Japan Orders Compliance Improvements at MUFG Bank and Its Morgan Stanley Securities Partnerships

Japan’s banking regulator ordered the banking and securities units of Mitsubishi UFJ Financial Group (MUFG) to improve compliance measures after the securities watchdog found multiple breaches of “firewall” regulations.

The penalties come less than two years after the securities arm of rival megabank Sumitomo Mitsui Financial Group was indicted on market manipulation charges, for which it was ordered to halt the offending business line and improve compliance.

The Financial Services Agency, which hands out such penalties, ordered each of the MUFG units to establish the causes of the breaches and submit business improvement plans to prevent recurrences.

The Securities and Exchange Surveillance Commission recommended in mid-June that MUFG Bank and the group’s two securities tie-ups with Morgan Stanley be penalised for the unauthorised sharing of client information.

Its investigation found at least 26 occasions where confidential information had been shared between MUFG Bank and one of the group’s two securities firms – Mitsubishi UFJ Morgan Stanley Securities and Morgan Stanley MUFG Securities.

It also found that MUFG Bank had offered preferential lending rates to clients that did business with the two securities brokerages.

Japan’s “firewall” regulations prohibit banks and securities companies in the same group from sharing customer data with one another without the customer’s consent.

MUFG said in a statement that it fully accepted the penalties and planned to submit the business improvement plans to the FSA.

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