Administrative Action against Nomura Holdings, Inc. and Nomura Securities Co., Ltd.

   1.  According to the Article 57-23 report request order based on the Financial Instruments and Exchange Act (“FIEA”) and its report submission by the Nomura Holdings, Inc. (Address: Chuo City, Tokyo / Japan Corporation Number: 7010001034881 / hereinafter referred to as “NHI”) and the investigation result from the NHI Audit Committee conducted by a special investigation team including external professionals, the FSA found significant inadequacies at NHI and the Nomura Securities Co., Ltd. (Address: Chuo City, Tokyo / JCN: 6010001074037 / hereinafter referred to as “NSC”) as follows:

 (1)NSC

(A) Inadequacy of the business management system for information control

 On March 5, 2019, a chief strategist, who belongs to NSC Market Strategy Research Department, obtained a presumed information from a research fellow who belongs to NHI Affiliated Companies, etc. and who is a member of the "Advisory Group to Review the TSE Cash Equity Market Structure" held by Tokyo Stock Exchange, Inc. ("TSE")(hereinafter referred to as "Information related to the TSE Internal Review status regarding Market Structure" or "IIRMS")
 The IIRMS includes a review of criteria for company listing and exit thresholds for the TSE 1st section would likely be stipulated at over JPY 25 billion of market capitalization.
 On March 5 and 6, 2019, the strategist communicated the IIRMS to sales persons of NSC, two sales persons of a NHI overseas subsidiary (Nomura International (Hong Kong), Limited.("NIHK")), and an external fund manager.
 Seven sales persons who received the IIRMS, including one NIHK sales person, provided IIRMS and solicited a total of at least thirty-three institutional investors.
 The strategist, moreover, provided e-mails which included a statement of “Possibility of 25 billion yen as threshold increased very recently” to a large number of external institutional investors. (hereinafter a series of activities conducted by the strategist and the seven sales persons referred to as the "Conducts”)
 Notwithstanding the fact that these Conducts did not violate laws and regulations, the Conducts were intended to solicit certain specific investors with offers of IIRMS, therefore, the Conducts are likely to impair and undermine the credibility for the integrity and fairness of capital markets significantly.
 The root causes of the Conducts include:
(a) there is no policy and procedure to regulate the Conducts appropriately;
(b) the employees involved in the Conducts lacked awareness for compliance which is required for employees of broker-dealers, and the sales persons prioritized improving their own reputations by showing that they have valuable sources of information with insufficient understanding of the substance of compliance;
and (c) inadequate preparedness of the examination and supervision framework that should prevent in advance inappropriate information offering to external institutional investors.
 In view of not having identified such actual business operations, the senior executives of NSC did not take effective management and supervision measures with regard to information controls, therefore, the business management of the NSC executive is insufficient.

(B)Insufficient improvement of the business operations based on the past administrative actions

 The Conducts use  price sensitive non-insider information, at the point of insufficient understanding for the substance of compliance, there are similarities to the public offering insider trading case in 2012, in which the FSA took an administrative action against NSC.
 Although NSC had been taking measures for reviews of internal business operations including information controls and worked to strengthen and ensure employees' professional ethics, (a) the Conducts were overlooked as a result, without being questioned and without whistle blowing from employees who are able to recognize the occurrences of these Conducts, and (b) it was insufficient to ensure compliance awareness to all the employees. From the result of employees opinion surveys held by NHI, there are some opinions, with limited focus, which recognize compliance as legal compliance only, moreover, admit the Conducts as satisfactory. Therefore, the improvements of the business operations are insufficient.
 As stated above, NSC conducted insufficient business operations and internal controls, therefore, the FSA recognizes that it meets the requirements for applying Article 51 of the FIEA, which applies to circumstances where issuing a business improvement order is "appropriate and necessary for the public interest or protection of investors, with regard to a business operation of a Financial Instruments Business Operator."

 (2)NHI

 The initiatives of the NHI Board of Directors to implement and demonstrate appropriate group business management functions are insufficient, based on the lessons learned from the public offering insider trading case in 2012, etc., against challenges including reviews of information controls and the thoroughly strengthening professional ethics that should be treated as a whole group. 
 As stated above, NHI conducted insufficient group business management, therefore, the FSA recognizes that it meets the requirements for applying Article 57-19, paragraph (1), of the FIEA which applies to circumstances where issuing a business improvement order is "necessary and appropriate in the public interest or for the protection of investors in light of the state of the business of a Designated Parent Company."
 

   2. The FSA, today, issued the following administrative action against NSC and NHI.

• (1)Business Improvement Order for NSC, based on the Article 51 of the FIEA

• (A)  Clarify where responsibility lies for this incident, including senior executives, based on this administrative action.

• (B)  Submit a detailed improvement plan to prevent recurrence in response to the proposal of the internal review by NHI and NSC. Moreover, ensure that the prevention measures are firmly implemented, based on the improvement plan developed.

• (C)  Report periodically the implementation of recurrence prevention measures.

• (D) Examine and report periodically the effectiveness of recurrence prevention measures. In case inadequacies are found as the result of the above examination, report the causes and the improvement measures to address the deficiencies.

• (E) Regarding (A) to (D) above, submit the first report by June 4, 2019 under joint signature of NHI. Thereafter, submit each report within 15 days from the end of each quarter and at any times as needed in consideration of the necessity.

• (2)Business Improvement Order for NHI, based on the Article 57-19, paragraph (1) of the FIEA

• (A)  Clarify where responsibility lies for this incident, including senior executives, based on this administrative action.

• (B)  Submit a detailed improvement plan to prevent recurrence in response to the proposal of the internal review by NHI and NSC. Moreover, ensure that the prevention measures are firmly implemented, based on the improvement plan developed.

• (C)  Report periodically the implementation of recurrence prevention measures.

• (D)  Examine and report periodically the effectiveness of recurrence prevention measures. In case inadequacies are found as the result of the above examination, report the causes and the improvement measures to address the deficiencies.

• (E)  Regarding (A) to (D) above, submit the first report by June 4, 2019 under joint signature of NSC. Thereafter, submit each report within 15 days from the end of each quarter and at any times as needed in consideration of the necessity.