SESC Latest Topics No.61＜September 2019＞

Recommendation for administrative disciplinary action against Smart Asset Management Co., Ltd.

<Summary>

The SESC recommended that the Prime Minister and the Commissioner of the FSA take administrative disciplinary action against Smart Asset Management Co., Ltd. (hereinafter, “the Company”), an Investment Advisor/Agency.

This recommendation is based on findings in an inspection of the Company, under which the Director-General of the Kanto Local Finance Bureau identified that the Company had (i) made false statements to customers for solicitation to enter into financial instrument transaction contracts, (ii) made an advertisement that significantly conflicts with actual fact of matter or that could cause serious misconception and (iii) failed to establish a framework required to, and a personnel structure sufficient to, properly conduct Investment Advisory/Agency Business.
 

Recommendation for administrative disciplinary action against Kazunori MURAYAMA.

<Summary>

The SESC recommended that the Prime Minister and the Commissioner of the FSA take administrative disciplinary action against Kazunori MURAYAMA (hereinafter, “the Person”), a Qualified Institutional Investor Business Operator under the former Financial Instruments and Exchange Act.
 
This recommendation is based on the findings in an inspection of the Person, under which the Director-General of the Kanto Local Finance Bureau (hereinafter, “the Kanto LFB”) identified that the Person had (i) submitted false reports to the Kanto LFB, (ii) engaged in Investment Management Business without statutory registration, and (iii) managed invested funds in a careless manner.

Recommendation for administrative disciplinary action against Japan Private Asset Securities Inc.

<Summary>

The SESC recommended that the Prime Minister and the Commissioner of the FSA take administrative disciplinary action against Japan Private Asset Securities Inc. (hereinafter, “the Company”), a Type I Financial Instruments Business Operator.
 
Based on an inspection of the Company, the SESC identified that the Company had provided special benefits to one of its customers.

Filling of criminal charges for loss compensation against Togo Securities Co., Ltd.

<Summary>

The SESC filed criminal charges for the violations (loss compensation) of the Financial Instruments and Exchange Act (FIEA) against one suspected company and three suspects with the Tokyo District Public Prosecutors Office. The conduct underlying the charges is described below.
 
The suspected company, Togo Securities Co., Ltd. (trade name of the company was efx.com Securities Co., Ltd., between October 18, 2014 and April 8, 2017) is headquartered in Minato-ku, Tokyo. Its purpose is engaging in the financial instruments business.
Suspect A, a director of the suspected company, supervised all operations of the suspected company, and supervised all operations of the SAKURA INVEST Co., Ltd which engages in the commodity derivatives transaction business as a substantial controller. Suspect B, the representative director of the suspected company, supervised customer complaint handling operations as a managing director. Suspect C was in charge of accounting operations of the suspected company as a consultant of the suspected company.
 
Suspect A and Suspect B, in conspiracy with several other persons, made SAKURA INVEST Co., Ltd provide an economic benefit to Customer D and three other customers who opened their own accounts for listed margin FX with the suspected company, and conducted the listed margin FX, in order to cover part of a loss that the customers had incurred in connection with derivatives transactions, with regard to the suspected company’s business and asset, despite there being no applicable exemption clause under the FIEA. Specifically;
 

1. 　Around the early of August 2015, the suspects made Customer D open its account for over-the-counter derivatives with SAKURA INVEST Co., Ltd and made an employee of the company make it appear as if the commodity CFD　transactions were for the orders of the account of Customer D. Through the method of using a personal computer at the company to input data into the system to the effect that Customer D incurred the profits in connection with the transactions, the suspects made the company attribute the profits to the account of Customer D while making it appear as if Customer D had conducted the transactions with its accounts on several occasions between the middle of August 2016 and the late of June 2018. In this manner, the suspects made the company provide an economic benefit of JPY 650,000 to Customer D; and
2. 　Around the middle of July 2016, the suspects made Customer E open its account for over-the-counter derivatives with SAKURA INVEST Co., Ltd. In the same way as the above 1, the suspects made the company attribute the profits to the account of Customer E while making it appear as if Customer E had conducted the transactions with its accounts on several occasions between the late of July 2016 and the late of December 2018. In this manner, the suspects made the company provide an economic benefit of JPY 2,100,000 to Customer E; and
3. 　(1) Around the middle of October 2016, the suspects provided Customer F with cash of JPY 200,000, and
   　(2)　Around the middle of October 2016, the suspects made Customer F open its account for over-the-counter derivatives with SAKURA INVEST Co., Ltd. In the same way as the above 1, the suspects made the company attribute the profits to the account of Customer F while making it appear as if Customer F had conducted the transactions with its accounts on several occasions between the late of October 2016 and the late of September 2018. In this manner, the suspects made the company provide an economic benefit of JPY 2,580,000 to Customer F; and
4. 　(1) Around the middle of October 2016, the suspects provided Customer G with cash of JPY 200,000, and
   　(2)　Around the middle of October 2016, the suspects made Customer G open its account of over-the-counter derivatives with the SAKURA INVEST Co., Ltd. In the same way as the above 1, the suspects made the company attribute the profits to the account of Customer G while making it appear as if Customer G had conducted the transactions with its accounts on several occasions between the late of October 2016 and the middle of December 2018. In this manner, the suspects made the company provide an economic benefit of JPY 1,910,000 to Customer G.

1. 　Around the middle of October 2017, the suspects contracted a settlement agreement with Customer H to the effect that the suspected company would pay cash of JPY 14,580,000 to Customer H, and under this agreement, the suspects provided total cash of JPY 14,580,000 for Customer H on several occasions between the late of October 2017 and the late of December 2018; and
2. 　Around the late of November 2017, the suspects contracted a settlement agreement with Customer I to the effect that the suspected company would pay cash of JPY 14,500,000 to Customer I, and under this agreement, the suspects provided total cash of JPY 14,500,000 for Customer I on several occasions between the late of November 2017 and the late of September 2018; and
3. 　Around the late of November 2017, the suspects contracted a settlement agreement with Customer J to the effect that the suspected company would pay cash of JPY 20,000,000 to Customer J, and under this agreement, the suspects provided total cash of JPY 16,500,000 for Customer J on several occasions between the late of November 2017 and the late of January 2019; and
4. 　Around the late of November 2017, the suspects contracted a settlement agreement with Customer K to the effect that the suspected company would pay cash of JPY 18,500,000 to Customer K, and under this agreement, the suspects provided total cash of JPY 16,500,000 for Customer K on several occasions between the late of November 2017 and the late of January 2019.