June 29, 2007

Recommendation of an administrative disciplinary action based on the result of inspection against Pictet Asset Management Japan Ltd.

1 Contents of the Recommendation

  Pursuant to paragraph 1 of Article 20 of the Establishment Act of Financial Service Agency (''FSA''), on June 29, Securities and Exchange Surveillance Commission ("SESC") issued a recommendation that the Prime Minster and the Commissioner of FSA take administrative disciplinary action any other appropriate measures against Pictet Asset Management Japan Ltd. (Location: Chiyoda-Ku, Tokyo, Representative Director: Yoshiharu Okazaki, Capital: 200 Million JPY, Number of officers and employee: 67, hereinafter the ''Company''.) This recommendation is based on the inspection result, whereby the following breach of laws by the company was founded.

2 Brief Summary of Facts
  Arbitrary allocation of shares of initial public offered stock (Allocation constitutes breach of loyalty duty.)
  With regard to allocation of acquired shares of IPO stock (the ''Shares'') to (i) assets of investment trust fund and to (ii) assets placed under discretionary investment management agreements (hereinafter collectively referred as the ''Assets''), the Company determined as a rule in December 2001 that the Shares must be allocated in proportion to value of assets, if fund managers of respective assets plan to incorporate the Shares into portfolio they operate. This rule was aimed for fair allocation of the Shares.
  However, the head of investment section who was responsible for allocation of the Shares gradually became disrespectful of the rule and in the end, (a) arbitrarily selected specific Assets of small value and intensively allocated the Shares, since such allocation contributes to the performance of the funds and (b) arbitrarily selected comparatively low performed Assets and intensively allocated the Shares for a certain period of time to improve its performance. This negligence of the rule resulted in repetitions of unfair and arbitrary allocation of the Shares.
  Acts of the Company which are relevant to investment funds constitute breach of Article 14, Par. 1 of the Act on Investments Trust and Investment Corporation. Acts which are relevant to assets placed under discretionary investment management agreements constitute breach of Article 30-3 of the Act on Regulation etc. on Investment Advisory Business Pertaining to Securities(''ARIABPS''). Acts conducted before April 30, 2006 constitutes breach of Article 30-2 of ARIABPS.

Cases for reference (PDF/35KB)

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