Japan's SESC seeks biggest ever fine against non-Japanese company

On 31 July 2013, Japan's Securities and Exchange Surveillance Commission ("SESC") announced that it is seeking a fine of ¥431.18 million ($4.4 million) against Juggernaut Capital Management Pte. Ltd. ("Juggernaut"), a Singapore based hedge fund, for market manipulation. This is the largest fine sought against a non-Japanese company to date by the SESC, surpassing the previous record by over ¥360 million.

In its recommendation, the SESC found that Juggernaut had inflated the share price of JASDAQ listed real estate developer RISE Inc ("RISE") between 21 March and 25 April 2012. Juggernaut did so by placing large-lot orders for the shares at inflated prices, and by trading heavily just before the close of the market, using a Cayman Islands based fund within its control. In this way, Juggernaut was found by the SESC to have misled other market participants into believing that there was strong demand for RISE's shares. As a consequence of Juggernaut's market manipulation RISE's share price more than doubled: rising from ¥31 to ¥75 and the SESC estimated that Juggernaut made an estimated ¥200 million as a result of its market manipulation. RISE has not been accused of any wrong doing.

The SESC's fine was the third of its kind against a non-Japanese firm. It has been taken as a sign that the SESC will increase monitoring of cross-border transactions. The SESC have acknowledged the support received from the Monetary Authority of Singapore in this case.

This SESC action also follows a more general trend toward stronger enforcement by Japanese regulators over the last year. Whilst the SESC will need the approval of Japan's Financial Services Agency to execute this fine, this is usually given as a matter of course.

The full text of the SESC's recommendation, which provides greater detail as to the calculation of this fine, can be accessed here.