SECURITIES AND EXCHANGE
SURVEILLANCE COMMISSION
May 22, 2001
The Securities and Exchange Surveillance Commission (SESC) conducted an
inspection of Tokyo-Mitsubishi Securities Co., Ltd. (Tokyo-Mitsubishi), based on
provisions of the Securities and Exchange Law (SEL), and found legal violations
described below.
Today, the SESC sent a recommendation to the Prime
Minister and the Commissioner of Financial Services Agency (FSA) to take
disciplinary actions and appropriate actions against Tokyo-Mitsubishi pursuant
to Article 20(1) of the FSA Establishment Law.
- Act of making a series of securities transactions to create artificial
market prices which does not reflect the actual state of the markets
In relation to an Equity Exchangeable Bond (EB) for
stocks of a listed company, for the purpose of lowering the stock price,
Tokyo-Mitsubishi sold the stocks by placing a series of lower limit or no
limit orders from 14:59 until the close on January 17, 2001. In fact,
whether additional interests (bonus coupon) of the EB were payable was
dependent upon the stock price on the very date of January 17, 2001.
As a consequence of the deliberate selling, the
stock price fell short of the benchmark price for additional interests, and
the payment worth approximately 365 million-yen could be avoided.
(Violation of a Ministerial Ordinance, Article 42(1)(ix) of the SEL)
- Solicitation with promise of special profit
In June 1998, Tokyo-Mitsubishi bought bonds from a
corporate customer, and then sold the bonds to its parent company, by order
of the customers. Thereafter, the customers requested Tokyo-Mitsubishi to
annul the bonds transactions, nevertheless.
In July 1998, Tokyo-Mitsubishi with an agreement of the customers carried
out other transactions, which could cancel out the effects of the original
transactions.
Under the newly proposed transactions,
Tokyo-Mitsubishi bought back the bonds from the original buyer, and sold
back to the customer concerned.
As the second buy-back and sale-back were conducted
by the same price as the original transactions, the brokerage commission,
which Tokyo-Mitsubishi had gained from the original transactions, was
provided to the customers. Moreover, Tokyo-Mitsubishi promised the exemption
of a brokerage commission from those reverse transactions. This can be
identified as an act of the solicitation into securities transactions with a
promise of special profit.
(Violation of a Ministerial Ordinance, Article 50(1)(vi) of the SEL,
prior to the amendment of December 1,1998)

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