Market manipulation overwhelmed Sumitomo Mitsui Financial (SMF) Group these days. Following the alleged market manipulation, SMF created a special investigation committee. The country’s third-largest brokerage reported that Tokyo prosecutors had caught four executives from SMBC Nikko Securities, as well.
Yuichiro Kondo, the chief executive explained in the conference that they openly accept and regret the doings of their executives. Meanwhile, the prosecutors see issues on block offers. SMBC Nikko provides large volumes for investors selling stocks in five companies. The block offers approach allows investors to unload their shares in a large volume without inflicting a negative impact on market prices.
First, the brokerages would buy stocks, then they would sell them to other investors with discounts. Thus, SMBC Nikko is guilty of buying those stocks via proprietary trading on the market. This way, SMBC Nikko attempted to prevent closing share prices from falling to the level where block offers investors are willing to sell.
Kondo said the brokerage has suspended block offer transactions for about 5% of its annual trading revenue. The impact on the latest incident becomes unclear. Furthermore, the arrested executives are arrested without their names’ exposure. Japanese media spilled that among those executives, two of them are Trevor Hill and Alexandre Avakiants. Trevor Hill is a senior managing executive officer and head of the equity department. Alexandre Avakiants is an executive officer.
Based on the information, SMBC Nikko received punishment after leaking insider information to clients before public share offering. They solicit trades from them. Before, in 2018 a former employee also got arrested on the alleged insider trading. SMF’s special committee expects there would be no more misleading in the future. This to protect SMF’s reputation, which today is at stake.
