UPDATE 3-Nomura CEO Watanabe to resign over trading leaks -Nikkei

Thu Jul 26, 2012 2:30am IST

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* Nomura awaiting regulatory sanctions for insider trading

* Clients have cut business due to scandal

* No obvious successor seen to Watanabe

* Bank due to report quarterly results Thursday

By Jochelle Mendonca

July 25 (Reuters) - Nomura Holdings Inc Chief Executive Kenichi Watanabe will resign to take responsibility for leaks of insider information to clients of the company's brokerage unit, the Nikkei newspaper reported.

A Nomura spokesman in New York declined to comment on the report, which comes a month after the investment bank halved Watanabe's pay for six months in response to the brokerage's third insider trading scandal since he took the helm four years ago.

Nomura, due to report results on Thursday, has confirmed it was the source of leaks on planned share offerings by energy firm Inpex, Mizuho Financial Group and Tokyo Electric Power in 2010.

In all three cases, employees in its institutional sales department provided the tip-offs.

A panel of attorneys brought in by Nomura to investigate the insider trading cases said it found equity sales staff would regularly pump colleagues for inside information about upcoming share offerings and then share tips with investors.

"When you look at their history, the number of scandals, this was the last straw," said Jim Sinegal, an analyst with Morningstar research house, who said he saw no clear successor.

"If I had to guess, I'd say it would be someone already at the top, the COO, maybe, or one of his top lieutenants," Sinegal added. "Though they need a broad cultural change, right now, I would bet against it being an outsider."

LOST BUSINESS

Nomura, Japan's largest brokerage, is awaiting possible sanctions from Japan's Financial Services Agency, but the scandal has already cost it clients.

Some asset managers have stopped trading with the firm to meet their own compliance rules, and it has lost underwriting business, including being left off the government's $6 billion sale of Japan Tobacco shares.

Shares of Nomura have almost halved in value since the first insider trading case emerged in March. That compares with a 12 percent fall in the Japanese securities subindex during the same period.

The bank is expected to report on Thursday that it roughly broke even in the latest quarter, but there is likely to be much more interest in its future prospects in the wake of the scandal.

Watanabe, 59, previously vowed to stay on and fix the problems, but support for him has cooled among Japanese regulators and shareholders.

There have been murmurings among some Japanese regulatory officials that Watanabe should step down. The regulators have no formal power to push for management changes, but have done so in the past.

Watanabe was reelected with an unusually low 63.6 percent of the vote at Nomura's annual meeting last month, down from 92 percent a year ago, after a proxy advisory firm called for him and board Chairman Nobuyuki Koga to be ousted because of the scandal.

The chastened CEO bowed in apology to shareholders at the meeting and said: "We have caused worry and trouble, and for that I would like to humbly apologise."

NO OBVIOUS SUCCESSOR

A departure by Watanabe would pose fresh issues for the bank given the lack of an obvious successor.

Watanabe joined Nomura in 1975 and took over as CEO four years ago, carving out a reputation for making key decisions on his own.

Chief Operating Officer Takumi Shibata, who helped orchestrate the acquisition of assets from the bankrupt Lehman Brothers during the financial crisis, is not viewed as a strong CEO candidate due to his lack of experience managing the mainstay retail operations.

The purchase of Lehman assets in Asia and Europe - the latter for just $2 - marked Nomura's emergence as a world player in investment banking.

Nomura was the first Japanese securities company to establish an overseas office 81 years ago. Before acquiring Lehman, it had expanded to 30 countries but still generated more than 90 percent of its revenues in Japan.

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