Securities Malfeasance in Japan: The Need for an Independent Organization to Monitor Insider Trading, Price Manipulation, and Loss Compensation

Illegal and unfair business practices such as insider trading, price manipulation, and loss compensation have plagued the Japanese stock market. Existing Japanese regulations prohibiting insider trading have proven ineffective due to lax enforcement. Laws against price fixing have rarely been enforced because the conditions necessary for the application of these rules are vague and the rules are difficult to apply. Prohibition of loss compensation has been weak because the Ministry of Finance possesses too much discretion and maintains too close a relationship with the securities firms. The author suggests creating an independent committee in Japan much like the SEC in the United States with the power to take preventive measures and combat malfeasance