SESC to set up data network to help combat insider trading

Work is under way to set up a system to swap information between the Securities and Exchange Surveillance Commission and brokerages to crack down on insider trading, the SESC said Wednesday.

The system, dubbed Compliance WAN (wide area network), is expected to be up and running by January and significantly expedite efforts by the SESC and brokerages to fight financial wrongdoing, the watchdog body said.

At present, the SESC demands data from brokerages on their customers' trading activities only after monitoring price movements and detecting dealings judged suspicious. Staff at each brokerage then save the requested information on floppy disks and other storage media and personally take them to the SESC.

The arrangement is time-consuming for the brokerages and sending the information by e-mail risks interception of confidential data by outsiders.

Meanwhile, the number of times the SESC requested trading data from securities firms for the purpose of investigation was 1,039 in the year that ended last June, up about 50 percent from 687 in 2004.

Probes by the SESC have recently uncovered insider trading involving employees of NHK, a certified public accountant and a Nomura Securities Co. employee.

The commission hopes the new online system will improve its investigative capability.

Compliance WAN will make use of an online network that the Japan Securities Dealers Association is building at a cost of ¥1.7 billion to connect brokerages, six domestic securities exchanges and the SESC through dedicated lines.

The link between the watchdog body and some securities firms is due to be completed by January and extended to other brokerages and the six bourses by next May.