Press Release

The Securities & Exchange Surveillance Commission (SESC) conducted a compliance inspection of the Tokyo Branch of Goldman Sachs Japan Limited (Goldman Sachs Securities) pursuant to the Law on Foreign Securities Firms 1971, and found law violations described below.

Today, the SESC sent a recommendation to the Prime Minister and the Commissioner of the Financial Services Agency (FSA) to take a disciplinary action against Goldman Sachs Securities, pursuant to Article 20 (1) of the FSA Establishment Law 1998.

Short-Selling in Breach of a Cabinet Order

During the period from 14th November 1998 to 31st July 2001, when executing short-selling of stocks for its own account, Goldman Sachs Securities had failed to disclose the fact of short-selling to stock exchanges.

The series of actions above is deemed as violation of Article 26-3 (1) of the Cabinet Order (Securities & Exchange Law) 1965 and Article 162 (1) (i) of the Securities & Exchange Law 1948, both of which regulate short-selling.

Contact Person: K. Sakamaki
Compliance Inspections, SESC
Phone: (81) 3-3581-9864

Explanatory Note

I. Law on Foreign Securities Firms 1971

When a foreign broker-dealer conducts securities business through branches in Japan, it shall be governed by the Law on Foreign Securities Firms 1971.
Article 31 & 42 of the Law granted the SESC the authority to inspect those foreign broker-dealers.

II. The Financial Services Agency Establishment Law 1998

Article 20 (1) of the Law stipulates that the Securities & Exchange Surveillance Commission can, after conducting compliance inspections or criminal investigations, send recommendations to the Prime Minister and the Commissioner of the FSA to take appropriate administrative actions.

III. Securities & Exchange Law 1948

Article 162 (1) (i) of the Law stipulates the prohibition of short-selling in such a way as in breach of a Cabinet Order (see IV.).

IV. Cabinet Order (Securities & Exchange Law) 1965

Article 26-3 (1) of the Cabinet Order stipulates that member firms of stock exchanges shall, whenever placing selling-orders, disclose whether a selling-order is short-selling or not to a stock exchange.