Nomura is fined $1 million for violating NYSE rules Japanese unit failed to maintain reserves


NEW YORK -- Nomura Securities International Inc. was fined $1 million yesterday by the New York Stock Exchange for rule violations involving Mexican bond trading.

It was the third-biggest sanction ever levied by the NYSE.

The bond trades, which Nomura carried out for its own account, resulted in the firm failing to meet capital requirements, the NYSE said. The exchange also said Nomura fell short in supervision and control of its traders.

The unit of Japan's biggest securities firm said it agreed to appoint an outside director to chair its audit committee and to strengthen its controls.

"This was the best thing for the company to move on," said Ira Sorkin, Nomura's chief legal officer.

Nomura's fine follows a Nov. 2 order by the Federal Reserve to Daiwa Bank Ltd. to shut its U.S. operations. Daiwa suffered $1.1 billion in trading losses tied to 11 years of Treasury bond trades.

Nomura conducted a series of bond trades between 1990 and 1992 in which the firm bought Mexican bonds and simultaneously agreed to sell them a few days later. The size of the transactions grew to $200 million from $20 million.

The NYSE disputed the way in which Nomura accounted for the trades, saying they left the firm with a capital deficiency of more than $150 million in October 1992. The exchange requires firms to maintain a minimum amount of capital to ensure that they can meet all their obligations to customers and other firms.

Even after senior Nomura officials decided to switch the trades into the parent company's account to avoid the capital deficit, the firm didn't take action. Six months later, in February 1993, the NYSE told Nomura to stop its Mexican bond trades.

"Nomura adopted an aggressive and incorrect interpretation of net capital regulations and did so without seeking clarification from its regulators or advice from outside counsel," the NYSE said.

The NYSE handed out its biggest sanction in 1992 in the form of a $2.5 million fine against Drexel Burnham Lambert Inc.

Nomura's fine is the second levied by the NYSE. It levied a $180,000 fine on Nomura in 1990 for, among other things, capital violations.

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