1. Nomura Holdings CEO, Kenichi Watanabe resigns following the Nomura insider-trading scandal, and he
will be replaced by longtime employee Koji Nagai. His resignation came just after COO, Takumi Shibata,
resigned due to leaks of insider information to clients on the planned share offerings by energy firm
Inpex, Mizuho Financial Group and Tokyo Electric Power back in 2010.
Mr. Watanabe and Mr. Shibata were known for leading Nomura’s global push back in 2008 when it took
over the non-US operations of Lehman Brothers. There global expansion plan was seen as a “once-in-a-
generation” opportunity at the time, but now raises questions about the company’s plans for the future.
Nomura does hope to make more bold choices, even restructuring a new global strategy into the
company in hopes of gaining back trust from their investors and clients. Unfortunately, insider-trading
scandals such as this one is all too familiar with Nomura. Instances of staff leaking information on IPOs
to customers before they are made public continues to occur within the company, and the firm even
believes that more cases of insider-trading, other than those already identified, are possibly lurking
under the radar, revealing even more possible instability within the company.
Although they are positive about their future, Nomura remains passive in attempts to prevent these
cases from springing, seeing as the pay cuts to Mr. Watanabe and Mr. Shibata were measures taken in
response to their third insider-trading scandal. The company may have brought in a panel of attorneys
to investigate the insider trading, but that should have been done years before as part of their due
diligence, in an effort to hopefully prevent one, if not all the scandals from occurring.
If Nomura had been more aggressive in their due diligence efforts, many warning flags could have
possibly been raised following a detailed operational due diligence report. Thorough investigation into
the management background could have raised possible warning signs on past discrepancies, suspicious
behavior patterns or business relationships that could be seen as a threat to the company. As previously
stated, there had been three insider-trading cases identified back in 2010; all coming from the
institutional sales department, but Nomura was slow to investigate these threatening practices. An
operational due diligence review would have looked into that area of the company thoroughly, and
could have possibly revealed useful findings regarding possible conflicts of interest within that
department.
Furthermore, since the 1990s, Nomura has had to change their executive leadership twice. The first
instance, back in ’91 occurred when their president admitted to compensating favored clients or stock
losses, and then again in ‘97 their president resigned when the bank was found to have channeled more
than $3 million to a gangster in order to keep him from raising trouble at the 1995 shareholder meeting.
These past problems illustrate how reputational risk, though most times overlooked, is an important
category to analyze. Checking into past problems within the company is crucial to any operational due
diligence review, and in doing this research, these two major events from the company’s past could
have been revealed.
Nomura Holdings, as well as Japan in general, has a history of insider-trading and illegal market activity
scandals that continue to occur, regardless of their supposed efforts to solve the problem. Unless
Nomura wants to risk the future of the company, they need to take a more active, aggressive role in

2. preventing further scandals from sprouting up within the company. Specifically, Japanese financial
regulators need to be more vigilant in supervising market activity, as well as stricter in penalizing those
such as Nomura, for their violations to those market guidelines. Furthermore, investors need to take it
upon themselves to seek an operational due diligence review when thinking of investing with a
particular firm. From a detailed review, necessary information regarding a company’s possibly
dangerous reputational risk, as well as possible fraudulent and dishonest behaviors within the executive
management could be revealed, and protect investors from a possibly bad investment.
http://www.bbc.co.uk/news/business-18993603