Yamaichi Securities Co. denied on April 21 a newspaper report that it had reimbursed Hanwa Co., an Osaka trader, for investment losses.
Calling the report made by a vernacular daily "totally groundless," a spokesman at Yamaichi Securities said the brokerage will file a criminal complaint against the newspaper because of the report. He said Yamaichi will not comment on the specifics of the report until it is dealt with in court.
The paper said that Yamaichi had reimbursed Hanwa in 1992 for investment losses by exercising rights to buy stock belonging to the steel product trader at prices above market value. It also said Yamaichi transferred 18.9 billion yen to Hanwa through transactions involving bonds with equity-purchase warrants over a six-month period from April 1992. Holders of warrants almost never exercise the right when stock prices are below the set price.
A spokesman at Hanwa said, "The company does not acknowledge any illegal deals with Yamaichi regarding warrant bonds it floated in 1992." But the Hanwa group -- which comprises the parent and its five affiliates -- was found to have been reimbursed about 8.7 billion yen for losses on its securities investments according to a government report released in 1991. The payment, according to the paper, was reportedly intended to cover large appraisal losses incurred by the Hanwa group as of the end of 1991 on securities investments that Yamaichi was managing. The amount of compensation would make Hanwa the top recipient of such compensation among Yamaichi's favored clients listed under the report.
Article 50 of the revised Securities and Exchange Law says brokerages are banned from promising compensation for investment loss at the time contracts are concluded and from actually carrying out such compensation.
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