December 12, 2013
Financial Services Agency
The Securities and Exchange Surveillance Commission (SESC) conducted an inspection on Deutsche Securities Inc (hereinafter referred to as “Company”), and found a violation of the Financial Instruments and Exchange Act (hereinafter referred to as ''FIEA''). On December 5, 2013, the SESC recommended taking an administrative action against the Company.
On the basis of the violation, the FSA today (December 12, 2013) issued the following administrative action against the Company based on Article 51 of the FIEA.
Whereas officers at employees’ pension funds are legally considered public officers, it was identified that the Pension Solution Department of the Company had provided officers of three employees’ pension funds with substantial benefits through gifts and entertainment with regard to contracts for financial instruments transactions.
(1) From October 2010 to December 2012, the Company provided officers including the Chairperson of employees’ pension fund A with benefits corresponding to approximately 3.94 million JPY in total for the purpose of selling index-linked bonds structured by the Company’s corporate group and other products (hereinafter referred to as “Index-Linked Bonds, etc.”) to the employees’ pension fund through bearing expenses of an overseas trip and providing them with entertainments approximately forty times.
(2) From December 2011 to December 2012, the Company provided officers including a Managing Director of employees’ pension fund B with the benefits corresponding to approximately 1.43 million JPY in total for the purpose of selling Index-Linked Bonds, etc. to the employees’ pension fund through providing them with entertainments approximately thirty times.
(3) From June 2010 to December 2012, the Company provided officers including Managing Directors of employees’ pension fund C with the benefits corresponding to approximately 0.9 million JPY in total for the purpose of selling Index-Linked Bonds, etc. to the employees’ pension fund through bearing expenses of an overseas trip and providing them with entertainments approximately thirty times.
The above conducts are acknowledged to fall under Article 117(1)(iii) of the Cabinet Office Ordinance on the Financial Instruments Business Operator under Article 38(vii) of the Financial Instruments and Exchange Act, which stipulates “an act of providing substantial benefits to a customer or a third person [...] with regard to a contract(s) for a financial instruments transaction(s)”.
Business Improvement Order based on Article 51 of the FIEA
(1) Ensure the implementation and the embeddedness of the preventive measures developed by the Company.
(2) Submit periodically reports on the implementation status of the preventive measures.
(3) Examine periodically the effectiveness of the preventive measures and report the results of the examination.
(Note) In case inadequacy is found as the result of the above examination, report the causes and the improvement measures to address the inadequacy.
(4) Regarding (1) to (3) above, submit the first report by January 14, 2014. Thereafter, submit each report within 15 days from the end of each quarter. Regardless of the above reporting deadlines, additional reports are required when needed.
Financial Services Agency
Securities Business Division, Supervisory Bureau
Tel: +81-(0)3-3506-6000 (main)
(ext. 3370, 3356)