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(Provisional Translation)
December 6, 2016
Securities and Exchange Surveillance Commission

Recommendation for Administrative Monetary Penalty Payment Order for Market Manipulation of shares of SEIBU HOLDINGS INC. by Morgan Stanley MUFG Securities Co., Ltd.


1. Contents of the Recommendation

The Securities and Exchange Surveillance Commission (the “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 market manipulation by Morgan Stanley MUFG Securities Co., Ltd. (Corporate Number: 2011001046046 “MSMUFG”) 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 market manipulation, whereby the following violation of laws and ordinances was identified.

2. Summary of the Findings Regarding Violation of the Laws and Ordinances

MSMUFG is a stock company which is registered with the commissioner of Kanto finance bureau as a Type I Financial Instruments Business Operator. MSMUFG, through an employee who engaged in securities trading, in relation to its business, regarding shares of SEIBU HOLDINGS INC., whose shares are listed on the Tokyo Stock Exchange First Section Market, during 14 trade days in total from September 24 to October 6 and from October 13 to October 19, 2015, with the purpose of inducing sales and purchases of other market participants, conducted transactions including, without intention to execute, placing a large amount of buy orders at prices around the best offers on the Tokyo Stock Exchange. Thus, in total, MSMUFG bought 416,500 shares while placing purchase orders for 9,258,000 shares on its own account. These constituted a series of sales and purchases and their offers of securities that would mislead others into believing that sales and purchases of the shares were thriving and would cause fluctuations in the market of the shares.

The actions mentioned above conducted by MSMUFG were recognized as “a series of Sales and Purchases, etc. of Securities” and their “Offers” conducted “in violation of Article 159(2)(i)” as stipulated under Article 174-2(1) of the Financial Instruments and Exchange Act (“FIEA”).

Summaries of the findings, etc. regarding the violation of the laws and ordinances are described in Attachment 1.

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 219,880,000 yen.

Details of the calculation are presented in Attachment 2.

4. Others

We have investigated this matter based on various sources including information provided by the Japan Exchange Regulation (JPX-R).

(Attachment 1)

Outline of Acts of Violation

Outline of Acts of Violation
(Click to Enlarge Image)

(Attachment 2)

Method of Calculation of the Amount of the Administrative Monetary Penalty

  1. Pursuant to the provisions of Article 174-2(1) of the FIEA, the amount of the administrative monetary penalty shall be calculated as the sum of (1) and (2) below:

    (1)Amount pertaining to a Matching Volume of Sale and Purchase (Note 1) pertaining to acts of violation: (Value pertaining to sale, etc. of securities on its own account) – (Value pertaining to purchase, etc. of securities on its own account)

    (Note 1):Matching Volume of Sale and Purchase: The smaller of the number of securities sold, etc. and the number of securities purchased, etc. pertaining to acts of violation.

    (2)Where the number of securities purchased, etc. on its own account pertaining to acts of violation exceeds the number of securities sold, etc. on its own account pertaining to acts of violation: (Highest price among the highest prices as designated under Article 67-19 or Article 130 of the FIEA of the securities on each day during a one-month period following the termination of acts of violation × the excess transaction volume) – (Value pertaining to purchase, etc. of securities with respect to the excess transaction volume)

    and

    (3)Pursuant to the provision of Article 176(2) of the FIEA, any fraction less than ten thousand yen of the sum of the amounts calculated as in (1) and (2) above shall be rounded down.

  2. In this case, the amount of the administrative monetary penalty is 219,880,000 yen. This amount is based on the sum of the amounts calculated as in (1) and (2) below, which sum has been rounded down for the amount less than ten thousand yen pursuant to (3) above.

    (1)The amount of the administrative monetary penalty regarding the amount pertaining to a Matching Volume of Sale and Purchase (Note 2) is 171,419,318 yen (Note 3).

    (Note 2)Amount pertaining to a Matching Volume of Sale and Purchase is 2,396,127 shares as described below:

    (i)Amount pertaining to the sale, etc. of the securities on its own account is 2,396,127 shares, which includes 2,255,700 shares that were sold, etc. pertaining to the acts of violation and 140,427 shares that were sold short on its closely related affiliates’ account at the time of the commencement of the acts of violation and are deemed to have been sold at 2,296 yen per share, which was the share price at the time of the commencement of the acts of violation, pursuant to Article 174-2(6) and (7) of the FIEA, Article 33-12(i) of the Cabinet Office Ordinance, and Article 1-17 of Administrative Monetary Penalty Provided for in Chapter VI-II of the Financial Instruments and Exchange Act (the “OOAMP”).

    (ii)Amount pertaining to the purchase, etc. of the securities on its own account is 2,539,208 shares, which includes 416,500 shares that were purchased, etc. pertaining to the acts of violation and 2,122,708 shares that were in its own possession at the time of the commencement of the acts of violation and are deemed to purchase at 2,296 yen per share, which was the share price at the time of the commencement of the acts of violation, pursuant to Article 174-2 (8) of the FIEA, and Article 33-13(i) of the Order for Enforcement of the FIEA.

    (Note 3)Details of the calculation are presented in Appendix 2 (PDF).

    (2)The amount of the administrative monetary penalty regarding the excess transaction volume (143,081 shares) where the amount pertaining to the purchase, etc. of the securities exceeds the amount pertaining to the sale, etc. of the securities as described in (1) above is 48,461,790 yen (Note 4).

    (Note 4)The amount is calculated as below:

    (As prescribed in Article 130 of the FIEA, the highest price among the highest prices on each day during a one-month period following the termination of acts of violation (2,664 yen)) × (Excess trading volume (143,081 shares: 2,539,208 shares – 2,396,127 shares) ) – (Value pertaining to the excess trading volume (331,506,220 yen) ) = 48,461,790 yen

[Reference: Examples of how to calculate the administrative monetary penalty]

[Reference: Examples of how to calculate the administrative monetary penalty]
(Click to Enlarge Image)

(PDFAppendix 1 (PDF))

(PDFAppendix 2 (PDF))

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