments law against "providing special benefits" to clients in recommending the sanction, which it is expected to make official soon, the sources said.
The Financial Services Agency, which carries out the recommendations of the SESC, will likely issue an order to Deutsche Securities to improve its business practices, the sources told Reuters. The sources spoke on condition of anonymity because no official decision on a sanction has been announced.
Deutsche had already started its own investigation into the matter before the SESC began a regular audit of the German bank's Japanese business in May, sources told Reuters in September.
The firm has stopped marketing directly to such pension funds as part of a review of its sales and compliance practices, the sources said.