Former executives of SMBC Nikko Securities Inc. pleaded not guilty over their role 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 role 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, were also present 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.
In February, the court found SMBC Nikko and former executive Teruya Sugino guilty of market manipulation. It slapped a fine on 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.
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,” he 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.”
Risks
Hill told the Wall Street Journal in a 2022 interview that it was “business as usual” for prop traders to buy a “big cheapening stock.”
At court on Wednesday, Hill said in Japanese: “I am not guilty.”
The scandal has highlighted the risks facing foreign executives in Japan because of a justice system that can make it “extremely challenging” to protect their rights, former Japanese prosecutor Nobuo Gohara said last year.
The country’s system has been criticized for its conviction rate of more than 99%, which means that trials are viewed as practically forgone conclusions.
–With assistance from Nao Sano.
(Updates with court development in lede, comments in fifth and seventh paragraph)
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