Press Release
July 19, 2007
Securities and Exchange Surveillance Commission

Recommendation based upon the result of the inspection of Banque AIG

1. Recommendation Issued

  Pursuant to Paragraph 1 of Article 20 of the FSA Establishment Act, the Securities and Exchange Surveillance Commission (the ''SESC'') today issued a recommendation that the Prime Minister and the Commissioner of the Financial Services Agency take administrative disciplinary action and any other appropriate measures on Banque AIG (Tokyo Branch located in Otemachi, Chiyoda-ku, Tokyo; Nigel Pentland as a Japanese Representative; with 38 directors/employees; hereinafter referred to as the ''Company''). The SESC issued this recommendation based upon the results of inspection of the Company, whereby the SESC detected the following violation of the Securities and Exchange Laws and its related ordinances by the Company.

2. Violation Found - Trade based upon undisclosed corporate information-

(1) On January 9, 2007, the Company, on behalf of its overseas affiliated company (hereinafter referred to as the ''Holder''), which held convertible bonds issued by Corp. A (hereinafter referred to as the ''CBs'', as the ''Bonds'' in respect of the portion thereof corresponding only to the bonds, or, as the ''SARs'' in respect of the portion thereof corresponding only to the stock acquisition rights), exercised an early redemption right attached to the CBs, with the intention of not exercising the SARs thereafter and receiving the entire amount of then outstanding Bonds in cash on a specified date, as the amount equivalent to 90% of the average of the closing prices of Corp. A's common share on five consecutive trading days on the Tokyo Stock Exchange, ending on 5 January 2007, fell below the bottom price of the CB's adjustable conversion price (X yen).

(2) Notified of the above exercise of the early redemption right, Corp. A made a public announcement titled ''Notice regarding the early redemption of Euro Yen Unsecured, Convertible Bond Type, Corporate Bonds with Stock Acquisition Rights'' dated 9 January, 2007'' (hereinafter referred to as the ''Notice''), which is deemed to have the effect of leading investors to believe that on and after that date the SARs would not be exercised. Following this announcement, in the morning of January 10, the price of Corp. A's common share went up above the closing price (Y yen) of the immediately preceding date and by 9:39 a.m. the price soared to X yen, equal to the then conversion price.

(3) Recognizing the above price movement, the Company decided to exercise the SARs and, on and after 10:26 a.m. of January 10, the Company exercised the SARs on behalf of the Holder. The Company also decided to sell the shares thus acquired, with the intention of making profits by selling the shares at the price above the then conversion price, and the Company's trader placed sell orders with another securities company and, by so doing, sold the shares at the market at its discretion, which the Holder had provided with the Company in accordance with the discretionary-account trading contract previously entered into between them, although the fact that the Holder exercised the SARs on and after the announcement of the Notice and that Corp. A consequently issued new shares was not disclosed. (See below table describing how the SARs were exercised and how the shares were sold during the period from January 10 to January 16, 2007.)

(4) No later than 10:47 a.m. of January 11, the trader reported to the Japanese representative of the Company the above exercise of the SARs and the sale of the shares; on that occasion, however, the representative expressed no objections to the trader's activities and the trader continued the exercise of the SARs and the sale of the shares until January 24.

(5) On January 17, the Company filed an amended report relating to the large shareholding report and disclosed in it ''the Holder exercised the SARs and acquired 1,689,187 shares of Corp. A on January 10.''

  In light of the facts mentioned above, the SESC hereby declares that the sales of Corp. A's shares by the Company (limited only to the sales from 10:26 a.m. of January 10 through 3:00 p.m. of January 15, in which period the exercise of the SARs as well as the issuance of Corp. A's shares was not disclosed) violates Item 10 of Article 4 of Ordinance of Cabinet Office concerning Regulation, etc. of Conducts of Securities Company, which prohibits ''trade based upon undisclosed corporate information (including trade done in accordance with a discretionary-account trading contract)''.

Table describing how the SARs were exercised and how the shares were sold

Table describing how the SARs were exercised and how the shares were sold

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