Tokyo Exchange Says Employees Bought Stock After Deal Leaked
Aug. 26, 1988
TOKYO (AP) _ The Tokyo Stock Exchange said Friday that 34 employees of Nippon Steel Co. and Sankyo Seiki Manufacturing Co. bought more than 68,000 shares of Sankyo stocks before the companies announced a major deal.
''There was apparently a leak of insider information,'' said Takao Nojiri, a senior managing director of the exchange. ''We will issue a strict warning to both companies and request them to submit their report on the cause of the leak and measures they will implement to avoid recurrence of such a case.''
Fifteen workers of Sankyo, a precision-machinery maker, and 19 workers of Nippon Steel, the world's largest steel maker, each purchased an average of 2,000 shares of Sankyo as early as four months before the announcement, the exchange said.
After markets closed July 29, the companies announced an agreement on Nippon Steel's acquisition of a large stake of Sankyo.
About a week before the announcement, the share price of Sankyo began skyrocketing. The exchange suspected major insider trading and launched an unusually thorough investigation.
On the day of the announcement, volume of Sankyo shares traded on the Tokyo Stock Exchange soared as much as 10 times the previous day's, leading the exchange to take an unusual measure of suspending the transaction of Sankyo shares in the afternoon session.
Under the current Japanese securities law, neither the companies nor workers will be a subject of criminal charges.
Scandals involving stock dealings in recent months intensified pressure on the Tokyo market to upgrade its ethical standards to that of the Western countries and forced the Finance Ministry to revise the Securities and Exchange Law.
Parliament recently passed a law allowing the Finance Ministry and the exchange a greater investigatory power. The law was partially implemented Tuesday.
A provision enabling securities authorities to press criminal charges on insider trading will not take effect until next April.
''We have to implement the new law step by step to make it work,'' said Kazuo Futagawa of the Finance Ministry's securities bureau.
The exchange also said some of the 34 employees of Nippon and Sankyo were directly involved in coordinating the agreement, but officials refused to give the exact number and their names.
''Under the current law, those individuals did not violate any law and we cannot say they were involved in insider trading,'' said Nojiri.
''The purpose of our investigation is not to pinpoint the people but to find out if there was a lack of appropriate control of information within those companies and make them to correct it,'' he said.
Hitoshi Shimakura, the exchange's director of the transaction review department, said some of the employees bought more than 5,000 shares before the deal was announced. But he added: ''We would rather not go into details of what individuals did.''
He also said the exchange will not release the names of individuals to their employers.
Nippon president Yutaka Saito met the chairman of the exchange, Michio Takeuchi, on Thursday and expressed regret for his employees' wrongdoing.