(Bloomberg) -- The Nomura Holdings Inc. trader at the heart of a market manipulation scandal has left the firm, while its chief executive officer and other top managers are giving up part of their pay to take accountability.
The employee who manipulated Japanese government bond futures is no longer with Nomura, according to an official at the firm who asked not to be identified discussing a private matter. CEO Kentaro Okuda will voluntarily return 20% of his pay for two months, a Nomura statement showed on Thursday. Deputy President Yutaka Nakajima and several other executives at the firm’s domestic securities unit will take similar or smaller cuts.
In its statement, Nomura also said “strict disciplinary action has been taken against the trader and relevant managers in accordance with internal rules and regulations.”
Nomura drew separate negative headlines on Thursday, when Kyodo reported that a former employee was arrested on suspicion of robbery and attempted murder of an elderly couple who were clients of the brokerage. The 29-year-old man worked for Nomura Securities Co. when the alleged crime took place in Hiroshima in July, Kyodo reported, citing an unidentified person involved in the investigation.
He is suspected of drugging a customer and his spouse, stealing about ¥26 million ($171,000) in cash from their home and setting fire to the building, according to the report. The couple in their 80s escaped safely, it said.
A spokesperson for Nomura Holdings confirmed that the person is a former employee who was dismissed for disciplinary reasons, without saying when he worked there.
FSA Fine
Meanwhile, the market manipulation case led Japan’s Financial Services Agency to impose a ¥21.8 million fine against the company on Thursday. Nomura said it has paid the fine.
The penalty followed a recommendation made last month by the Securities and Exchange Surveillance Commission, the agency’s investigative arm, which found a Nomura employee placed misleading orders in the government bond futures market in March 2021. The trader profited by placing large orders without intending to buy or sell all of them, in a practice called layering, the watchdog said.
The incident has led clients to take their bond trading and underwriting business elsewhere, hurting Nomura at a time when it is refocusing on Japan as a key growth area. The nation’s debt market has come back to life after the Bank of Japan raised interest rates and scrapped a policy of controlling bond yields earlier this year.
“We take this matter very seriously,” the company said in a separate statement, where it apologized to clients and concerned parties for the trouble this has caused. “We will continue to further enhance our compliance framework and internal controls to prevent similar incidents occurring in the future and to regain trust.”
Besides its top executives returning part of their pay, Nomura announced several steps to prevent a recurrence, including:
- conducting regular checks on the system for suspicious transactions such as layering, as well as having each trader’s orders and cancellations checked by a superior after the close of trading hours
- ensuring front office trading management operations are carried out properly, making sure post-trade checks are conducted and reviewing the monitoring status.
“While at the time of the incident, Nomura Securities’ trading surveillance system could detect cancellation of trades exceeding a certain volume, the system was not designed to detect a series of layered transactions like the one in this incident,” the firm said. “We have already upgraded the system to detect layered orders and cancellations, and have not detected any such transactions since the upgrade.”
Nomura is scheduled to report second-quarter earnings on Friday, which are expected to show profit grew for a third straight quarter. The market manipulation incident came to light at the end of the reporting period.
The firm had more than doubled pay for its top managers last fiscal year, as earnings rebounded on booming domestic markets.
(Updates with report of ex-worker’s arrest from fifth paragraph)
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