Nomura’s predicament deepens after identity theft case and attempted murder arrest

The number of scandals at Nomura Holdings is increasing, and there are concerns that the restructuring plan for Japan’s largest securities company, which is just beginning to bear fruit, will be derailed.

Nomura on Thursday gave pay cuts to Chief Executive Officer Kentaro Okuda and other executives after the company admitted that its employees manipulated bond markets and several companies suspended trading with the brokerage firm. It was announced that he would be punished. Less than an hour later, local news agencies reported that a former Nomura employee had been arrested on suspicion of robbery and attempted murder of an elderly customer.

Finance Minister Katsunobu Kato called both incidents “extremely regrettable” at a regular press conference on Friday.

Scandals cast a shadow on profits

A drumbeat of bad news overshadowed its financial results on Friday, when Nomura reported better-than-expected quarterly profits, more than doubling from a year earlier to 98.4 billion yen ($645 million). Revenues from the core areas of asset management, trading and investment banking all increased. This was the third consecutive quarter of profit growth, and the longest consecutive quarter of profit growth under Mr. Okuda.

Chief Financial Officer Takumi Kitamura expressed regret over the market manipulation incident and the arrest of a former employee. He said it was too early to gauge the potential impact of the arrests on the company’s wealth business, but added that the impact on profits from the bond trading violations would likely be limited.

“It’s a matter of emotion,” said Hideyasu Ban, an analyst at Bloomberg Intelligence, adding that brokerages needed to allay customers’ concerns about the former employee’s arrest. “Their reputation is at risk.”

Nomura’s stock price fell 2.7% at the close of trading in Tokyo on Friday. The benchmark TOPIX index fell 1.9%.

Nomura’s image is damaged

Scandals have reinforced Nomura’s image as a company prone to missteps, including billions of dollars in losses due to data breaches and the collapse of Archegos Capital Management.

Mr. Okuda has been trying to overcome these setbacks since taking the top job more than four years ago. Nomura has been riding the wave of trades and trades as Japan’s stock and bond markets recover from years of stagnation. Mr. Okuda has set a goal of doubling pre-tax profits by 2031.

Instead, after a strange few weeks, the bank goes into damage control mode again.

Japan’s Financial Services Agency’s investigative division reported in September that Nomura employees placed misleading orders in the government bond futures market in 2021. The trader made money by placing large orders without intending to buy or sell all of them, a practice the watchdog called out. Layering is a type of spoofing. The Financial Services Agency on Thursday imposed a fine of 21.8 million yen on the company. The trader is no longer employed at the company, a person familiar with the matter told Bloomberg News.

The incident prompted clients to move their bond trading and underwriting operations elsewhere, and Nomura suffered a blow as Japan re-emerged as a major growth area.

At least 10 institutional investors have suspended some business activities with Nomura over the violations, according to people familiar with the matter. Additionally, other customers removed the company from underwriting debt transactions. This has lowered Nomura’s ranking in the corporate bond market, dropping to fifth place in October from third place the previous month, according to data compiled by Bloomberg. The company also suspended the primary dealer’s “special rights” in government bond auctions for about a month.

There is damage control, but no relief.

The company said in a statement Thursday that it “takes this matter very seriously” and apologized to customers and stakeholders. “We will continue to further strengthen our compliance system and internal controls to prevent similar incidents from occurring and restore trust.”

In response, Mr. Okuda agreed to return 20% of his salary for two months, while Vice President Yutaka Nakajima and several other executives in the domestic securities division will receive pay reductions of the same amount or less, according to the statement. It’s planned.

After announcing pay cuts and fines early Thursday, things became clearer for Nomura when Kyodo News reported that a former employee had been arrested on suspicion of robbery and attempted murder of two customers. Kyodo News reported, citing anonymous sources involved in the investigation, that the 29-year-old man was working at Nomura Securities at the time of the alleged crime in Hiroshima in July.

According to reports, he is suspected of drugging a customer and his spouse, stealing approximately 26 million yen in cash from their home, and setting it on fire. The couple, who are in their 80s, reportedly escaped safely.

A Nomura Holdings spokesperson confirmed that the person was a former employee who had been fired for disciplinary reasons, but declined to say how long he had been employed.

A spokesperson said, “It is extremely regrettable that a former employee of our company has been arrested.”

Disclaimer: This article has been published from a news agency feed without any modifications to the text.