Nomura CEO to Step Down

By ATSUKO FUKASE And PHRED DVORAK

TOKYO–Japan's Nomura Holdings Inc. has become the latest casualty of a global regulatory crackdown on investment banks, after its top two executives decided to resign to take responsibility for their company's involvement in alleged insider trading.

Kenichi Watanabe, Nomura's chief executive, and Takumi Shibata, its chief operating officer, are planning to relinquish their posts following admissions that Nomura salespeople allegedly gave information on share offerings to customers before it was public, a person familiar with their thinking said Thursday. The departures could also throw a wrench into the global ambitions of Japan's biggest investment bank, by removing the two architects in charge of implementing a bold international expansion.

The resignations also come as Japan's biggest broker struggles to overcome deep dissatisfaction with its performance that has plagued it since its acquisition of the international operation of Lehman Brothers in 2008, the same year Messrs. Watanabe and Shibata took the top posts.

Japan's Nihon Keizai Shimbun business daily reported that Koji Nagai, the current head of brokerage arm Nomura Securities Co., will become CEO, and Atsushi Yoshikawa, head of Nomura's investment-banking business, will become COO. Messrs. Watanabe and Nagai are meeting the press to brief on ``management structure'' at 6 p.m. Japan time.

The events unfolding at Nomura bear some striking similarities to what's been happening over the past month at the U.K.'s Barclays PLC, where CEO Robert Diamond and COO Jerry del Missier recently stepped down in the face of displeasure from regulators probing allegations of manipulating a key interest rate. In Japan, financial regulators have been bearing down in an investigation into insider trading that started in 2010, after a series of suspicious stock moves ahead of share offerings. Nomura, which was underwriter in three of those cases, last month said an internal probe found that its employees had little understanding of Japan's insider-trading rules and may have leaked information to clients before it became public. Nomura and 11 other major Japan-based brokers are due to give Japan's Financial Services Agency detailed reports on their internal controls next week.

Nomura's top executives, like those at Barclays, initially underestimated the severity of the problems at their company, and didn't appreciate how unhappy regulators -- and the greater public -- were with their response. At Barclays, Messrs. Diamond and del Missier initially thought they could settle the allegations of interest-rate fixing by paying a fine. Nomura's Mr. Watanabe last month announced voluntary suspensions of some business lines as well as executive pay cuts and promises to probe further into allegations that employees were feeding customers inside information -- yet insisted he would stay on as CEO.

Nomura hasn't officially been charged with wrongdoing, since Japanese insider-trading laws only allow prosecution of companies that have profited directly from the trades.

Over the past few weeks, however, Nomura has been dropped from underwriting deals for at least eight Japanese companies, and has lost its previous role as joint global coordinator for what's expected to be Japan's biggest equity deal of the year, the estimated $6 billion-plus initial public offering of shares by Japan Airlines Co.

Nomura Thursday said its net profit tumbled 89% on year in the April-June period, to 1.89 billion yen, in the first indication of how the scandal may be affecting its bottom line.

News of the expected resignations sent Nomura shares up 5.7% to close at 259 yen on the Tokyo Stock Exchange.

A version of this article appeared July 26, 2012, on page C1 in the U.S. edition of The Wall Street Journal, with the headline: Nomura CEO to Step Down.