(Provisional Translation)
May 28, 2004
Financial Services Agency

The administrative action against
UBS Securities Japan Ltd., Tokyo Branch

1. The state of insufficient internal control of undisclosed corporate information from the viewpoint of preventing unfair trade

   The Securities and Exchange Surveillance Commission (SESC) conducted the inspection of UBS Securities Japan Ltd., Tokyo Branch (''the Branch'' hereafter), and found the following violation of the Securities and Exchange Law (''the Law'' hereafter). The SESC recommended the Commissioner of the Financial Services Agency (FSA) to take a disciplinary action against the Branch on May 21, 2004open new window.

(1)    According to the Branch, the Compliance Department of the Branch has been in charge of providing in-house training programs on undisclosed corporate information to the employees of theBranch and it is the principle of the Branch to control undisclosed corporate information strictly in accordance with its in-house rules in cases it has come to obtain such information from the viewpoint of preventing unfair trade. The Branch also states that the Equity Research Department of the Branch has been in charge of examining whether undisclosed corporate information is contained or not in analyst reports, and thus preventing undisclosed corporate information to be put on its analyst reports.
   However, under the circumstances where the Head of the Equity Research Department and the Head of the Compliance Department of the Branch have not taken appropriate measures to control the undisclosed corporate information, a researcher of the Equity Research Department of the Branch who obtained undisclosed corporate information with respect to the share buyback and the downward revision of account settlement put the information in his analyst reports without being aware of the fact that the information concerned falls under the undisclosed corporate information. Moreover, the Publications Section of the Equity Research Department, being in charge of examining the report, failed to detect the descriptions in question in the analyst reports. As a result, from April 2003 onward, the Branch provided undisclosed corporate information to a large number of its customers and its employees more than once by putting such information on analyst reports. The Branch has thus been conducting its business in such state recognized as having an insufficient internal control of undisclosed corporate information from the viewpoint of preventing unfair trade.
(2)    The acts above are found to be ''the state that a securities company is deemed not to have a sufficient degree of internal control of corporate information from the viewpoint of preventing unfair trade'' stipulated in the Article 10 (ix) of the Ordinance of the Cabinet Office Concerning the Regulations, etc. of Conducts of Securities Companies, and thus to have violated the Article 43 (ii) 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 improvement orders to the Branch today:

Improving compliance with the law

(1)    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.
(2)    Submitting a report to the FSA on the implementation of the above measures by June 28, 2004.

For further information, please contact the following:

Securities Business Division
Supervisory Bureau
FSA, JAPAN (Tel:03-3506-6000)
Deputy Director: Tadashi YONEMURA (ex.3370)
Section Chief: Yoshitomo ISHII (ex.3356)

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