(Provisional Translation)
June 27, 2001
Financial Services Agency

An administrative action against Goldman Sachs Japan Ltd., Tokyo Branch

1. On May 29, 2001, the Financial Services Agency(FSA) requested Goldman Sachs Japan Ltd., (''the Branch'' hereafter) to report the cause of the malfunction with their trading system of covered warrants which the Branch buys and sells based on their own option pricing formula.
   As a result of that, the following violations of the Law on Foreign Securities Firms(LFSF) were found:
   • On May 24, 2001, the Branch displayed the price of the covered-warrant underlying a specific listed stock, far from the theoretical price to be calculated on their own option pricing formula via the internet to many investors through broker-dealers specializing in the internet trading which received the price indication from the market information providers.
   • As a result of that, the Branch made many investors mistaken with the price information so that the Branch received many orders from the investors at the price.
   • Furthermore, on their screen, the Branch displayed notes of confirmation for the investors that the contracts were rightly made at the price.
   Such conduct was found to violate the Article 4-1 of the Cabinet Order concerning the Regulations of Conducts of Securities Companies.
2. On the basis of the above findings, the FSA issued the following orders against the Branch:

(1)	Suspend Businesses
	[1] Suspend all the trading operations related to covered warrants in the Branch from July 2 to July 13, 2001 excluding the certain businesses for settlement. [2] Suspend the business operation related to issuing and offering of covered warrants in the Branch from June 28 to July 27, 2001.
(2)	Improve the compliance with the law
	[1] Disclose the pricing formula of covered warrants and ensure investors fair and transparent pricing of covered warrants by maintaining appropriate volatility. [2] Clarify locus of responsibility, strengthen the internal control system, and make preventive measures against recurrence of the violations mentioned above, such as strengthening the transaction surveillance system already used in the trading system. [3] Check and totally revise the manual prepared for the future contingencies such as displaying erroneous prices of covered warrants and malfunction with the trading system. [4] Check, totally revise, and explain the important matters thoroughly to investors, such as exemption clauses dealing with erroneous pricing and troubles with the trading system, which enables the Branch to cancel the contracts with customers. [5] Settle the troubles with the investors related to the transactions of the covered warrants as soon as possible.
(3)	Deadline
	By July 27, 2001, report to the FSA what kind of measures should be worked out and to what extent the measures should be executed according to the order for improvement of the compliance with the Law listed above.