Japan’s Financial Regulator Penalizes MUFG and Joint Ventures for Client Confidentiality Breaches
Japan’s Financial Services Agency (FSA) has penalized Mitsubishi UFJ Financial Group Inc.’s (MUFG) flagship banking unit and two joint ventures for violating client confidentiality rules, Kyodo News reported. The FSA ordered MUFG Bank Ltd., Morgan Stanley Mitsubishi UFJ Financial Group Inc.’s Securities Co., and Mitsubishi UFJ Morgan Stanley Securities Co. to improve their operations, according to the report. An FSA spokesman declined to comment.
This scandal has shaken confidence in Japan’s largest banking group, prompting some clients to take their bond underwriting business elsewhere. Japan’s regulations prohibit commercial and investment banking arms of the same financial group from sharing client data without consent to prevent lenders from abusing their bargaining positions.
The Securities and Exchange Surveillance Commission (SESC), the FSA’s investigative arm, revealed earlier this month that Mitsubishi UFJ Financial Group Inc.’s Bank, Morgan Stanley Mitsubishi UFJ Financial Group Inc.’s Securities, and Mitsubishi UFJ Morgan Stanley Securities had inappropriately exchanged client information at least 26 times to secure business. The SESC also uncovered other misconduct, including instances where MUFG Bank attempted to win underwriting business for the brokerage unit.
The banking industry has long lobbied officials to ease these restrictions, arguing that it would better serve clients’ interests if lenders and their affiliated brokerages could offer products and services together.
Similar violations were found a few years ago at the brokerage subsidiary of Sumitomo Mitsui Financial Group Inc.
