Nomura Holdings Inc. (8604) Chief Executive Officer Kenichi Watanabe broke his silence on a government crackdown on insider trading, delivering his first personal apology over the company’s role in the probe.
Japan’s biggest brokerage will make sincere efforts to restore confidence, Watanabe told shareholders at an annual meeting in Tokyo today, according to investor Hideyuki Sakai, 41, who attended the private gathering. Nomura spokeswoman Keiko Sugai confirmed the remarks.
Watanabe, 59, is under pressure to explain how employees leaked information ahead of share sales managed by Nomura in 2010 that third parties used for trading. Regulators have also investigated firms including Sumitomo Mitsui Financial Group Inc. (8316)’s brokerage unit and JPMorgan Chase & Co. (JPM:US) in an effort to restore confidence in Japan’s capital markets.
The CEO today declined to comment on the leaks, saying the company’s response depends on the outcome of an internal investigation, according to shareholders including Sakai, who has owned Nomura shares for about three years. Nomura has employed a group of outside lawyers to conduct its review, which it plans to complete by the end of the month.
Some 1,852 shareholders attended the meeting, according to spokeswoman Sugai. That’s up from last year’s 1,554. As well as the insider trading issue, investors demanded an explanation for deteriorating profit, falling shares and dividend cuts.
“I’m not happy with Nomura’s response today as they didn’t answer questions about their involvement in the insider cases,” said Yoshiko Kimura, who owns 800 shares. “The president and management should resign to take responsibility for this as well as dividend cuts and poor earnings.”
Shareholders today approved the reappointment of executives including Watanabe, Sugai said.
Shares of Nomura rose 2.2 percent to 281 yen at the close in Tokyo, paring losses over the past year to 27 percent. They tumbled to 224 yen on Nov. 24, the lowest in at least 37 years.
Nomura cut its full-year dividend to 6 yen from 8 yen after posting earnings that fell 60 percent to 11.6 billion yen ($146 million) in the year ended March. The Tokyo-based company is cutting costs that surged after it bought bankrupt Lehman Brothers Holdings Inc. during the 2008 global financial crisis.
Nomura apologized in a statement on June 8 for its employees’ roles in leaking information before share sales by Inpex Corp., Mizuho Financial Group Inc. and Tokyo Electric Power Co. in 2010.
It’s the third time Nomura employees were found to have facilitated insider trading since Watanabe became CEO in 2008. In 2009, the Securities and Exchange Surveillance Commission said a staffer in the mergers advisory division gave tips over meals and phone calls to an accountant who traded shares in five takeover bids.
Financial Services Minister Tadahiro Matsushita yesterday urged Nomura to “explain as much as they can in terms of corporate governance and employees’ ethics.” The securities firm may face “severe action” over the leaks, Matsushita said earlier this month, without elaborating.
A former executive at SMBC Nikko Securities Inc., a brokerage unit of Sumitomo Mitsui, was arrested this week, becoming the first banker from a major firm to be detained for suspected insider trading since a Nomura employee was in 2008. The SESC and Yokohama city prosecutors are investigating the person, Hiroyoshi Yoshioka, and three others.
Yoshioka denied any involvement in insider transactions while he was employed by the securities firm, SMBC Nikko President Eiji Watanabe told reporters on June 25.
The cases have raised concern about the security of private information at Japanese financial institutions. Japan’s benchmark Topix Index (TPX) has dropped 13 percent since late March, when the commission began announcing that underwriters were leaking information before the stock offerings.
The Tokyo Stock Exchange will inspect about 30 Japanese and foreign brokerages from around October to determine how they guard market-sensitive information, a senior TSE official said, requesting anonymity as the bourse hasn’t made an announcement. The official declined to name which firms it will review.
The SESC last month found that an employee of JPMorgan gave information on a 2010 offering by Nippon Sheet Glass Co. (5202), according to two people with knowledge of the matter. New York- based JPMorgan said on May 29 that it’s “cooperating fully” with the authorities on the matter.
Deferred payments boosted Nomura CEO Watanabe’s total compensation by 74 percent to 299 million yen in the year ended March, the company said in a filing to the Finance Ministry today. Chief Operating Officer Takumi Shibata’s compensation rose 68 percent to 260 million yen, also because of deferred payments. The executives’ basic pay remained flat and no cash bonuses were awarded, Nomura said.
Nomura investor Yoshio Fukuda, 79, said he traveled from Yokohama to join the meeting at the Hotel Okura for the first time, looking for reassurance over the company’s profitability and management. He said he won’t add to his 1,000 shares.
“It’s a mess,” he said.
To contact the reporters on this story: Takahiko Hyuga in Tokyo at firstname.lastname@example.org; Shingo Kawamoto in Tokyo at email@example.com
To contact the editor responsible for this story: Chitra Somayaji at firstname.lastname@example.org