59. Toyota Faces Insider Trading Probe Around Share Buyback

The Tokyo Stock Exchange is investigating alleged insider trading in Toyota, the world's third largest car maker, ahead of an announcement it was planning to buy back and can­cel Y250bn ($2.3bn) of its own shares.

The exchange's probe will focus on the abnormally heavy trading in the company's shares that took place between 9am and 9.40am on January 16, before the official announce­ment about the buyback at 3pm the same day.

Toyota's share price rose nearly 10 per cent in the first 10 minutes after the market opened and closed up 12.7 per cent on volume, four times higher than the previous day.

Toyota said it understood the TSE made routine enquiries into market move­ments whenever there was a major market announcement by a company.

The TSE declined to com­ment on any specific investiga­tions.

Any investigation not only puts the spotlight on disclo­sure standards within Toyota and its advisers, but calls into question moves to allow com­panies to use own share buy-backs to support their share prices.

The government is designing measures to support Japan's flagging stock market and has agreed to free up the regulations that govern share buy-backs.

Japanese companies cannot repurchase their shares except under special circumstances, for example when making pro­visions for stock option schemes or when cancelling them.

The proposals would allow companies to buy and hold their shares, similar to the Treasury Stock system used in the US.

Two policy making panels, convened to discuss market support measures, backed the idea but warned that Japan's wayward disclosure regime could create opportunities for abuse.

They urged the government to ensure that proper mea­sures were in place to prevent privileged information being leaked to the market before proposing to relax the environ­ment surrounding share buy-backs.

The government is keen to support share prices to allevi­ate the pressure on smaller shareholders. The Nikkei 225 has dropped from a high of about 20,000 last year to under 14,000.

An investigation into insider dealing ahead of Toyota's announcement could confirm fears that market support mea­sures would not benefit the people they were designed to help.

Toyota's decision to buy back its own shares was prompted by Japan's banks unwinding their holdings in the company. This put consid­erable selling pressure on its share price.

As Japanese banks continue to unwind their holdings in a number of major Japanese companies, further selling pressure on those companies' shares and the wider market is expected.

The government hoped that liberalising share buybacks would remove the discrepancy between the supply and the demand for those companies' shares.

Vocabulary check

1. Инсайдерские торговые операции – это операции с ценными бумагами на основе внутренней информации о деятельности компании-эмитента.

2. Инсайдерская торговля может быть как легальной, так и незаконной, в зависимости от степени доступности информации.

3. В инсайдерскую торговлю потенциально могут быть вовлечены не только директора компаний, но и члены их семей, брокеры и др. заинтересованные лица.

4. Комиссия по ценным бумагам и биржам (США) требует, чтобы все лица, имеющие доступ к внутренней информации о корпорации, сообщали о своих сделках.

5. Группа инвесторов может манипулировать рынком с помощью определенной стратегии для получения спекулятивной прибыли.

6. С целью выявления незаконных сделок банки в настоящее время могут предоставлять информацию о клиентах с большим количеством денег на счетах.

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