ISSUES AND ETHICS IN FINANCE (FIN657)

INDIVIDUAL PRESENTATION
( INSIDER TRADING )

NURUL ANIS ASYIQIN BINTI MOHD MUSTAFA

MATRIC ID: 2019295068
CLASS: JBA242 5D

PREPAID FOR: SIR FERRI BIN NASRUL

The Related Article

Insider Trading In Japan:

The Nomura Case

Published on March 12,

2013
 The Nomura Cases

An insider trading scandal at Nomura Group shakes the Japanese

conglomerate to its core. In 2010, market participants claim
there is suspicious trading in deals Nomura is underwriting.
Inpex (an oil and gas producer), Tokyo Electric Power, and
Nippon Sheet Glass report suspicious trading activities prior to
the issuance of new shares in their companies. From these
reports, the Japan Securities and Exchange Surveillance
Commission (SESC) launches an investigation, which leads to the
definitive discovery of insider trading by Nomura sales
officers.
 INSIDER TRADING?
Insider trading refers to the practice of purchasing or
selling a publicly-traded company’s securities while in
possession of material information that is not yet public
information. Material information refers to any and all
information that may result in a substantial impact on the
decision of an investor regarding whether to buy or sell the
security.
By non-public information, it is mean that the information is
not legally out in the public domain and that only a handful
of people directly related to the information possessed. An
example of an insider may be a corporate executive or someone
in government who has access to an economic report before it
is publicly released.
The Issues in the Article
On October 31, 2012, the Japan Stock Exchange fined Nomura
Securities Company 200 million Yen ($ 2.5 million) for
1
suspicious trading activity reported prior to the issuance of
new shares against Nomura Company.

Nomura CEO Kenichi Watanabe and other executives resigned

2 because of an insider trading inside Nomura that would be a
barrier to competing with other companies.

There was a fall in share prices, the cancellation of an

3
underwriting project agreement, and a leadership turnover
against Nomura Company stemming from insider trading.
 WHY IT HAPPENED?
Sales representatives shared certain information with hedge
fund managers and bankers outside Nomura who leaked
information about at least three public offerings to
favored fund managers, who then profited from short sales
ahead of the expected share price decline.

Insider trading occurs because of the desire to achieve

greater scale and greater profits against an individual or
company.

Insider trading occurs due to the desire of Nomura

employees to meet sales targets.
Solutions?
The government imposes actions against
perpetrators such as fines or imprisonment.

Employers can also impose actions such as

dismissal or fines.

Employees need to be more careful and

accountable to the trust.

Clearly define sensitive non -public

information within the company.

Do not disclose non -public information to

outsiders.
 CONCLUSION
In conclusion, insider trading is against the law to a
company because the source of the information has a binding
legal obligation and the trader must know that the source
violated that obligation. It is an ethic of focusing on
property rights and justice. When a person takes material
information that has not been made public, and makes a trade
based on that knowledge, that person steals from the
corporation in question. Companies that have non -public
information are said to own that information. In terms of
fairness, trading in publicly unknown information is unfair
to companies and other market investors because those with
inside information have an unfair advantage. At the systemic
level, insider information causes the stock market to be an
uneven playing field. Ultimately, the practice leads to a
decline in confidence in the market and a fall in
participation, which is detrimental to a properly
functioning financial market.
THANK YOU