Japan’s Sumitomo Mitsui hit with administrative order for violating rules


TOKYO, Oct 7 (Reuters) – Japan’s financial regulator on Friday ordered Sumitomo Mitsui Financial Group Inc (SMFG) (8316.T) to devise measures to improve compliance after the group’s banking and securities arms breached intra-group information firewall rules.

The Financial Services Agency’s order to Japan’s second-largest financial group could hamper the banking industry’s lobbying for greater deregulation of rules that restrict the sharing of customer information between banking and securities units within the same financial group.

It was discovered that SMFG’s securities and banking departments had shared confidential information of several client companies without their consent on potential transactions, including takeover bids and mergers. Read more

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Japan’s three major financial groups, which each have both banking and securities units, have asked the government to ease firewall rules, introduced in 1993 and modeled on the US Glass Steagall Act. , now defunct, to prevent abuse of banks’ dominant bargaining position. They say these rules are outdated and hurt their global competitiveness.

But independent securities groups such as Nomura Holdings Inc (8604.T) and Daiwa Securities Group Inc (8601.T) say big economies without firewall rules instead have stricter privacy regulations. They also say the risk of banks abusing their position is higher in Japan because bank lending is a dominant method of financing businesses.

At SMFG, the violations came to light when the Securities and Exchange Surveillance Commission investigated a case of market manipulation at SMFG’s securities unit, SMBC Nikko Securities.

SMBC Nikko and six former executives have been charged with market manipulation for buying 10 individual shares on the market, allegedly to drive up their prices and ensure bulk trade deals don’t fail. Read more

The unit was ordered on Friday to halt block trading activities for three months and improve compliance.

Prior to the scandal, SMBC Nikko had already suspended its block trading activities, which accounted for around 5% of its annual trading revenue.

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Reporting by Makiko Yamazaki; Editing by Edmund Klamann and Christopher Cushing

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