By Noriyuki Hirata
TOKYO May 26 Japan's securities regulator will seek a fine against a fund management arm of Sumitomo Mitsui Trust Holdings for insider trading for the second time and believes an employee of broker Nomura Holdings was again the source of the leak, two people with direct knowledge of the matter said.
The case is the second in two months to involve Nomura, increasing the chances that Japan's largest broker could face sanctions as part of an industry-wide probe into dubious trading around a series of public offerings in 2009 and 2010.
The Securities and Exchange Surveillance Commission (SESC) will recommend a fine against the unit of Sumitomo Mitsui Trust after finding a fund manager sold shares in Mizuho Financial Group Inc after receiving information about its share offering before it became public in 2010, the sources said.
The SESC believes an employee of Nomura, which was an underwriter on the Mizuho offering, was the source of that tip-off, according to the people, who spoke on condition of anonymity because they are not authorized to speak on the matter.
Nomura declined to comment. Sumitomo Mitsui Trust could not be reached for comment. The SESC as a policy does not comment on individual cases or ongoing investigations.
What will mark the second case targeting Sumitomo Mitsui Trust follows a similar one in March when the firm acknowledged a fund manager traded on inside information about a separate share offering by energy firm Inpex Corp.
Nomura was also the lead underwriter on the Inpex offering, and the regulator believes a Nomura employee leaked information on that share sale as well, sources with direct knowledge of the matter have told Reuters.
The SESC dispatched investigators to Nomura's Tokyo offices in late April in an escalation of its probe into the broker.
Nomura's last penalty related to insider trading was in 2008 when it was ordered to improve internal controls after a Hong Kong-based employee in its M&A department was caught trading on non-public deal information which he also passed on to friends.
It could face a similar sanction this time or possibly a more severe penalty, such as suspending some operations, depending on the course of the SESC's probe.
The SESC sought a 50,000 yen ($630) fine against Chuo Mitsui in the Inpex case, a recommendation that was imposed by the Financial Services Agency (FSA), the regulatory body in charge of carrying out penalties against banks.
The small size of the fine, calculated on a pre-set formula based on the expected commission from the trade, was held up by some market participants as symbolic of the limited power of the regulator to act as an effective deterrent.
The penalty against Sumitomo Mitsui Trust is expected to be small in the Mizuho case as well, the people said.