NOMURA UNVEILS FRESH PREVENTIVE MEASURES FOR INSIDER TRADING

TOKYO, June 7 (Kyodo) - Japan's largest brokerage house Nomura Securities Co. announced Friday a series of measures to tighten information security as well as pay cuts for executives following an insider trading scandal involving a former employee. Nomura Securities President Kenichi Watanabe said at a news conference that he and Chairman Nobuyuki Koga will take pay cuts of 30 percent for three months. A company investigative committee, set up in April to look into the handling of nonpublic information at its investment banking division, said Nomura, as an organization, did not breach any rules on stock trading in regard to the insider trading case involving the former employee. But there are some areas for improvement that will allow the company to better handle highly confidential information on corporate mergers and acquisitions, including training programs for employees to instill ethics, the committee said in a report. ''Training in regard to education on professional ethics was not necessarily sufficient,'' the report said. ''It was necessary to convey in strong words that insider trading would definitely be discovered and that such wrongdoing, once discovered, would be subject to harsh social sanctions,'' it said. The report also said the company failed to fully address ''attitude changes'' among young employees, adding that recent insider trading incidents often involved workers aged between 29 and 31. Nomura's board of directors set up the three-person committee soon after the former employee, Li Yu, a 30-year-old Chinese national, was arrested on suspicion of insider trading in violation of the Financial Instruments and Exchange Law. Li and a friend were charged Monday for allegedly trading unfairly in shares of four companies including those of Sanko Junyaku Co., a subsidiary of major drug maker Eisai Co., and medical support provider Site Support Institute Co. Prosecutors believe the pair earned about 13.7 million yen through the insider deals. The report acknowledged some defects in existing rules on information management, saying there was carelessness with regard to the use of code names when talking to clients inside the office and the printing of confidential papers and files. As preventive measures, the report called for tougher regulations on the treatment of client names, the use of conference rooms for company meetings, full-time locks on lockers and management of printed papers. Referring to globalization and changes in young people's business ethics, Masaharu Shibata, head of the investigative committee and chairman of NGK Insulators Ltd., said Nomura lacked awareness that ''human resources could be a risk factor.'' Watanabe said he feels a grave responsibility for the fact that the insider trading scandal damaged people's confidence in stock trading. Li, a graduate of Kyoto University, was hired by Nomura in November 2005 and worked at the corporate information division until last December when he was transferred to a Hong Kong unit of the securities firm.