(Provisional Translation)
March 18, 2003
Financial Services Agency

The administrative action against
Nikko Salomon Smith Barney Limited, Tokyo Branch

1. Acts of conducting a series of securities transactions intended to create artificial market prices which do not reflect actual states of markets

The Securities and Exchange Surveillance Commission (SESC) conducted the inspection of Nikko Salomon Smith Barney Limited, Tokyo Branch (''Branch'' hereafter), and found the following violation of the Securities and Exchange Law (''Law'' hereafter). The SESC recommended the Commissioner of the Financial Services Agency (FSA) on March 7, 2003 to take a disciplinary action against the Branch.

(1)

On July 18, 2002, the Branch placed a series of limit and market orders to purchase several issues listed on Tokyo Stock Exchange (TSE) and/or Osaka Securities Exchange for the purpose of raising closing prices of those issues at the TSE. As a result, the prices of those issues did rise. Beforehand, the Branch had had a contract with one big institutional investor who intended to release its significant amount of stock portfolio by contributing it into the exchange traded fund (''ETF''). According to the contract, the Branch was to compose the ETF by purchasing the institutional investor's portfolio as a whole and acquiring the rest of the ETF basket from the market. It was agreed between the Branch and institutional investor that the value of the newly acquired part would be calculated by the closing prices of the specified date instead of the actual purchase prices of the Branch. Thus the contract meant to the Branch that the higher the closing prices of the TSE, the more profit it would have from this transaction. * The contract can be approximately explained by following formula;

The payment from the Branch to the institutional investor

The value of the institutional investors' portfolio

Total value of the ETF (pre-fixed using the price in the futures market of specified dates)

The value of the newly acquired part calculated by the closing prices

(2)

The acts above are found to be ''acts of conducting a series of securities transactions intended to create artificial market prices which do not reflect actual states of markets'' stipulated in the Article 4 (iii) of the Ordinance of the Cabinet Office Concerning the Regulations, etc. of Conducts of Securities Companies, and thus to have violated the Article 42 (1) (ix) of the Law as applied by the Article 14 (1) of the Law on Foreign Securities Firms.

2. The administrative action against the Branch

On the basis of the above findings, the FSA issued the following business suspension and improvement order to the Branch today:

(1)	Suspending business operation
	- Suspending all the stock tradings on its own account from March 19, 2003 to April 16, 2003 (20 business days) except for the execution of transactions contracted on or before March 18, 2003.
(2)	Improving compliance with the law
	- Strengthening the internal control system, securing strict compliance by all the directors and staff, taking preventive measures against recurrence of the above-mentioned violation, and clarifying locus of responsibility. - Submitting a report to the FSA on the implementation of the above measures by April 18, 2003.