Press Conference by Tadahiro Matsushita, Minister for Financial Services

(Excerpt)

(Tuesday, August 7, 2012, from 9:27 a.m. to 10:05 a.m.)

[Questions & Answers]

Q.

Regarding insider trading related to public offerings of new shares, a media report has stated that Japan Advisory had business relations with all of the 12 companies ordered to review their information management systems. Is that true? If so, what actions will the Financial Services Agency (FSA) take?

A.

In relation to their systems for managing corporate information, on August 3, the 12 companies reported, first, on their internal organization, second, on the management status of corporate information and, third, on their challenges and countermeasures.

I would like to refrain from commenting on the specifics of their reports.

However, I understand that even though the companies have developed systems for managing corporate information to a reasonable degree, they have identified new challenges in light of the series of insider trading cases and they will make improvement efforts.

As to the status of specific transactions, such as transactions with Japan Advisory, I would like to refrain from making comments.

Generally speaking, if a problem is recognized, the FSA will of course appropriately share information with the Securities and Exchange Surveillance Commission (SESC). The FSA will also take strict actions in accordance with the laws and regulations.

On June 29, the FSA rescinded Japan Advisory's registration and ordered the company to improve its business operation, as you know.

Q.

In relation to the 12 major securities companies' review that was mentioned earlier, the FSA has ordered Daiwa Securities Group to submit reports and ordered Nomura Securities to improve its business operation. As for the other 10 companies, how will the FSA make sure that they will implement improvement measures?

A.

As I mentioned earlier, I hope that the 12 companies will conduct internal review while appropriately exercising governance. I have also repeatedly expressed my strong hope that that they will voluntarily announce the results of the review, so I am sure that they will do so.

Generally speaking, if a problem is recognized, the FSA will of course appropriately share information with the SESC and take strict actions in accordance with the laws and regulations.

Q.

I presume that the FSA has required the companies to report on points of improvement. May I take it that the FSA will not do anything further to make sure they are really implementing improvement measures?

A.

Naturally, as the FSA has ordered the 12 companies to submit reports, it will keep a close watch to make sure that they will implement the measures.

Q.

I would like to wait for the companies to make voluntary disclosure regarding the contents of their reports, but when you look at the reports as a whole, do you recognize any new challenge that the securities industry must address?

A.

The FSA is now closely examining the reports, and I have not yet received a report about details from my staff. However, when we consider the fact that Nomura Securities' involvement in the insider trading cases has triggered such strong reactions in Japan and abroad - as you know, Nomura Securities has dealt with the reactions by reshuffling its management team, expressing its resolve to carry out fundamental reform and announcing various measures - the 12 companies must adequately take that into consideration and regain public trust by voluntarily implementing reforms if they recognize problems regarding their internal control systems and their governance. As they are top-class companies, we believe they will exercise governance. We will continue to keep a close watch on their actions.

Q.

Just to confirm regarding the 12 securities companies' review, they reported to the FSA on August 3 and today is August 7. While you expressed your strong hope that they will voluntarily announce the results, around what date do you expect the announcement will be made? Will it be today or tomorrow?

A.

We have been strongly encouraging them to voluntarily announce the results. As far as I know, the companies are preparing to announce the results within today, August 7 (Tuesday). We have been strongly encouraging them to announce the results.

Q.

I would like to ask you again about insider trading. Yokohama District Prosecutors Office and the SESC have completed their criminal investigation of SMBC Nikko Securities, marking the end of the investigation of the series of insider trading cases. This was a serious case in which an executive officer of a company handling corporate information was involved in insider trading. Could you comment on the series of cases as well as on your perspective on the problem?

Also, regarding SMBC Nikko Securities, did the company have any organizational defects in relation to the series of cases? If so, are you going to order the company to implement recurrence prevention measures or discipline officers or employees?

A.

I am aware of a newspaper report that mentioned a 30% reduction in executive compensation for SMBC Nikko Securities' president in connection with the company's involvement in insider trading. As for the fact that a former executive officer of SMBC Nikko Securities was accused of and charged with involvement in insider trading related to several stock issues, the FSA naturally thinks that is very regrettable. From the perspective of preventing illegal transactions such as insider trading, securities companies need to strictly manage corporate information related to tender offers. They are also required to develop effective internal control systems and conduct business with a high level of compliance awareness and professional ethics.

Generally speaking, if a problem is recognized with regard to business operations of a securities company, we identify how the company has figured out and responded to the problem and take appropriate actions in accordance with the laws and regulations.

Q.

Derivatives transactions on the Tokyo Stock Exchange have apparently been halted completely due to a system glitch. This is the second system glitch this year. What do you think of that?

A.

I do not have precise information concerning that, so I would like to refrain from making comments.

I will later check the facts. Let me start by checking the facts.

Thank you very much.

(End)