Japanese securities firm Nomura Holdings, Inc. is undergoing a management shakeup today amid fallout from an insider trading scandal.
On Thursday, the firm announced a new management lineup effective August 1 that will see the current CEO and chief operating officer and a handful of senior managers leaving the firm, and its subsidiary Nomura Securities.
The changes come in the wake of an insider trading scandal in Japan, in which the Securities and Exchange Surveillance Commission (SESC) has ordered penalties against various firms for insider trading based on inside information received from Nomura employees.
In announcing the management changes the firm didn’t address the insider trading scandal directly, saying, “Nomura faces a rapidly evolving business environment marked by instability in Europe and global regulatory tightening. Under new leadership, Nomura will build a new global business model that allows the firm to remain flexible and adapt quickly to the changing environment.”
It also provided an update on its progress implementing recommendations from the SESC in connection with its institutional equity sales business and its system for managing inside information. It notes that changes to things such as internal controls, information handling practices, entertainment expenses, training, and analyst conduct will be implemented by the end of August, except for those requiring systems changes.
“We intend to restore the confidence that we have lost in the capital markets by thorough implementation of the improvement measures and to continuously reinforce our state of readiness through such measures as continuous voluntary inspection and investigations,” it says.
Fitch Ratings says that the resignation of the firm’s CEO and COO following a series of insider trading scandals, “may lead to a slowdown of the group’s international growth strategy”, which it says could ease some of the pressure on its credit ratings.
The rating agency notes that the departing executives were key architects of the firm’s acquisition of the Lehman businesses in 2008. “Although their aggressive overseas strategy has supported Nomura’s global franchise, it has been a source of losses and has increased the company’s risk profile in the wake of the downturn in the eurozone,” it says.
The wide-ranging management shuffle improves certainty, which could spell a reduction in the risk profile of the international business, would support its ratings, Fitch says. However, it notes that there will also be risks attached to any reversal of the international strategy, “as any attempt to sell international operations could be hampered by current market conditions and a lack of potential buyers”.