SESC Latest Topics No.20«January 2016» Last Updated : January 29, 2016

What’s New on the SESC Website

(Month of January 2016)

This page contains the latest in events, developments, and updates to the SESC website.

Topics

Press Releases

(Following press release is available in Japanese)

Financial Instruments Businesses etc.

January 29, 2016:

Recommendation for an administrative action against The Arts Securities Co., Ltd.open new window

«Summary»

The SESC recommended that the Prime Minister and the Commissioner of the FSA take an administrative action against The Arts Securities Co., Ltd. (“the Company”), a Type I and II Financial Instruments Business Operator and an Investment Advisory and Agency Business Operator.

Based on an inspection of the Company, the SESC identified that it has provided customers with false information for the sales of bonds and has sent financial statements containing false details to the securities companies selling the bonds.

Market Misconduct

December 24, 2015:

Filing criminal charges against Suspects A and B for spreading rumors and using fraudulent means, and in addition against Suspect A for failing to submit Reports of Possession of Large Volume.open new window

«Summary»

The SESC filed charges with the Tokyo District Public Prosecutor’s Office for cases in relation to the shares of New Japan Chemical Co., Ltd. (“New Japan Chemical”) listed on the Osaka Securities Exchange (at that time) and the shares of MEIWA CORPORATION (“MEIWA”) listed on the Tokyo Stock Exchange in violation of the Financial Instruments and Exchange Act (“FIEA”).

No.1 Suspects A and B in conspiracy conducted transactions for the purpose of gaining property benefit, including those described below.

  1. They artificially raised the price of New Japan Chemical shares by publicizing statements that implied that they would continue to hold the shares, and recommended other investors to follow them to continue to hold the shares, and by publicizing false information that the share price could rise sharply by huge short covering since there were huge outstanding short positions as in a precedent where the share price rose sharply by short covering.

    In fact, however, they had no intention to continue holding the shares, and the market was not in a state of “short squeeze” where the price could rise sharply because short sellers who had faced difficulties for borrowing shares, due to increasing short selling positions and decreasing trade volumes resulted from decreasing floating shares, would buy back shares at higher prices for short covering.

    They artificially raised the share price by publicizing statements three times, including false information as described above between November 1, 2011, and December 29, 2011, on a website named “Tokidokinokanenone” operated in the name of “Hannyanokai” governed by Suspect A, which many and unspecified persons can access, for the purpose of buying and selling the shares and raising the share price artificially to gain profits by selling the shares they bought in advance.

    They sold a total of 2,930,000 shares for a total of 1,608,344,600 yen under the name of Suspect B and two other persons at the artificially raised share price on 49 trading days between November 2, 2011, and February 10, 2012.

  2. They artificially raised the share price by publicizing false information that the price of New Japan Chemical shares could rise sharply due to the short squeeze as described in 1, and by conducting a series of sales, purchases and entrustments of the shares that would mislead other persons into believing that sales and purchases of the shares were thriving and would cause fluctuations in prices of the shares between February 15, 2012, and March 2, 2012. They, however, hid these facts and pretended that their prediction came true as the share price rose to 1,297 yen as they stated in the “Tokidokinokanenone” referred to in 1.

    In addition, they artificially raised the price of MEIWA shares by publicizing statements that implied that they would continue to hold the shares and recommended other investors to follow them to continue to hold the shares, and by publicizing false information that the share price could rise sharply since the market was in a state of “short squeeze” as in a precedent where the share price rose sharply.

    In fact, however, they had no intention to continue holding the shares, and the market was not in a state of “short squeeze”.

    They artificially raised the share price by publicizing including false information on a website named “Tokidokinokanenone” as described above, which many and unspecified persons can access, for the purpose of buying and selling the shares and raising the share price artificially to gain profits by selling the shares they bought in advance.

    They sold 4,634,400 shares of New Japan Chemical for a total 3,253, 630,400 yen in the name of Suspect B and other two persons for 11 trading days between April 18, 2012, and May 7, 2012.

Suspects A and B bought and sold the shares of New Japan Chemical and MEIWA at the artificially raised prices by spreading rumors and using fraudulent means for the purpose of causing fluctuation in share prices and buying and selling the shares.

No.2 Suspect A failed to submit Reports of Possession of Large Volume as described below.

  1. As of September 2, 2011, Suspect A held a total of 1,856,600 shares of New Japan Chemical in the name of two other persons and jointly held 284,600 shares with his/her spouse. Although Suspect A became a Large Volume Holder since the shareholding ratio of Suspect A and the joint holder, which is calculated by dividing the number of shares held by the total number of issued shares, exceeded 5%, Suspect A failed to submit a Report of Possession of Large Volume within the time limit to the Commissioner of the Kanto Local Finance Bureau, without any exemption clause applicable under the FIEA.

  2. As of February 29, 2012, Suspect A held a total of 1,765,200 shares of New Japan Chemical in the name of two other persons and jointly held 235,700 shares with his/her spouse. Although Suspect A became a Large Volume Holder since the shareholding ratio of Suspect A and the joint holder, which is calculated by dividing the number of shares held by the total number of issued shares, exceeded 5%, Suspect A failed to submit a Report of Possession of Large Volume within the time limit to the Commissioner of the Kanto Local Finance Bureau, without any exemption clause applicable under the FIEA.

  3. As of March 14, 2012, Suspect A held a total of 2,236,900 shares of MEIWA in the name of two other persons. Although Suspect A became a Large Volume Holder since the shareholding ratio, which is calculated by dividing the number of shares held by the total number of issued shares, exceeded 5%, Suspect A failed to submit a Report of Possession of Large Volume within the time limit to the Commissioner of the Kanto Local Finance Bureau without any exemption clause applicable under the FIEA.

December 22, 2015:

Recommendation to impose an administrative penalty order against two offenders who received insider information from an officer of a contractor of SUMITOMO CORPORATION for committing insider trading related to shares of SUMITOMO CORPORATION.open new window

«Summary»

The SESC recommended that the Prime Minister and the commissioner of the FSA impose an administrative penalty order of 8,920,000 yen against offender (1), and an administrative penalty order of 500,000 yen against offender (2).

Based on an inspection, the SESC determined that the offenders had committed insider trading by selling shares of SUMITOMO CORPORATION using the insider information, in violation of the Financial Instruments and Exchange Act.

December 15, 2015:

Recommendation to impose an administrative penalty order against an offender who committed market manipulation related to shares of Bank of The Ryukyus, Limited.open new window

«Summary»

The SESC recommended that the Prime Minister and the commissioner of the FSA impose an administrative penalty order of 2,240,000 yen against an offender who committed market manipulation in violation of the Financial Instruments and Exchange Act.

Based on an inspection, the SESC determined that the offender had committed false sale and purchase without purpose of transfer of right through opposing purchase and sale orders of the shares of Bank of The Ryukyus, Limited. Through these techniques, the offender intended to mislead the market into believing that sales and purchases of the shares of Bank of The Ryukyus, Limited were thriving.

December 15, 2015:

Recommendation to impose an administrative penalty order against an offender who received insider information from an officer of SK-Electronics CO., LTD., for committing insider trading related to shares of SK-Electronics CO., LTD.open new window

«Summary»

The SESC recommended that the Prime Minister and the commissioner of the FSA impose an administrative penalty order of 15,630,000 yen against an offender who received insider information from an officer of SK-Electronics CO., LTD.

Based on an inspection, the SESC determined that the offender had committed insider trading by purchasing shares of SK-Electronics CO., LTD. using the insider information, in violation of the Financial Instruments and Exchange Act.

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