Japans Securities Exchange and Surveillance Commission (SESC) yesterday said its investigations into failed Yamaichi Securities showed the company had broken the law and it called on the finance ministry to punish the firm.
We expect the Finance Ministry will take the appropriate action but what it will be remains unseen, an SESC spokesman told reporters.
Although he suggested that some sort of administrative penalty was the most likely possibility, he said the final decision would be up to finance minister Hikaru Matsunaga.
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Yamaichi closed its doors for good on March 31, although 500 employees will remain to complete liquidation of the company, expected to take several months.
Yamaichi collapsed under the weight of massive bad debts last November.
According to SESC investigations since then, the firm committed more than 92 legal violations from 1988 to 1991 in connection with tobashi, in which loss-making portfolios were shifted from client to client with a pledge that the paper losses would be covered.
The company promised to guarantee fixed returns and buy back portfolios at above market value, the spokesman said. Yamaichi also provided more than one client with 51.9 billion yen in profits following its promise to guarantee fixed returns between 1992 and 1993, he added.
He said the company had also falsely reported to SESC investigators in 1993 that it had not engaged in any tobashi or other off-book dealings.
All these actions had been taken with the knowledge of Yamaichis executives, he added.
Separately, a Ministry of Finance (MOF) spokesman told reporters that the ministrys own probes of Yamaichi had showed the companys off-book losses may actually be closer to 290 billion yen rather than the approximately 270 billion yen reported by Yamaichi last November.
But he added that the MOF did not find any evidence of fresh losses not covered by Yamaichis report and said the ministry still does not have a complete and detailed picture of the companys assets and liabilities.