jp morgan caught manipulating

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    Japan Punishes JP Morgan Unit
    Friday February 28, 4:59 am ET

    TOKYO (Reuters) - Japan's financial regulator said on Friday it had ordered the brokerage unit of J.P. Morgan Chase & Co. (NYSE:JPM - News) in Tokyo to suspend stock trading on its own account for 10 business days from March 3-14.

    The penalty against the Tokyo office of J.P. Morgan Securities Asia Pte Ltd. was issued three days after a watchdog said the unit had manipulated market prices through irregular transactions involving exchangeable bonds (EBs).

    In a related move, Japan's Ministry of Finance said it would bar the J.P. Morgan unit from participating in Japanese government bond auctions from March 3-14.

    "We treat this matter with the utmost seriousness...and are continuing to strengthen our internal regulatory compliance measures and working to prevent a recurrence," J.P. Morgan's Tokyo unit said in a statement.

    Announcing the penalty, the Financial Services Agency (FSA) said it had ordered the brokerage to improve its internal controls to ensure that no such violation occurred again.

    It said the penalty, which had been sought by the Securities and Exchange Surveillance Commission (SESC) watchdog, excluded the execution of transactions contracted on or before Friday.

    EBs, which are high-risk, high-return structured bonds exchangeable for company stock, are redeemed in cash with interest if the price of a selected stock is higher than a predetermined price on a set date.

    The SESC said its investigation found that the unit launched large-lot sell orders in shares in a company selected for an EB before the market closed on January 16, 2001, when the payment method -- cash or shares -- on the EB was due to be determined.

    The brokerage deliberately kept the price below the pre-fixed price, it said.

    Other brokerages have also been hit by administrative penalties for improper transactions involving EBs after Japanese regulators stepped up their surveillance of domestic and foreign financial firms to bolster confidence in Tokyo's markets.

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