Japanese worry about ‘vague’ trading laws

Press, 7 October 1987, Page 45

Japanese worry about ‘vague’ trading laws

By

JAMES KYNGE

NZPA-Reuter Tokyo Japanese laws policing insider trading on some of the biggest equity markets in the world are ineffective and need to be reformed, a top Finance Ministry official said. “The laws are extremely vague,” said Kazumoto Suzuki, director of the Finance Ministry Stock Dealing Inspection Division. “We must coordinate with academics, lawyers and the law ministry to find ways to change and tighten the law.” However, he declined to give details on possible changes. Market analysts said

that under the current system stockbrokers or companies caught using inside information are unlikely to be punished by the courts.

Japan’s eight stock exchanges are policed by about 140 officials of the Finance Ministry Securities Bureau. “But there are limits to what we can investigate under the present law,” an Osaka-based investigator said. “The laws are similar to the U.S., but we have no independent policing body like the Securities and Exchange Commission, so we have little real power.” Tateho announced on

September 2 that it had lost about 28 billion yen in bad bond investments.

Nikko Securities Co and Hanshin Sogo Bank Ltd have issued statements saying they did not use inside information when they sold Tateho’s shares just before the announcement.

The Osaka exchange, the world’s third largest in terms of capitalisation after Tokyo and New York, has said Nikko, Tateho’s major financial adviser, sold 1.69 M Tateho shares and bought about 257,000 in August. Osakabased Hanshin Sogo Bank said last week it had not used privileged informa-

tion when it sold Tateho shares before Tateho revealed its losses. A spokesman for Hanshin said his bank sold 100,000 shares before Tateho’s announcement but declined to say how long before.

New stockmarket trading rules, which were imposed on September 1, now require company executives, their relatives and individuals holding more than 10 per cent of a listed company to use special registration cards when dealing in the firm’s stocks. Whenever a card holder trades in shares of an associated company, the broker must notify the company and the Japan Securities Dealers Association will investigate. However, Suzuki said that quite apart from the problem of deciding what is and is not privileged information, which remains loosely defined, there are doubts about how effective the new rules can be.