Press Release

May 22, 2001

The Securities and Exchange Surveillance Commission (SESC) conducted an inspection of Tokyo-Mitsubishi Securities Co., Ltd. (Tokyo-Mitsubishi), based on provisions of the Securities and Exchange Law (SEL), and found legal violations described below.

Today, the SESC sent a recommendation to the Prime Minister and the Commissioner of Financial Services Agency (FSA) to take disciplinary actions and appropriate actions against Tokyo-Mitsubishi pursuant to Article 20(1) of the FSA Establishment Law.

  1. Act of making a series of securities transactions to create artificial market prices which does not reflect the actual state of the markets

    In relation to an Equity Exchangeable Bond (EB) for stocks of a listed company, for the purpose of lowering the stock price, Tokyo-Mitsubishi sold the stocks by placing a series of lower limit or no limit orders from 14:59 until the close on January 17, 2001. In fact, whether additional interests (bonus coupon) of the EB were payable was dependent upon the stock price on the very date of January 17, 2001.

    As a consequence of the deliberate selling, the stock price fell short of the benchmark price for additional interests, and the payment worth approximately 365 million-yen could be avoided.

    (Violation of a Ministerial Ordinance, Article 42(1)(ix) of the SEL)
  2. Solicitation with promise of special profit

    In June 1998, Tokyo-Mitsubishi bought bonds from a corporate customer, and then sold the bonds to its parent company, by order of the customers. Thereafter, the customers requested Tokyo-Mitsubishi to annul the bonds transactions, nevertheless.

    In July 1998, Tokyo-Mitsubishi with an agreement of the customers carried out other transactions, which could cancel out the effects of the original transactions.

    Under the newly proposed transactions, Tokyo-Mitsubishi bought back the bonds from the original buyer, and sold back to the customer concerned.

    As the second buy-back and sale-back were conducted by the same price as the original transactions, the brokerage commission, which Tokyo-Mitsubishi had gained from the original transactions, was provided to the customers. Moreover, Tokyo-Mitsubishi promised the exemption of a brokerage commission from those reverse transactions. This can be identified as an act of the solicitation into securities transactions with a promise of special profit.

    (Violation of a Ministerial Ordinance, Article 50(1)(vi) of the SEL, prior to the amendment of December 1,1998)

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