Recommendation for Administrative Monetary Penalty Payment Order for Market Manipulation in Shares of PACIFIC METALS CO., LTD. and Other Securities by an Individual Residing[...]

Recommendation for Administrative Monetary Penalty Payment Order for Market Manipulation in Shares of PACIFIC METALS CO., LTD. and Other Securities by an Individual Residing Abroad

1. Contents of the Recommendation

The Securities and Exchange Surveillance Commission, today, made a recommendation to the Prime Minister and the Commissioner of the Financial Services Agency that an administrative monetary penalty payment order be issued in regard to market manipulation in shares of PACIFIC METALS CO., LTD. and other securities by an individual residing abroad pursuant to Article 20(1) of the Act for Establishment of the Financial Services Agency. This recommendation is based on the findings of an investigation into market manipulation, whereby the following violation of laws and ordinances was identified.

2. Summary of the Findings Regarding Violations of Laws and Ordinances

The person subject to administrative monetary payment order (residing in China) traded contracts for difference ("CFDs"), whose underlying assets were Japanese stocks, with an overseas bank A ("Bank A"). On receipt of an order from the individual, Bank A in turn immediately and automatically placed an order to buy or sell underlying shares on the Tokyo Stock Exchange ("TSE") and other trading venues through securities company group B.

The individual placed orders with Bank A to buy or sell CFDs whose underlying assets were shares of PACIFIC METALS CO., LTD. ("PACIFIC METALS") and Noritsu Koki Co., Ltd ("Noritsu Koki"). This was done for the purpose of raising or depressing the share price by inducing purchases or sales of the shares by others, during the following period. (Note: The behavior of misconduct is shown in Appendix 1.)

1. For two business days from 10:16:40 a.m. on September 4, 2019, to 1:35:27 p.m. on September 5, 2019, the individual sold a total of 44,900 PACIFIC METALS CFDs at a higher price through Bank A, etc., which was artificially raised through placing multiple, layered, buy orders of a total of 42,500 PACIFIC METALS CFDs near the best bid ("BB"). Similarly, the individual purchased a total of 55,100 PACIFIC METALS CFDs at a lower price, which was artificially depressed through placing multiple, layered, sell orders of a total of 38,700 PACIFIC METALS CFDs near the best offer ("BO").
2. For one business day from 9:50:45 a.m. on September 6, 2019, to 1:05:17 p.m. on September 6, 2019, the individual sold a total of 45,200 Noritsu Koki CFDs at a higher price through Bank A, etc., which was artificially raised through placing multiple, layered, buy orders of a total of 59,600 Noritsu Koki CFDs near the BB. Similarly, the individual purchased a total of 43,200 Noritsu Koki CFDs at a lower price, which was artificially depressed through placing multiple, layered, sell orders of a total of 9,000 Noritsu Koki CFDs near the BO.

This constituted a series of purchase or sale of OTC derivatives that would potentially mislead others into believing that purchase or sale of securities are thriving and cause fluctuations in prices of the shares.

A summary of misconduct is shown in the Chart.

The act by the individual described above was recognized as "a series of Sales and Purchase of Securities, etc." and "make an offer" conducted "in violation of Article 159(2)(i)" as stipulated under Article 174-2(1) of the Financial Instruments and Exchange Act ("FIEA").

3. Calculation of the Amount of the Administrative Monetary Penalty

Pursuant to the FIEA, the amount of the administrative monetary penalty applicable to the above violation is a total of 2,810,000 yen. (Note: The calculation is shown in Appendix 2.)

4. Acknowledgements

We appreciate the assistance of the British Columbia Securities Commission, the Cayman Islands Monetary Authority, the China Securities Regulatory Commission, the Danish Financial Supervisory Authority, the Hong Kong Securities and Futures Commission, the Hungary Magyar Nemzeti Bank, the Ontario Securities Commission, the United Kingdom Financial Conduct Authority, and the Japan Exchange Regulation in this matter.
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