(Provisional Translation)
December 2, 2013
Securities and Exchange Surveillance Commission

Recommendation for Administrative Monetary Penalty Payment Order for Insider Trading by Stats Investment Management Co., Ltd.


1. Contents of the Recommendation

The Securities and Exchange Surveillance Commission (“SESC”), today, made a recommendation to the Prime Minister and the Commissioner of the Financial Services Agency that an administrative monetary penalty payment order be issued in regard to an insider trading by Stats Investment Management Co., Ltd. (“Stats”) pursuant to Article 20(1) of the Act for Establishment of the Financial Services Agency. This recommendation is based on the findings of the investigation into the insider trading, whereby the following violations of laws and ordinances were identified.

2. Summary of the Findings regarding Violations of the Laws and Ordinances

Stats was empowered to manage the assets of two Cayman domiciled unit trusts, Ginga Service Sector Fund and Ubiquitous Master Series Trust Class D Fund, based on the discretionary investment management agreements which Stats had entered into.

By July 2, 2010, at the latest, Stats, through its officer who was in charge of the investiment management of the said assets as fund manager, was tipped by an employee A of a securities company the material information that the executive decision-making body of INPEX Corporation (“INPEX”) made a decision to launch a follow-on public offering of its shares, which at first another employee B of the said securities company had learnt through the negotiation of the underwriting agreement and which later the said employee A had learnt in the course of his duties. Having been tipped as such, on July 6, 2010, prior to the publication of the said material information on July 8, 2010, the said officer sold the shares of INPEX as the investment management based on the discretionary investment management agreements mentioned above. Accordingly, on the account of the said funds, Stats sold a total of 456 shares of INPEX for 218,473,000 yen.

It was concluded that the conduct of Stats mentioned above constituted “a person has conducted Sales and Purchase, etc.set forth in Article 166(1) in violation of the provisions of Article166(1) or (3)” as stipulated under Article 175(1) of the Financial Instruments and Exchange Act before the amendments by the Act No.86 of 2012(“FIEA”).

3. Calculation of the Amount of the Administrative Monetary Penalty

Pursuant to the FIEA, the amount of the administrative monetary penalty applicable to the above violation is 540,000 yen.

Details of the calculation are presented in the Attachment.

4. Others

It had been reported to the SESC by the securities company mentioned in Section 2 above that this case was found in the course of its voluntary examination. The securities company has thereafter continued to cooperate with the SESC in its investigation.

Attachment

(1) Pursuant to Article 175(1)(iii) of the FIEA and to Article 1-21(1)(i) of the Cabinet Office Ordinance on Administrative Monetary Penalty Provided for in Chapter VI-II of the FIEA, a person who has, for the purpose of investing assets under management, engaged in transactions (“Violator") specified under Article 175(1)(iii) of the FIEA may be ordered to pay an administrative monetary penalty in the amount calculated as follows: (a) The total amount of money or other property paid or payable to the Violator as remuneration for the investment of the assets under management for the month in which the said transactions were executed (b) is multiplied by the highest value reached by the total amount of the issue included in the assets under management that was transacted during the period between the day on which the said transactions were executed and the last day of the month in which the said transactions were executed and (c) is then divided by the total value of the assets under management as of the last day of the month in which the said transactions were executed.

In this case, the transactions in question involved the investment of two groups of assets under management. Therefore, the administrative monetary penalty is calculated separately for each group of assets under management and added together to obtain the total amount of administrative monetary penalty payable.

Assets under management (A):

(a) 14,591,134 yen (b) 147,798,000 yen (c) 5,123,624,544 yen
= 420,901 yen

Assets under management (B):

(a) 2,221,451 yen (b) 72,933,000 yen (c) 1,270,673,889 yen
= 127,504 yen

Total:

420,901 yen + 127,504 yen = 548,405 yen

(2) Pursuant to the provisions of Article 176(2) of the FIEA, the fraction less than ten thousand yen contained in (1) above shall be rounded down.

*Last Updated: December 16, 2013

Recommendations to the FSA | top