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Nomura Loses More Bond Deals After Information Leak

Finbarr Flynn and Issei Hazama
Nomura Loses More Bond Deals After Information Leak

(Bloomberg) -- Nomura Holdings Inc. has lost more bond underwriting deals following revelations that its employees inappropriately shared sensitive stock market information.

Honda Finance Co., Komatsu Ltd., and Tokyo Metro Co. dropped Nomura as a joint lead manager of yen bond sales, according to details provided separately on Monday by other managers on the deals. Fuji Oil Holdings Inc. did the same, joining Osaka Gas Co., which said last week that it excluded the firm from a planned yen debt sale.

Nomura cut the pay of Chief Executive Officer Koji Nagai and other executives temporarily over the incident, which is hurting business at a time when Japan’s biggest brokerage is already reeling from its first annual loss in a decade. The Financial Services Agency is preparing to impose a business improvement order against the firm for the first time since 2012, a person with knowledge of the matter said last week.

Shares of Nomura opened 2.6% lower on Monday before paring the losses to trade down 0.2% at the midday break in Tokyo.

An internal investigation by Nomura revealed that a researcher at an affiliate shared information on potential changes to the Tokyo Stock Exchange sections with a strategist at the brokerage. The information was then circulated within the firm and with institutional investor clients. Although the incident didn’t violate laws, according to Nomura, it found that the staff members interpreted compliance too narrowly and supervision was lacking.

Considering Investors

Japanese bond issuers often exclude securities firms from capital markets roles after indiscretions because institutional investors tend to suspend purchases from such brokers until, for example, they have prevention measures in place. Over the past year, Mitsubishi UFJ Morgan Stanley Securities Co. and SMBC Nikko Securities Inc. were removed from some bond deals following alleged misdeeds by employees.

Honda Finance dropped Nomura after considering the impact on investors involved in the deal, said Takashi Sugiyama, an executive at the car finance firm. Tokyo Metro decided to remove the bank after recent media reports, and having judged the facts, according to spokesman Takahiro Yamaguchi.

Tokyo-based Nomura is ranked third among managers of yen bond sales this year, trailing Mizuho Financial Group Inc. and Daiwa Securities Group Inc., according to data compiled by Bloomberg. Nomura was second in 2018.

To prevent a recurrence of the incident, Nomura outlined measures to raise compliance awareness and oversight, and said it will close one sales department. Staff involved in the leaks and their supervisors have faced “strict disciplinary actions,” the firm said Friday. Nagai will forgo 30% of his salary for three months.

(Updates with comments from issuers in the seventh paragraph.)

--With assistance from Takashi Nakamichi.

To contact the reporters on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net;Issei Hazama in Tokyo at ihazama@bloomberg.net

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Russell Ward, Peter Vercoe

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