Press Conference by Tadahiro Matsushita, Minister for Financial Services

(Excerpt)

(Tuesday, June 26, 2012, from 9:26 a.m. to 9:50 a.m.)

[Opening Remarks by Minister Matsushita]

At the cabinet meeting, Minister for National Strategy Furukawa reported on an action plan for invigorating the economy by promoting women's participation. The plan includes measures to encourage men to take child care leave. Minister Furukawa also requested efforts to achieve the government's goal of increasing the proportion of women in the government to 30%, although the overall number of public servants is planned to be reduced.

In addition, regarding cyber attacks being launched around the world, the foreign minister mentioned international cooperation based on a treaty on cyber crimes.

That is all I have to say.

[Questions & Answers]

Q.

Yesterday, an executive officer of SMBC Nikko Securities Inc. was arrested on charges of engaging in insider trading in violation of the Financial Instruments and Exchange Act. Although criminal investigation had already been launched in this case, could you comment on it once again following the arrest?

A.

This case is very regrettable. It is just three weeks since I took office as the minister for financial services. Over this period, this case has continuously been mentioned, whether in the Diet or at press conferences. I am very interested in the background to this case. I feel great regret at a corporate governance problem like this, in which sensitive information held by a select group of people is used to generate illegal profits.

From the perspective of preventing unfair trading, such as insider trading, securities companies must strictly manage corporate information related to public offering of new shares. I would like securities companies to perform their duties properly. I would also like them to develop effective internal control systems. Moreover, they must conduct business with a high level of compliance awareness and professional ethics. If a problem is recognized regarding this securities company's business operation, the Financial Services Agency (FSA) will take strict action in accordance with laws and regulations. We will appropriately deal with this case.

Q.

We have seen a series of insider trading cases involving Japanese securities companies, such as SMBC Nikko Securities and Nomura Securities Company, which have considerably shaken confidence in the market. As the minister for financial services, how do you intend to restore confidence in the whole market? Do you have any message you would like to send to the management teams of securities companies?

A.

Over the three weeks since I took office, these insider trading cases have continuously been mentioned, whether in the Diet, at press conferences or during talks with my colleagues. I have been surprised by these cases myself. As I mentioned earlier, it is natural for securities companies to prevent unfair trading, such as insider trading. This problem concerns the fundamentals of governance, so I would like securities companies to strictly manage corporate information, develop effective internal control systems and conduct business with a high level of compliance awareness and professional ethics. I would like them to perform their duties properly. That is what I would like to stress.

Q.

Given that several insider trading cases occurred in succession, it has been pointed out that it may be difficult to prevent this problem through efforts by securities companies alone and that a new fundamental reform may be necessary. What would you say to that?

A.

The FSA is also considering various measures. We will consider and work out necessary measures after checking and sorting out facts related to the succession of insider trading cases.

However, the most important thing is that the companies and people concerned should recognize their own governance, responsibilities, their own positions and their own jobs. I would like to stress that I am concerned that there are serious problems in that respect.

Q.

I would like to ask you about the insider trading cases. Tomorrow, June 27, Nomura Securities will hold a general shareholders' meeting. A general shareholders' meeting is an important occasion where the company explains its investment and business activities. What is your view on the duty of accountability Nomura Securities should fulfill at the meeting in relation to the series of insider trading cases?

A.

I believe that as the leading securities company in Japan, Nomura Securities should provide appropriate explanations. How should the company explain to shareholders its own corporate governance and matters related to the fundamentals of its business? I would like Nomura Securities to properly fulfill its duty of accountability as the leading company in this field in relation to its corporate governance and employees' compliance awareness and professional ethics. That is my frank opinion.

Q.

It is already several months since the insider trading cases involving Nomura Securities came to light. However, an internal report has not yet been compiled. As the company's general shareholders' meeting will be held in this situation, I am wondering how the company will explain the cases. How do you feel about that?

A.

I do not think that these cases have fully been examined. Nomura Securities itself should make judgment on this problem as a matter of governance on its own responsibility. I expect that Nomura Securities will make an announcement after carefully judging the adequacy of its internal investigation that involves outside lawyers.

Q.

Regarding the general shareholders' meeting, you said that the investigation has not fully examined the cases, so may I take it that you believe the company should provide appropriate explanations to the possible extent at the meeting?

A.

That is correct. The company should properly fulfill its responsibility for this problem as its own governance problem.

Q.

From what perspective will you consider administrative action against SMBC Nikko Securities Inc., a former employee of which was arrested yesterday?

A.

I would like to refrain from making comments on our administrative action against a specific case. However, generally speaking, if a problem is recognized regarding a securities company's business operation, we take strict action in accordance with laws and regulations.

Q.

The person who was arrested this time had been working for SMBC Nikko on loan from Sumitomo Mitsui Banking Corporation (SMBC), so we may say that this is an insider case involving SMBC. In that sense, this has a significant impact on the banking and securities industries. What do you think of the fact that an employee of a megabank, which should have a more rigorous compliance system than securities companies, was involved in the case?

A.

I am aware of a media report about what you mentioned.

Q.

I am asking you not about a media report but about facts.

A.

I would like to refrain from commenting on a specific case.

Q.

The financial assistance for Spanish banks is said to be worth around 100 billion euro. Although its details have not been disclosed, do you think that the size and method of this assistance and the way of disclosing it are appropriate?

A.

I am aware that Spain formally requested financial assistance for its banking sector yesterday in light of the results of an external evaluation of Spanish banks, which were announced on June 21. I believe that restoring the Spanish financial sector to a sound condition is an important first step toward stabilizing the market. In any case, the FSA will monitor European governments' policies toward the European fiscal and financial problems with strong interest. I am aware of various speculations over the size of the assistance, but I would like to refrain from commenting in that respect.

Q.

A media report said that as interest rates have remained low, the standard prospective yield for life insurance will be lowered in April next year for the first time in 12 years, which will prompt life insurance companies to consider raising insurance premiums. What do you think of that?

A.

I am aware of the media report about a hike in life insurance premiums in April next year or later. The FSA refrains from commenting on individual life insurance companies' premiums. From the perspective of the protection of policyholders, I believe it is important to ensure the payment of insurance claims into the future, so the FSA will conduct appropriate supervision.

(End)