Nomura CEO takes pay cut: all about the Japanese financial company, its scandals | Explained News #JapanFinance

In a press conference last week, Okuda said he and top executives would take a 30% pay cut over the next three months. He said, “We would like to deeply apologise to the victims as well as many other people involved for the great inconvenience and concerns caused. We are truly sorry.”

We explain the cases, and how this has impacted the company.

What is Nomura?

Nomura is an international financial conglomerate, and Japan’s largest investment bank. It employs 26,000 employees worldwide, with offices in Tokyo, London and New York.

It was founded in the early 1900s by Tokushichi Nomura as a money-changing business. The company built its reputation in the Japanese retail banking market, but is a formidable player in international investment banking.

Nomura first came into the limelight following its acquisition of the Lehman Brothers’ Asia-Pacific business during the 2008 economic crisis.

The robbery and arson attempt

The former wealth management employee was charged in August with arson and robbery. The 29-year-old man had reportedly visited the house of an elderly customer and their spouse in July without the company’s prior approval. According to the prosecution, he allegedly drugged the two, stole about ¥26 million ($170,000) in cash from their home and set it on fire. The couple escaped.

The former employee had reportedly joined Nomura Securities as a fresh graduate in April 2018. From April 2022, he was placed with the Hiroshima branch office from April 2022 and gave asset management advice to individual and business clients.

He was fired on August 4.

In the days since, Nomura said it has taken disciplinary action against “relevant managers”, and launched an investigation into “other possible incidents” related to the former employee.

He was arrested on October 30, and charged by the Hiroshima District Public Prosecutors Office on November 20.

What safeguards were instituted following the incident?

In addition to the pay cuts by Okuda and other executives, the company has promised to implement measures to prevent the recurrence of similar crimes. These include having the managers speak directly to clients before scheduling a visit by wealth management staff.

According to a Bloomberg report, Nomura will closely monitor employee movements to ensure “more robust and effective oversight.” This includes introducing “block leave” to ensure the absence of employees from the workplace and prevent wrongdoing. Additionally, the company will evaluate employee conduct strictly, and conduct training sessions on professional ethics.

The ‘spoofing’ scandal

On September 30, Nomura fired senior trader Takushi Sawada after the Securities and Exchange Surveillance Commission, the investigative arm of Japan’s Financial Services Agency, identified that he had made windfall gains from market manipulation.

The SESC said that the trader arranged a series of buy-and-sell orders on derivatives tied to 10-year government bonds, only to cancel them. According to a filing with the US Financial Industry Regulatory Authority, he was thus able to manipulate the stock price, driving it up with the buy orders, in an illegal practice called spoofing.

The SESC fined Nomura ¥21.8 million ($143,000) and prompted some clients to take their business to rivals in the space.

How has Nomura been impacted?

The two crises have dented the company’s reputation in the deeply conservative Japan, where salespeople making house calls is still commonplace. A deep cynicism of the stock market has prevailed, with the collapse of the 1980s bubble and the following “lost decades” of stunted economic growth. The return of inflationary pressures could provide an impetus and encourage people to rely on stocks, in addition to traditional savings methods.

Nevertheless, the bank has mostly done well and has seen its earnings grow this year. According to an FT report, net profit more than doubled in its latest quarter. Nomura has increased its commitment to cost-cutting efforts, planning to slash $187 million in the short run, on top of existing plans to cut $414 million.