Equity research in Japan under FSA’s scrutiny: Credit Suisse gets slap on wrist after Deutsche Bank

Rick Steves

Following a similar case involving Deutsche Bank AG in Japan back in December, Japan’s Financial Services Agency (FSA) is sanctioning Credit Suisse’s Japanese unit for leaking non-public information. According to Japan’s financial services watchdog, an equity research analyst at Credit Suisse disclosed non-public information regarding a company’s earnings-forecast, which they considered to affect investors’ decision-making. Given […]

Following a similar case involving Deutsche Bank AG in Japan back in December, Japan’s Financial Services Agency (FSA) is sanctioning Credit Suisse’s Japanese unit for leaking non-public information.

According to Japan’s financial services watchdog, an equity research analyst at Credit Suisse disclosed non-public information regarding a company’s earnings-forecast, which they considered to affect investors’ decision-making.

Given that non-public information obtained through interviews by internal analysts sometimes contain Corporate Information, and that the equity research division and compliance officers failed to identify it before providing information to customers, the FSA found that an analyst informed, by phone, a staff member in charge of sales and at least one customer of the Corporate Information of Corporate Information gathered the day before, in September 2015.

That initiative led the sales representative to solicit at least 33 customers to buy stocks of the company in question by providing them Corporate Information before official disclosure.

Japan’s FSA administrative action includes requirements in favor of preventive measures, enhanced and strengthened business management and internal control environment. Credit Suisse took a step further and announced last week that the firm will prohibit its analysts to visit companies to gather Corporate Information before earnings reports. The company has decided to cancel its bi-annual conference in April, held before earnings season. Next conference is scheduled in October.

The Financial Services Agency has been evaluating the dynamics of corporate information disclosure in order to promote fairness between market participants regarding non-public data. In reaction to the new regulatory environment in Japan, Nomura Holdings Inc. stopped interviewing companies about their business performance before earnings reports, for research purposes.

Mizuho Financial Group Inc.’s securities unit and Daiwa Securities Group Inc. have also taken similar measures, regarding results previews based on such interviews, to abstain from potentially clashing with Japan’s FSA.

 

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