Press Release

1. Recommendation Issued

    The Securities and Exchange Surveillance Commission today issued a recommendation that the Prime Minister and the Commissioner of the Financial Services Agency (FSA) take administrative disciplinary action pursuant to Paragraph 1 of Article 20 of the FSA Establishment Act based upon the results of the inspection of J.P.Morgan Securities Asia Pte. Limited (Tokyo Branch located in Akasaka, Minato-ku, Tokyo; Representative in Japan Satoru Nagase; staffed with approximately 800 employees including directors; hereinafter referred to as "J.P.Morgan Securities"), which found the following facts constituting violations of laws and regulations by J.P.Morgan Securities and its employee.


2. Facts Found

• 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 redeemable with shares ("Reference Shares") of another company different from the bond issuer company, or the exchangeable bonds (the "EB"), such another company being a listed company, a trader of Japan Single Stock Desk, Asia Pacific Equity Derivatives Trading (presently called Single Stock Derivatives, Japan Equities Trading) of J.P.Morgan Securities, in the course of the business, placed a series of limit sell orders at 796 and 795 yen in a large quantity of the Reference Shares, caused the price of the Reference Shares to fall down to 795 yen from the immediately preceding transaction price of 800 yen effected at the market, and created a situation in which the closing price of the Reference Shares would not have become equal to or higher than 797 yen unless all of such sell-ordered shares would have been sold, between 14:58 and the end of the day's trading on 16th January, 2001, on which date how the EB be redeemed was to be determined; either in cash or with the Reference Shares, depending upon the day's closing price of the Reference Shares, with the intention of putting the closing price at the level (lower than 797 yen) resulting in the EB redemption with shares, in order to enable an affiliated company with J.P.Morgan Securities to avoid position risks that would arise in case of the cash redemption in lieu of physical delivery of the Reference Shares that the affiliated company had held in preparation of the share redemption.
    As the result, the price of the Reference Shares in fact closed at 795 yen, and the EB's share redemption was fixed.

    The foregoing 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 15 of Article 24 under the Ordinance of Cabinet Office Concerning Foreign Securities Firms (before the amendment by the 18th Ordinance of Cabinet Office in 2001) 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.