The president of a Tokyo finance company was arrested Wednesday on suspicion of making 5.5 billion yen in profits through fraudulent stock transactions, police said.

Hiroyuki Utsugi, 33, was allegedly involved in illicit speculation and manipulation of the stock price of an auto parts manufacturer listed on the second section of the Tokyo Stock Exchange.

According to the investigation, Utsugi ordered the Shinjuku branch of Nomura Securities Co. to purchase about 1.7 million shares of TDF Corp. for around 7 billion yen on Jan. 10, 1997, using the name of Hiroshi Teramachi, chairman and then president of THK Co., a Tokyo machinery maker.

Teramachi, however, turned down Nomura's request that he pay the bill for the purchase, claiming he had no knowledge of such an order. Utsugi allegedly sold about 1.3 million yen shares in TDF later the same day through several brokerages, making a profit of about 5.5 billion yen.

Police suspect Utsugi manipulated TDF's stock price by making heavy buy orders and sold the shares he had previously purchased at high prices. Although TDF's stock price had been stable at around 300 yen with few transactions, it suddenly soared two years ago, raising suspicions of speculative and manipulative trading. The stock was traded between 4,100 yen and 4,200 yen on Jan. 10, 1997, on turnover of 1.77 million shares.

Since setting up his business in April 1989, Utsugi has managed several companies and taken up stock trading with a group of young speculators, informed sources said. His companies were not named. But the source of finance for his business activities remains a mystery, the sources said.