Tokyo Exchange, Inc. (TSE) and Osaka Exchange, Inc. (OSE) have taken disciplinary action against Tachibana Securities Co., Ltd.
The exchanges asked the company to submit a business improvement report. The measures were identified on the basis of the results of the discussions of the Japanese exchange regulation.
Tachibana Securities proclaims that it is a “stock -specific company” for a wide range of investors and deals with sales in a total of 11 branches, mainly through sales sales from sales representatives.
Following the revision of the invitation of domestic stocks to elderly customers (75 years of age or more) from April 2022 to August 2024 (“Review Period”) in a company inspection by the Kanto local funding office, some issues were identified.
- Practices of false declarations to customers on domestic shares and the provision of misleading information on important issues
The company’s sales representatives have repeatedly transferred false statements about earnings/losses in stocks sold and provided misleading information on important issues to 31 customers with the aim of earning salaries from selling stocks and transactions for other stocks.
- Inappropriate Investment Invitation Practices associated with domestic shares transactions
The company has failed to make adequate improvements, despite taking guidance on cases of inappropriate investment invitation practices for domestic shares in an inspection carried out by a self -regulated organization in 2023 and continued to make similar inappropriate investment inappropriate investments.
- Excessive fees imposed due to excessive transactions
The average numbers for the annual transaction turnover index and the number of executions for customers who received inappropriate investment invitations were extremely high. In addition, the average remuneration ratio for customers who received these inappropriate investment invitations was also extremely high and there were many customers whose cumulative fees during the review period exceeded their profits/losses, including profits and loss losses.
The company’s sales representatives that prioritize the acquisition of customers’ profits and repeatedly participate in inappropriate investment practices that have led to excessive transactions for customers, resulting in excess fees for these customers.
- Inadequate internal control and business management systems
In the company, an effective internal control system had not been established due to shortages in the following areas. The branch manager of the Sales Department and the internal control person, who is the first line of defense, did not follow the transactions or confirmed the phone records, so there were no checks to prevent sales representatives from participating in inappropriate investment.
The Internal Audit Department, the second line of defense, did not properly have the sales department despite the fact that it had information on similar cases in the past and the cases pointed out by the inspection carried out by the Self -regulation Agency, so the checks were inadequate and the monitoring of transactions were inadequate.
The Internal Audit Department, the third line of defense, had not carried out effective internal controls for reasons involved.
In addition, the company’s management team abandoned the improvement measures on the issues highlighted in the inspection conducted by the Self -Development Organization in 2023 in the Department of Internal Audit without discussing such measures within the management team.
In addition, even after the inspection by the Self -Regulation Agency, the company did not take seriously the reports from the Department of Internal Audit on Sales Representatives involved in attraction practices similar to those highlighted in the Inspection and failed to provide appropriate instructions for research or internal instructions.
As a result, the company’s business management system is considered inadequate.
Most of the performance evaluation criteria and bonus calculation methods for sales representatives were based on actual remuneration, resulting in a system of incentives being strongly prejudiced to the actual remuneration acquired.
With the continuation of a system of incentives that have been biased towards the actual fees acquired, the management team promoted a corporate culture that prioritized sales for many years without establishing an effective system of compliance with laws and regulations, including management from the first to the third to the third line.
Elderly customers have been pressured into excessive transactions due to sales representatives that prioritize the acquisition of customers against customer profits and repeatedly participate in inappropriate investment practices, as the company’s internal control and management systems were inadequate. These situations did not improve after being highlighted in the inspection by the self -regulatory organization.
The business activities of the company were considered to fall under Article 51 of Fieea, which states that the prime minister can take action “if the prime minister considers that it is necessary and appropriate for the public interest or for the protection of investors as concerns for business”.