SESC Proposes $1.9m Fine for Morgan Stanley MUFG over Market Manipulation

The trader allegedly manipulated the market by selling Seibu shares after their price rose and cancelled the buy orders.

Japan’s financial market watchdog, the Securities and Exchange Surveillance Commission (SESC), today recommended fining Morgan Stanley MUFG Securities for alleged market manipulation related to shares of railway operator, Seibu Holdings, according to a Reuters report.

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SESC has recommended that the Financial Services Agency (FSA) imposes a penalty of ¥220 million ($1.9 million), as revealed in a statement posted on its website.

Findings

The SESC said that a trader at the brokerage manipulated the market to raise Seibu’s share price by conducting transactions without the intention to execute and placed a large number of buy orders at prices around the best offers on the Tokyo Stock Exchange. In total, the trader bought 416,500 shares while placing purchase orders for 9,258,000 shares on Morgan Stanley MUFG’s account.

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These constituted a series of sales and purchases. Their offers of securities would mislead others into believing that sales and purchases of the shares were thriving and would cause fluctuations in the market of the shares.

According to SESC: “The trader sold Seibu shares after their price rose and cancelled the buy orders”. 

Morgan Stanley MUFG said in a statement: “We sincerely accept this recommendation and we are making further improvement on internal controls. We deeply regret the incident and apologise.”

Guardian of the Market

As the ‘guardian of the market’ independent of the supervisory functions of the FSA, the SESC plays a key role in maintaining fair, equitable, transparent, and sound markets through daily market surveillance, inspections of financial instruments business operators, investigations of market misconduct, disclosure statements inspection and criminal investigations.

The watchdog makes recommendations for administrative penalties to the FSA which rules on cases and penalises accordingly.

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