(Provisional translation)
April 5, 2013
Securities and Exchange Surveillance Commission

Recommendation for Administrative Action based on Findings of the Inspection of RBS Securities Japan Limited


1. Contents of the recommendation

Pursuant to Article 20, paragraph (1) of the Act for the Establishment of the Financial Services Agency, the Securities and Exchange Surveillance Commission (“SESC”) issued today, on April 5, a recommendation that the Prime Minister and the Commissioner of the Financial Services Agency (“FSA”) shall take administrative action against RBS Securities Japan Limited*(hereinafter referred to as “RBS Securities”). This recommendation is based on the findings of the inspection by the SESC, whereby the following violations of the law and regulation were identified.

*Location Chiyoda-Ku, Tokyo

Representative in JapanMr. Ryusuke Otani

Capital 64,900 million JPY

Number of officers and employees154

2. Summary of the findings

(1)Inappropriate conducts related to Yen LIBOR

From around middle of 2006 to early 2010, one trader at the Department of Short Term Market (at the time; hereinafter referred to as “Trader A”) and his colleagues at RBS Securities continuously approached Yen LIBOR submitters (hereinafter referred to as “Submitters”) of Royal Bank of Scotland plc (hereinafter referred to as “RBS plc”) including through RBS plc’s traders and made requests to change Yen LIBOR submissions in order to affect Yen LIBOR in favor of the derivative transactions by Trader A and his colleagues .

The above conducts of Trader A and his colleagues could undermine the market integrity, considering that Yen LIBOR is a significantly important financial index that serves as a benchmark interest rate for various financial transactions. Therefore, the conducts are acknowledged to be seriously unjust and malicious and have a serious problem from the viewpoints of the public interest and protection of investors.

Furthermore, in light of the fact that RBS Securities has failed to identify these misconducts for a long period of time and has not taken any appropriate measures, it is acknowledged that its internal control system has serious deficiencies.

(2)Receipt of non-public customer information from the Parent Bank, etc.

In conjunction with RBS plc’s acquisition of ABN AMRO Bank N.V., the two banks’ Tokyo branches were consolidated at the end of June 2009.

Prior to the consolidation, Chief Operating Officer (hereinafter referred to as “COO”) of RBS Securities set the completion of the bank consolidation as his major objective, and involved himself in the banks’ business through chairing and attending the meetings to discuss the issues of the bank consolidation, together with employees of RBS plc’s Tokyo branch.

Under such circumstances, from May 2008 to February 2010, the COO on several occasions and the then Chief Executive Officer of RBS Securities on one occasion respectively, received non-public customer information of Tokyo branches of RBS plc and ABN AMRO Bank N.V.

In addition, the Compliance Department of RBS Securities did not initiate any factual investigations even after the faults of these issues were pointed out from the inside, which means that its internal control system has serious deficiencies.

The conducts mentioned above in (1) are acknowledged to be unjust and malicious and have a serious problem from the viewpoints of the public interest and the investor protection, since (i) these conducts are recognized to be made in the course of RBS Securities’ business operation and (ii) such conducts could undermine the market integrity. Furthermore, it is acknowledged that its internal control system has significant deficiencies. Therefore, it is acknowledged that the situation of RBS Securities’ business operation is a case where administrative action is “necessary and appropriate for the public interest or protection of investors, with regard to a Financial Instruments Business Operator’s business operation” as stipulated under Article 51 of the Financial Instrument Exchange Act (hereinafter referred to as “FIEA”).

The conducts mentioned above in (2) are acknowledged to fall under the provision of Article 153-1(7) of the Cabinet Office Ordinance on Financial Instruments Business based on Article 44-3(4) of the FIEA.

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