Former executives of SMBC Nikko Securities Inc. pleaded not guilty over their roles in allegedly rigging the stock market, more than a year after they were arrested in a scandal that rocked Japan’s financial industry.
(Bloomberg) — Former executives of SMBC Nikko Securities Inc. pleaded not guilty over their roles in allegedly rigging the stock market, more than a year after they were arrested in a scandal that rocked Japan’s financial industry.
The firm’s former head of equity Trevor Hill and his deputy Alexandre Avakiants entered pleas in business suits at the Tokyo District Court on Wednesday. Three others — former deputy president Toshihiro Sato and ex-general managers Makoto Yamada and Shinichiro Okazaki — also denied wrongdoing before a packed courtroom.
Local prosecutors brought charges early last year against the individuals as well as SMBC Nikko for allegedly propping up share prices for transactions known as block offers. The case has sent the brokerage of Japan’s second-biggest lender reeling. SMBC Nikko has posted losses for four straight quarters and undertaken emergency cost cuts, while parent Sumitomo Mitsui Financial Group Inc.’s efforts to strengthen investment banking have been hit.
Prosecutors told the court that they believed the defendants expanded block-offer business to boost revenue for their teams and earn bigger bonuses for themselves.
Lawyers for the defense said the acts under scrutiny didn’t amount to price stabilization operations banned by the law.
Hill said in Japanese: “I am not guilty.”
In February, the court found SMBC Nikko and former executive Teruya Sugino guilty of market manipulation. It fined the firm and sentenced the ex-manager to one year and six months of imprisonment, suspended for three years. Both parties had admitted to the charges.
SMBC Nikko declined to comment on the latest case.
The case isn’t a simple domestic problem, and has attracted attention from across the world, according to Yoshifumi Imagawa, a law professor at Ryukoku University.
“The number of foreign investors and activists is rapidly growing in Japan’s stock market,” Imagawa said. “If a major securities firm is undertaking such operations as legitimate investment business, rendering Japan’s market hard to trust, people abroad will probably feel uncomfortable.”
Prop Traders
Hill told the Wall Street Journal in a 2022 interview that it was “business as usual” for proprietary traders to buy a “big cheapening stock.”
“There’s a good legal reason for asserting that the latest case doesn’t amount to stabilization operations” that violate the law, former Japanese prosecutor Nobuo Gohara said. “I want the defense’s argument to be listened carefully to.”
Gohara has said the case may highlight the challenges foreign executives face in Japan to protect their rights.
The country’s justice system has been criticized for its conviction rate of more than 99%, which means that trials are viewed as practically forgone conclusions.
The next hearing is scheduled for June 22.
–With assistance from Nao Sano.
(Updates with arguments in fourth and fifth paragraphs)
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