Press Release

December 10, 1997

The Securities and Exchange Surveillance Commission (SESC) conducted the investigation of Daiwa Securities Co. (Daiwa) based on the provisions of Securities and Exchange Law (SEL) and found legal violations and improper activities described below.

appropriate measures against Daiwa pursuant to Article 19 1) of Ministry of Finance Establishment Law on December 10, 1997.

1. Providing property gains to compensate for losses Daiwa, by involvement of the seven then board members totally including the vice president, for the purpose of compensating for a part of a customer's losses incurred in securities transactions, offered to the customer:

1)approximately \318,200,000 in total by disguising its own equity-buying transactions as the customer's transactions 107 times between November 1992 and December 1995;

2)approximately \36,600,000 in total by disguising its own profitable securities transactions with an already fixed profit as the customer's transactions 12 times between January and December, 1995.(violation of SEL 50-31)3))

2. Entering into an agreement to make discretionary trading account of securities transactions to decide, without consulting the customer, whether purchase or sell, shares issued, number of shares and prices, and executed the customer's order for two accounts based on this agreement from September 1992 to May 1996 and from January 1994 to June 1996 respectively.(violation of SEL 501)3))

3. Problems with internal controls The SESC recognized the following problems with Daiwa's internal controls underlying legal violations mentioned above:

1)the Internal Administration Supervisor, who was in a position of securing compliance with laws and regulations, was involved deeply in illegal actions as described above from the early stage. No corrective measurements were taken against these conducts in spite that such illegal activities were conducted often for a long time and Internal Control Division recognized many unusual conducts at Investment Consultation Division of the head office.

2)such improper process was taken that the input of a part of own transactions into the in-house computer which should be done soon after the order was placed, was delayed intentionally , and was made as a customer's transaction after the market was closed to disguise Daiwa's own stock transaction as a customer's one;

3)under the Internal Administration Supervisor, Daiwa refused to report the fact in the SESC's investigation and carried out cover-up operations to make the investigation difficult.

The SESC thus recognized that the officers and employees involved in such improper activities were not mindful of compliance with laws and rules gravely and there was serious defect with internal control system of Daiwa.