Japan: Morgan Stanley Fined, Barclays Censured for Short Selling

The difficulties of operating normally in Japan were starkly illustrated this week with news that the Tokyo Stock Exchange (TSE) had fined Morgan Stanley and censured Barclays Capital for short selling. Morgan Stanley (Japan) Ltd was fined JPY 15 million

By None

The difficulties of operating normally in Japan were starkly illustrated this week with news that the Tokyo Stock Exchange (TSE) had fined Morgan Stanley and censured Barclays Capital for short selling.

Morgan Stanley (Japan) Ltd was fined JPY 15 million for short-selling and JPY 20 million for creation of an artificial market. In a statement, the TSE said the American investment bank had failed to “give an explicit indication to stock exchanges many times that it would make a short sale of the stock for its own account,” that it “made a short sale for its own account many times at a price lower than the price of the stock which was published immediately prior to the short sale” and that it engaged in “a series of transactions to create an artificial market without any reflection of the actual state of market.” “On December 4, 2001,” continued the statement, “intending to execute a large amount of short sale of a stock, traders of Morgan Stanley Securities realized that such execution was difficult, insomuch as buy orders were only placed at lower prices than the latest market price and short sale on a minus tick is prohibited by a Cabinet Order. With a view to effecting the short sale of the stock, the firm acquired shares from a customer, on the spot the traders repeatedly sold those shares on a minus tick, which affected the stock price downwards, and executed the short sale successively.”

TSE also censured Barclays Capital Japan Ltd. for short selling during the period from January 2001 until November 2001, “The Branch executed short-selling of stocks by clients’ order without legally required disclosure of the fact of short-selling to the stock exchanges many times because staffs misunderstood an order-system and so on,” reads the TSE statement. “And the Branch made a short sale at a price lower than the latest published price prior to the short sale.”

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