Another administration uses ESF as slush fund to bypass Congress

a href=http://biz.yahoo.com/rb/030228/financial_japan_jpmorgan_6.htmlhttp://biz...

TOKYO, Feb. 28 (Reuters) -- Japan's financial regulator
said on Friday it had ordered the brokerage unit of J.P.
Morgan Chase amp; Co. in Tokyo to suspend stock trading on
its own account for 10 business days from March 3-14.

The penalty against the Tokyo office of J.P. Morgan
Securities Asia Pte Ltd. was issued three days after a
watchdog said the unit had manipulated market prices
through irregular transactions involving exchangeable
bonds (EBs).

In a related move, Japan's Ministry of Finance said it
would bar the J.P. Morgan unit from participating in
Japanese government bond auctions from March 3-14.

quot;We treat this matter with the utmost seriousness ...
and are continuing to strengthen our internal regulatory
compliance measures and working to prevent a
recurrence,quot; J.P. Morgan's Tokyo unit said in a statement.

Announcing the penalty, the Financial Services Agency
(FSA) said it had ordered the brokerage to improve its
internal controls to ensure that no such violation occurred
again.

It said the penalty, which had been sought by the
Securities and Exchange Surveillance Commission
(SESC) watchdog, excluded the execution of
transactions contracted on or before Friday.

EBs, which are high-risk, high-return structured bonds
exchangeable for company stock, are redeemed in
cash with interest if the price of a selected stock is
higher than a predetermined price on a set date.

The SESC said its investigation found that the unit
launched large-lot sell orders in shares in a company
selected for an EB before the market closed on
Jan. 16, 2001, when the payment method -- cash or
shares -- on the EB was due to be determined.

The brokerage deliberately kept the price below the
pre-fixed price, it said.

Other brokerages have also been hit by administrative
penalties for improper transactions involving EBs
after Japanese regulators stepped up their surveillance
of domestic and foreign financial firms to bolster
confidence in Tokyo's markets.