* 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 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
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."
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
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
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
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
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.