Financial Services Agency

September 16, 2010 Financial Services Agency Tokai Tokyo Regarding administrative actions against joint-stock companies Tokai Tokyo As a result of the inspection by the Securities and Exchange Surveillance Commission of the stock company (hereinafter referred to as "our company"), it was found that the following violations of laws and regulations were found. recommendations were made. During an on-site inspection at our company, in response to an inquiry from a customer to our company, a salesperson of our company has continuously provided loss compensation and yield guarantees to a specific customer for more than 10 years, and after that, to cover the funds Suspicion of selling assets of customers without permission and illegally withdrawing cash was discovered. The Company is currently conducting an internal investigation into the full details of the matter, and the following facts were found in the inspection this time as a result of verifying the Company's system for preventing financial product accidents, etc. (1) The function to check fraudulent activity and abnormalities in customer assets was formalized and superficial. were withdrawn several hundred times from automatic cash deposit and withdrawal machines (hereinafter referred to as "atm") installed at banks, etc., totaling approximately 630 million yen. Most of the withdrawals were repeated daily withdrawals of 999,000 yen, which is the daily withdrawal limit from ATMs, and greatly reduced customer assets in a short period of time. were not aware of this situation. In addition, from October 2007 to May 2010, from October 2007 to May 2010, sales staff a made a total of approximately 100 million yen from atm about 1,000 times in the account of one customer who said that he had provided yield guarantees, etc. I deposited yen. Most of the deposits were made many times in a day, the limit of 100,000 yen for one time deposit from ATM, and 35 times a day, 3.5 million yen on many days. While the internal control manager was aware of this situation, he did not conduct any particular investigation. ○ With regard to the customers in charge of a salesperson, problems such as short-term turnover, significant slump in transaction balance, remote customers, etc. have often been pointed out in the attention system and in-house inspections to extract customers whose transactions should be closely watched. there is In particular, when verifying when an attention account is pointed out, the internal control manager found that a. (a) They often pointed out problems such as long tenure at the branch and long relationships with the customers they were in charge of, but no particular investigation was conducted. (2) Insufficient formulation of measures to prevent recurrence of financial product accidents, etc. Equivalent to dismissal discovered at the Company during the inspection period (November 3, 2007 to May 14, 2010) Of the financial product accidents, etc., certain recurrence prevention measures are taken for cases involving unauthorized trading. However, there are also cases of malicious illegal acts such as loss compensation that take a long time to be discovered.・I did not reinforce it. ○The Company has established a job series in which employees are not transferred from the hiring branch, or the range of transfer is limited to a certain area. Under this system, employees often work at the same sales office for a long period of time, and in addition to maintaining long-term relationships with customers, from the perspective of preventing financial product accidents, etc., opportunities to verify business details are limited. It is a thing. During the period covered by this inspection, there were incidents involving financial products related to the above occupational line of work that had been employed at the same branch for a long period of time, and salesperson a had also been employed at the same branch for a long period of time as part of the above line of work. In this regard, the Company has not taken any measures against fraud risks related to long-term tenure of employees, such as not implementing intensive monitoring of employees who have been in the same line of business or who have been in the same sales office for a long period of time. The status of the financial instruments accident prevention system at the Company must be improved for the public interest and the protection of investors with respect to the business operation and property status of financial instruments business operators stipulated in Article 51 of the Financial Instruments and Exchange Act. recognized as applicable in certain circumstances. Based on the above, the following administrative actions were taken against our company today. ○ Business improvement order based on Article 51 of the Financial Instruments and Exchange Law (1) Provide appropriate explanations to customers affected by this scandal and take all possible measures to deal with customers. (2) Based on the findings of the Securities and Exchange Surveillance Commission, we will investigate the root cause of this matter, summarize the problem, and enhance and strengthen the business management system and internal control system from the following perspectives. thing. ○ In order to prevent similar scandals, under the leadership of the management team, we will verify the state of the business management system and internal control system, check for abnormal fluctuations in customer assets, and conduct daily mutual checks and balances at branches. Formulate drastic measures to prevent recurrence, including strengthening and reviewing the personnel management system. ○ In order to ensure the effectiveness of appropriate business operations, develop the necessary systems and conduct training, etc. for officers and employees. ○ Clarify where the responsibility for this matter resides. ○Regarding the above, please report to the FSA in writing by October 14, 2010 (Thursday) on the response and implementation status.