Nomura chief resigns over insider trading

The head of Japan\'s biggest securities firm resigned on Thursday in the wake of an embarrassing insider trading scandal, part of a widening national probe into the widespread practice. Nomura Holdings\' Chief Executive Kenichi Watanabe will step down as of July 31, while Takumi Shibata, Nomura\'s chief operating officer, will also leave his post, the company said in a statement. Watanabe vowed last month he would not resign after Nomura released the findings of a damning report that revealed some employees had been leaking material information to clients. But on Thursday, he stepped aside to be replaced by Koji Nagai, president of Nomura Securities. \"I wanted to see that measures for improvement to address the matters pointed out (by authorities) and other additional measures are put in place,\" Watanabe told a press briefing in Tokyo. The news comes as Japanese authorities are carrying out a wide-ranging probe into insider trading which, although illegal in Japan, is widespread and carries only token fines. Separately on Thursday, Nomura said net profit in its fiscal first quarter to June shrank 89.4 percent to 1.89 billion yen ($24.19 million) owing to lower retail and wholesale trading business. Revenue was 12 percent higher year-on-year at 369.3 billion yen, it said. Watanabe and the firm\'s other top executives decided drastic action was needed to regain clients\' trust, according to earlier press reports, including the leading Nikkei business daily. Scandal-hit Nomura has reportedly been dumped from several bond and share sales including the government\'s planned sale of its stake in Japan Tobacco and once-bankrupt Japan Airlines\' expected share offering later this year. The company report said Japan\'s biggest brokerage was overrun with \"serious systemic defects that would erode confidence in (Nomura) as a securities company\". Nomura\'s top executives, including Watanabe, agreed to take temporary pay cuts of between 10 and 50 percent, with Watanabe\'s compensation to be chopped in half for six months, the company said at the time. The report said the firm\'s sales staff tipped off clients about share sales and information often flowed freely between sales and Nomura\'s investment banking and research side, which is usually barred. There was little or no training for younger employees about their ethical responsibilities and \"some instances of excessive entertainment of particular clients were found to be contrary to business ethics\", it added. Although it usually draws huge fines and jail time in the West, insider trading is largely tolerated in Japan with recent fines coming in at around just $1,500, while criminal convictions are few and far between. But there has been renewed pressure to crack down on lax regulations and legal loopholes, which have dented Japan\'s corporate governance image. Nomura shares rose 5.71 percent to 259 yen in Tokyo with its financial results released after markets closed.