Yahoo Finance MUFG Penalized by Japan’s Regulator for Client Info Breach
(Bloomberg) -- Japan’s financial regulator penalized Mitsubishi UFJ Financial Group Inc.’s flagship banking unit and two joint ventures for violating client confidentiality rules, potentially dealing a further blow to their business.
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The Financial Services Agency ordered MUFG Bank Ltd., Morgan Stanley MUFG Securities Co. and Mitsubishi UFJ Morgan Stanley Securities Co. to improve their operations. The FSA also asked for reports by July 24 on the cause of the breach and planned measures to prevent a recurrence.
The scandal has shaken confidence in the country’s largest banking group, causing some clients to take bond underwriting business elsewhere. Japan forbids commercial and investment banking arms of the same financial group from sharing client data without their consent, in part to keep lenders from abusing their bargaining positions.
“We hope that MUFG will take this matter seriously and take drastic measures for improvement, including the management control system, to ensure that such a situation will never occur again,” said Japan’s Finance Minister Shunichi Suzuki.
The FSA’s investigative arm, the Securities and Exchange Surveillance Commission, said earlier this month that MUFG Bank, Morgan Stanley MUFG Securities and Mitsubishi UFJ Morgan Stanley Securities had inappropriately exchanged client information at least 26 times to win business. The market watchdog also found other improper conduct, including cases in which MUFG Bank tried to win underwriting business for the brokerage unit.
In one case, a representative director of MUFG Bank at that time was aware that the information sharing was potentially inappropriate, according to the FSA release. That official was Kanetsugu Mike, according to people familiar with the matter. An MUFG spokesperson declined to comment on Mike.
While the group did not abuse its superior bargaining position, sharing client information without permission was a ‘big problem’, an FSA official said. MUFG has the responsibility to manage the entire organization and was making progress in strengthening its system, the official added.
MUFG said it took the business improvement order seriously and pledged to prevent a recurrence. Morgan Stanley MUFG Securities also said it took the matter seriously and would submit a remediation plan promptly.
The banking industry has long lobbied officials to ease restrictions, arguing it would better serve clients’ interests if lenders and their group brokerages can offer products and services together.
Officials found firewall violations a few years ago at rival Sumitomo Mitsui Financial Group Inc.’s brokerage subsidiary.
--With assistance from Taro Fuse and Erica Yokoyama.
(Updates with comment from finance minister)
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