The Securities and Exchange Surveillance Commission on July 15 issued a recommendation to the finance minister to take punitive action against Nomura Securities Co. and four former Nomura executives for making illegal paybacks to a "sokaiya" corporate racketeer.

Nomura was given a maximum six-week order to suspend operations in 1991 after revelations surfaced of a loss-compensation scandal involving most of the nation's major brokerage houses. Nomura could be ordered to suspend business for between four and five months this time, observers said. To date, the severest action taken against a securities firm by the ministry was the maximum eight-week ban on operations slapped on Chiyoda Securities Co. in March 1996.

For the first time ever, the commission identified in its recommendation that there were problems in Nomura's internal management operations, including the failure of operation control divisions to discover and address the illegal activities. The Finance Ministry is expected to take severe punitive action against Nomura because it is the second time the industry leader has offered loss compensation to customers.

A stiff punishment is also needed to show that such behavior will not be tolerated as the nation prepares its "Big Bang" initiative to deregulate its financial sector and implement global standards and market rules, observers say. The securities watchdog said its investigation showed that four former company executives, including former Nomura president Hideo Sakamaki, were involved in loss compensation amounting to about 49.7 million yen from January to June 1995.