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False information disclosures on stock purchases make Japan’s Financial Services Agency look incompetent

January 28, 2008
By Ken Worsley


When disclosures of Japanese shares need to be made, the information is submitted to Financial Services Agency’s Japan’s EDINET (Electronic Disclosure for Investors’ NETwork) website. I’m sure that anyone who has used the EDINET website will agree with me that it’s pretty much a piece of junk. From having pages locked in frames to a useless search function that was developed without considering usability, it’s a system designed by people who don’t use it - which is a problem. When such systems are launched to the public, it’s a sign that the management in charge is incompetent and that the system is bound to have problems in the future.

And EDINET now has a serious problem. On Friday, six fake reports of large share purchases were made. According to reports, the disclosure was made by Teramento, a company in Kawasaki. According to the filing made, the firm took a 51% stake in Toyota Motors, Nippon Telegraph & Telephone, Sony, Fuji Television Network, Mitsubishi Heavy Industries and Astellas Pharma.

That would be a huge market move indeed, valued somewhere in the neighborhood of 20 trillion yen ($187 billion). Teramento itself is capitalized at 1,000 yen.

On Sunday, the Financial Services Agency said that it had requested Teramento to correct the information. Teramento apparently refused, and the FSA issued an order for the correction to be done by Monday.

Apparently, the FSA has acted quickly on this matter out of concern that the issuance of such false information could damage trust in Japan’s financial market.

However, in a Sunday article, the Yomiuri hinted that “unreliable information can also be easily made available online.” This is very true. It would be irresponsible to show how to do such a thing here, but the EDINET system is wide open to tampering. This incident was only a matter of time in coming.

If the FSA is serious about restoring trust to Japan’s markets, it’s going to have to develop a real website with a real system for disclosing information (and that includes making the system user friendly and multilingual). Simply issuing orders to have the information corrected will not restore confidence in the system, especially if Teramento had nothing to do with the submission of the information in the first place.

It’s time for the FSA to get its act together. It’s time for the Fukuda cabinet to stand up and show the world that it has some interest in bringing Japan’s market disclosure systems up to speed with the rest of the world.

Filed Under Equity Markets, Finance 

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Comments

4 Responses to “False information disclosures on stock purchases make Japan’s Financial Services Agency look incompetent”

  1. WG on January 29th, 2008 2:48 am

    Is this funny or sad? It’s almost a farce…there’s no red flag to check such huge disclosures before they go live? You’d think any 5% or greater stake in something like a Nikkei 225 firm would be red flagged and have to be eyed over and verified before being listed…nope. I doubt this firm has anything to do with it, unless some angry employee thought it was a piss take. Follow the money!

  2. monkeybridge on January 31st, 2008 4:54 pm

    You’d think any 5% or greater stake in something like a Nikkei 225 firm would be red flagged and have to be eyed over and verified before being listed

    Ha! Remember me? I sold off almost 70% of a listed firm and no one noticed for months! No one! No red flags. Have I been arrested? Ha!

  3. Ken Worsley on February 1st, 2008 7:01 pm

    Did you get a job at Teramento?

  4. WG on February 5th, 2008 1:26 pm

    Has this story completely died off?

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