The Securities and Exchange Surveillance Commission (SESC), JapanÆs securities watchdog, has recommended the Financial Services Agency take administrative disciplinary action against Nikko Asset Management for inappropriately handling purchase orders for an investment trust that left some customers at a disadvantage.

In a statement, Nikko AM says, ôAlthough Nikko Asset Management, as an investment trust management company, has made its best efforts to protect investors, it intends to take [the recommendation] with utmost seriousness, and will endeavour to ensure sound and proper business operation in the future by further improving the internal systems so as to prevent any similar incident from recurring.

ôNikko Asset Management sincerely apologises that the incident which led to the recommendation may cause the customers and parties concerned great anxiety and inconvenience...This incident does not affect the investment activities of the assets of the investment trusts managed by Nikko Asset Management...it does not affect the net asset value of any such funds.ö

The firm admits it accepted purchase orders placed by a large number of investors for an open-ended stock investment trust, which was distributed through securities companies and others, on December 28, 2004. This was despite the fact that no purchase and cancellation orders were to be accepted on that day under the terms and conditions of the trust. This was due to a failure to indicate the list of dates on which no orders are accepted on information about the funds provided to distributors.

The firm absorbed some of the differences of the purchasing prices resulting from changing the date of accepted orders ôfor the investors who placed purchase orders through a certain securities companyö. In the case of orders coming through other channels, investors were left to suffer any losses as a result of the difference in prices. The SESC judged this discriminated unfairly against some customers.