TOKYO -- In spite of earlier threats to crack down on brokerages after widespread scandals in the industry, Japan's Ministry of Finance has meted out a series of measures that observers say amount to little more than a light slap on the wrist.
The Ministry of Finance ordered Nomura Securities, Daiwa Securities, Nikko Securities and Yamaichi Securities, the "Big Four" brokerages, to refrain from doing business with corporate clients for four days and advised the companies to punish executives involved in the misdeeds.
Yesterday's announcement was accompanied by disclosures that the four large brokers spent nearly $900 million to cover losses of their largest corporate clients, almost double what had been previously reported. Two of the companies, Nomura and Nikko, also loaned money to a gangster to help him buy shares in a stock Nomura later pushed up.
Finance Minister Ryutaro Hashimoto said that as a result of the order, the four brokerage houses would have to virtually suspend business for four days. Hashimoto said the punishment was harsher than it appeared because the suspension was for the brokerage houses' "lack of ethics," not because they had broken any laws.
Although the measure was the longest ban ever imposed by the Ministry of Finance on the securities houses (the ministry had previously imposed a three-day ban) market observers say that absence of harsher punishment demonstrates how difficult it is for the ministry to come down hard on companies it regulates.
"They (the Ministry of Finance officials) don't appear to be serious about reforming the securities business," says Hiroshi Okumura, an economist at Ryukoku University and an expert on stock market regulation. He and other leading Japanese critics are calling on Japan to form a separate regulatory body more like America's Securities and Exchange Commission.
Top executives of the four firms announced forced resignations and pay cuts for executives involved in the scandals.
Nomura said it would dismiss two executives and reduce the salaries of its president and vice chairman for one year. Nikko said two executives would be forced to resign and 17 employees would be disciplined. Yamaichi said it would cut the salaries of six executives, including its chairman and president, by 20 percent over a three-month period. Daiwa said it would cut the pay of its top three executives by 10 percent for a three-month period. The presidents of Nikko and Nomura had previously resigned their posts be
cause of the scandal.
More painful to the big brokerage firms may be the side effects of the spreading scandal. Five prefectures and seven cities have decided to cut their ties with the big houses temporarily, including Yokohama and Kobe.
Separately, the Tokyo Stock Exchange said it had decided to fine Nomura and Nikko $36,200 each and Yamaichi and Daiwa $21,700 each.