Press Conference by Yuji Yamamoto, Minister for Financial Services

(Excerpt)

February 2, 2007

Q.

Please explain once again what your thoughts are on the series of misconduct at Nikko Cordial Corporation relating to the restatement of its financial reports.

A.

I commend the company for having been capable of taking the first step to break away from its past, in the sense that it has established a special investigation committee inside the company, finished its report on the results of investigation in a speedy fashion and disclosed the results thereof without concealing anything. The former management team did not disclose facts of this kind; it is fair to say that it did not disclose any so-called negative facts. In that sense, my evaluation is that its conduct is changing.

Q.

The special investigation committee's report has pointed out that the audit firm was not able to fully prevent illicit acts. How will the Financial Services Agency (FSA) tackle this?

A.

While it may be deemed to have been the result of the deficiencies on the part of the audit firm, there have been changes to the audit firm's opinion, and in particular, to the audit firm itself. Nothing definite can be said without taking into account the audit firm's explanation as to what circumstances in the past have led to this situation, but generally speaking, this kind of thing has happened on many occasions lately, so in regards to determining our future approach to further improving audit functions in that context, I have extremely high expectations for the fruits to be borne from the upcoming amendment of the Certified Public Accountant Law. As this will naturally be incorporated into deliberations at the current Diet session and questions will be asked, we hope to work out a firm solution in the process of answering their questions in a serious manner.

Q.

In relation to this, it is not impossible to regard the aforementioned incident as misconduct associated with a securities business run by a securities company, considering the origins of Nikko Cordial Corporation, even though it is a holding company. What are your thoughts on supervisory administration targeted at securities businesses for the future?

A.

You are right especially in that it does give the impression of operating in the securities market despite being a holding company. Given their parent-subsidiary relationship, even if it claims that the parent company's constitution is different from its subsidiary, there is an aspect that should not be brushed off on the grounds of the difference in their corporate status, as they are consolidated in accounting and financial terms as a matter of course and they need to be addressed as one. When soundness beyond the scope of the business company or the market has to be ensured, if such an aspect need be brought up in the substantial cause-and-effect relationship, it is natural to consider discussing bringing the parent company within the scope of audits as well. We will firmly contemplate what to do in the future, including taking such perspectives, while examining Nikko Cordial Corporation's new audit report which may be submitted at the end of February.

(End)

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