April 17, 2024

DealBook: Nomura Chief Quits Amid Insider Trading Scandal

Kenichi Watanabe, right, announces his resignation on Thursday as his successor, Koji Nagai, looks on.Yoshikazu Tsuno/Agence France-Presse — Getty ImagesKenichi Watanabe, right, announces his resignation on Thursday as his successor, Koji Nagai, looks on.

TOKYO — In a resignation more reminiscent of Nomura’s scandal-plagued 1990s than the global investment bank it has sought to become, the firm’s chief executive and his top lieutenant resigned on Thursday over recent revelations their employees abetted insider trading.

The bank’s chief executive, Kenichi Watanabe, who was the architect of Nomura’s takeover of Lehman Brothers‘ assets in Asia and Europe, resigned to take responsibility for the scandal, together with Takumi Shibata, the chief operating officer.

They will be succeeded by Koji Nagai, who leads Nomura’s securities unit, and Atsushi Yoshikawa, chief of the bank’s operations in the United States, according to a company announcement. The management changes were approved by Nomura’s board on Thursday.

“I resign,” Mr. Watanabe bluntly told reporters, offering no apology in his opening remarks at a Tokyo news conference.

He said he had overseen the start of promised measures to bolster Nomura’s internal controls, and to further investigate insider trading practices at the firm. “Now it is time for a new era with new people,” he added.

Mr. Nagai promised to regain investor trust in the disgraced bank. “I intend to reform the company mind-set,” he said.

The resignations mark a fresh low for an institution that has struggled since snapping up Lehman’s international operations four years ago.

Nomura, together with the British bank Barclays, swallowed Lehman’s businesses at the height of the financial crisis in 2008 in risky bids to bolster their global standings.

But now, as Barclays faces an investigation of interest-rate manipulation, Nomura is embroiled in its own new scandal: accusations of widespread leaks of privileged information, which are part of a widening insider-trading investigation by Japanese regulators.

After an internal investigation, Nomura has acknowledged that employees leaked information on at least three public offerings in 2010 to favored fund managers, who then made money by pre-empting the expected drop in the share price with heavy short-selling.

Investors reacted positively to reports of the management shake-up, first reported on Thursday by the Nikkei business daily, driving Nomura shares up almost 6 percent ahead of its earnings announcement later in the day.

After stock markets closed, Nomura said it had squeezed out a net profit of 1.98 billion yen ($24.2 million) in the three months through June, down almost 90 percent from 17.7 billion yen for the period a year earlier, but beating analysts’ expectations.

Nomura’s chief financial officer, Junko Nakagawa, credited a $1.2 billion cost-cutting drive, which she said was completed ahead of schedule.

Article source: http://dealbook.nytimes.com/2012/07/26/nomura-chief-resigns-amid-insider-trading-scandal/?partner=rss&emc=rss