Press Release
March 9,2006
Securities and Exchange Surveillance Commission

Recommendation based upon the result of the inspection against
J.P. Morgan Securities Asia Private Limited.


1. Recommendation Issued


  Pursuant to Paragraph 1 of Article 20 of the FSA Establishment Act, on March 2,2006, the Securities and Exchange Surveillance Commission (''SESC'') issued a recommendation that the Prime Minister and the Commissioner of the Financial Services Agency (''FSA'') take administrative disciplinary action and any other appropriate measures against J.P. Morgan Securities Asia Private Limited (Tokyo Branch located in Akasaka, Minato-ku, Tokyo; Tetsuya Kawano as a Representative in Japan; staffed with approximately 780 employees/directors; hereinafter referred to as '' J.P. Morgan Securities''). This recommendation is based upon the results of the inspection against J.P. Morgan Securities, whereby the following violation of the laws and regulations by the company and its former employee were detected.


2. Violation Found
Act of entering into a series of future contracts in stock index to create an artificial market, which does not reflect the actual state of the market.

  From 13:57 to 15:10 on November 4, 2004, an employee of Equity Derivative Trading Department in J.P. Morgan Securities placed in the TSE market a series of sell orders for TOPIX future contracts for December 2004 against buy orders placed by him immediately before the above sell orders, both of which were placed at the same security index point, and vice versa, and consequently entered into a series of TOPIX future contracts in the account of an overseas affiliate of J.P. Morgan Securities, which contracts would not cause any transfer of rights. By entering into a series of such contracts, the employee created an artificial market stock index points in TOPIX futures contracts, which did not reflect the actual state of the market.

Through conducting the aforementioned acts, J.P. Morgan Securities and the former employee are held to have violated Item 3 of Article 4 of Ordinance of Cabinet Office concerning Regulation, etc. of Conducts of Securities Company (before amended in 2005), which prohibited ''Act of making a series of future contracts in stock index to create an artificial market, which does not reflect the actual state of the market.''

 


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