Nomura Faces Dual Crises: Trading Scandal and Attempted Murder Arrest

Preview

Nomura Trading Scandal and Attempted Murder Arrest

Trading Scandal Details

Nomura Holdings has been embroiled in a significant trading scandal involving the manipulation of Japanese government bond (JGB) futures. The scandal came to light in March 2021 when it was revealed that a proprietary trader at Nomura Securities placed multiple orders on the Osaka Exchange at best buy or inferior prices, effectively layering the ask order book. Simultaneously, the trader purchased bonds at a lower price and placed buy orders at best bid or inferior prices to layer the bid order book, selling the futures at a higher price. This manipulation made futures trading appear more active, potentially influencing future prices on the exchange.

Preview

The scandal resulted in 2,466 unit sell orders and 462 units bought, along with 1,619 buy orders and 462 units sold. Japan’s Financial Services Agency imposed a 21.76 million yen administrative monetary penalty on Nomura Securities and suspended its Special Entitlements of JGB Market Special Participants (Primary Dealer) for a period, which lifts on November 14, 2024.

Preview

Attempted Murder Arrest

A former Nomura Securities employee has been arrested on suspicion of robbery and attempted murder of an elderly couple who were clients of the brokerage. The 29-year-old man allegedly drugged the couple, stole about 26 million yen ($171,000) in cash from their home, and set fire to the building. The couple, in their 80s, managed to escape safely from the blaze.

Nomura confirmed that the individual was a former employee who was dismissed for disciplinary reasons, although the exact timing of his employment was not disclosed. This arrest has further damaged Nomura's reputation, which has already been tarnished by the trading scandal.

Financial Impact

The trading scandal has had a profound financial impact on Nomura. The company has seen a significant loss of business, with at least 10 firms, including major life insurers and asset management firms, temporarily suspending some business activities with Nomura. This includes a fall in league table rankings and market share for Nomura, particularly in bond underwriting.

Additionally, the company has been forced to return a portion of executive compensation and has seen its primary dealer privileges suspended by Japan’s finance ministry for a month. The fallout from the scandal has also led to a temporary suspension of business activities with Nomura by several firms, which may resume when further preventive measures are detailed.

Broader Implications

The scandals have deepened Nomura's woes, threatening its turnaround plan and potentially eroding investor confidence. The company has taken several steps to prevent a recurrence, including updated training programs, improvements to compliance systems, and the introduction of the Global Markets Surveillance Planning Department to oversee new initiatives.

In summary, the trading scandal and the attempted murder arrest have significantly impacted Nomura's operations and reputation. The company is now focused on rebuilding trust and implementing measures to prevent future incidents.

Preview