3 Chinese held over insider trading

An employee at Nomura Securities Co. and two acquaintances, all Chinese nationals, were arrested Tuesday on suspicion of insider trading.

The employee, aged 30, is suspected of leaking insider information to the two brothers, who made tens of millions of yen on the stock market in 2006 and 2007, sources said.

Nomura, the nation's largest securities house, dismissed its employee the same day.

All three men were arrested by the Tokyo District Public Prosecutors Office.

One of the acquaintances is a company worker, aged 37, who studied at Kyoto University with the dismissed Nomura employee. The other individual is his brother, a 25-year-old university student.

The Securities and Exchange Surveillance Commission (SESC) believes the acquaintances used the information, including unpublished information on mergers and acquisitions, to earn between 40 million yen and 50 million yen by dealing in the stocks of about 20 companies, sources said.

On Tuesday, the commission searched about a dozen sites, including Nomura's headquarters and questioned the Nomura employee and others on suspicion of violating the Securities and Exchange Law, now called the Financial Instruments and Exchange Law.

At a news conference Tuesday night, Nomura Securities President Kenichi Watanabe apologized for the apparent insider trading.

He also said the SESC is investigating Nomura Securities itself in connection with the allegations on a voluntary basis.

Investigative sources said the Nomura employee repeatedly leaked unpublished information obtained through work to the acquaintances, who also lived in Japan, while he was at the brokerage's division in charge of M&A proposals.

He was transferred to Nomura's subsidiary in Hong Kong late last year.

In one of the cases, before Oji Paper Co.'s plan to take over Hokuetsu Paper Mills Ltd. was made public in July 2006, the three bought Hokuetsu stocks and sold them after the prices rose on news of Oji Paper's plan, the sources said.

Nomura had a contract with Oji Paper to provide advice regarding the takeover deal.

The information leaked also included another listed company's plan to buy shares of a group company to make it a wholly owned subsidiary, the sources said.

The SESC started its investigation last summer and questioned the employee after he returned to Japan on Monday.(IHT/Asahi: April 23,2008)