Press Release

Recommendation
based on the inspection results of
Banc of America Securities-Japan, Inc. Tokyo Branch

1. Recommendation Issued

    The Securities and Exchange Surveillance Commission (SESC) issued today a recommendation that the Prime Minister and the Commissioner of the Financial Services Agency (FSA) take administrative disciplinary action and other appropriate measures pursuant to Paragraph 1 of Article 20 of the FSA Establishment Act based upon the results of the inspection of Banc of America Securities-Japan, Inc. Tokyo Branch (hereinafter referred to as ''Banc of America Securities'') (located in Akasaka, Minato-ku, Tokyo; represented in Japan by Hiroshi Ninomiya; a trade participant of both Tokyo and Osaka Stock Exchange; staffed with approximately 200 employees including directors), which ascertained the following facts constituting violations of laws and regulations by the company.

2. Facts Ascertained

• Act of making a series of transactions for the sale or purchase of a security to create an artificial market without any reflection of the actual state of the market

    In connection with corporate bonds with a clause to exchange them for shares of another company different from the bond issuer company, or exchangeable bonds (hereinafter referred to as ''the EB''), of which the reference shares were a specific issue of shares of a listed company, Banc of America Securities, with the involvement of the (then) head of the trading section of the equity financial products department, placed a series of large quantities of market-on-the-close limit orders to sell the reference shares at a lower price (¥174) than the EB's strike price (¥175), and thus created a situation in which the closing price of the reference shares would not become equal to or higher than the strike price unless all the orders would have been consummated, during the last one minute of trading time for the day, i.e., from 14:59 until the end of the day's trading, on 5^th December, 2001, which was the valuation date when the EB's redemption method was to be decided as to whether by payment of cash equal to the EB's principal amount or by delivery of the reference shares depending upon the day's closing price of the reference shares, with the intention of making the reference price lower than the strike price so that the EB would be redeemed by delivery of the shares, in order to enable the Banc of America Securities' parent corporation to avoid risks as a holder of the reference shares that had been held in case of the redemption by delivery of the shares.
    As a result of this, the price of the reference shares in fact closed below the strike price, and the parent corporation succeeded in avoiding risks as a holder of the reference shares.


    The above act is acknowledged to fall under the ''act of making a series of transactions for the sale or purchase of a security to create an artificial market without any reflection of the actual state of the market'' provided for in Item (3), Article 4 of the Ordinance of Cabinet Office Concerning Regulation, etc. of Conducts of Securities Company as applied by Paragraph 21 of Article 24 under the Ordinance of Cabinet Office Concerning Foreign Securities Firms based upon Item (9), Paragraph 1 of Article 42 under the Securities and Exchange Law as applied by Paragraph 1 of Article 14 under the Law on Foreign Securities Firms.