Japan Suspends Some Trading at Brokerages : Securities: Nomura and three other big brokerage houses were punished for questionable activities.

TOKYO —  Japan’s government punished Nomura Securities Co. on Tuesday for excessive promotion of a particular stock, ordering the world’s largest brokerage to suspend some trading activities for up to six weeks.

The Finance Ministry also told Nomura and Japan’s next three largest brokerages to halt stock trading in their corporate divisions temporarily for compensating favored clients for stock market losses in the last fiscal year.

These suspensions are to last one week for Nomura and Daiwa Securities Co., two weeks for Yamaichi Securities Co. and three weeks for Nikko Securities Co., said Nobuhiko Matsuno, chief of the ministry’s Securities Bureau.

This will be the second round of suspensions for the four for such compensation. All the measures go into effect next Monday.

The ministry’s actions reflect a more vigorous enforcement strategy undertaken to counter criticism that Japan doesn’t adequately police its financial markets, which have been rocked by some serious scandals this year.

Excessive promotion of stock shares is a less serious charge than stock manipulation, which means trading with the purpose of fixing a stock price at a certain level. The ministry said its investigators did not find proof that Nomura had manipulated shares of Tokyu Corp., a railroad-based conglomerate, in October, 1989.

Matsuno said measures against Nomura include a one-month ban on overall business in stock trading and investment research at nearly 80 branches nationwide and a six-week ban on the same activities at seven other branches.

Nomura has about 152 offices; those singled out for penalties were especially active in promotion of Tokyu shares.

The ministry will also extend its ban on Nomura offering government bonds until November, Matsuno said. Nomura had been barred from the underwriting syndicate in October.

Nomura also must submit a reform plan by Nov. 25.

“We want Nomura to establish an operation system which can prevent recurrence of such excessive promotion,” Matsuno said.

A Nomura official, speaking on condition of anonymity, said: “It will be an enormous inconvenience for our clients.”

Yamaichi President Tsugio Yukihira told reporters that the penalty would cause his firm a loss of “several million yen,” or tens of thousands of dollars.

In a hearing at the ministry Monday, Nomura President Hideo Sakamaki admitted the ministry’s charges that Nomura improperly promoted Tokyu shares. He also admitted the company’s 1990 compensation for selected clients’ market losses.

The ministry’s hearing did not address allegations that Nomura promoted Tokyu shares to benefit a former underworld boss, Susumu Ishii, who died in August.

In fiscal 1990, which ended in March, the big four brokerages paid $335 million in compensation for favored clients despite agreements forbidding the practice.

These pay-backs came to light after the four already had acknowledged compensation totaling $930 million to about 200 clients between October, 1988, and March, 1990. For that, the ministry ordered them to voluntarily restrict new corporate sales activities for four days.

Extensive violations of the ministry’s 1989 directive banning such compensation suggested weakness in ministry supervision of the securities industry.

Last month, Parliament adopted a law outlawing such compensation. Previously, it had been illegal only if promised in advance, but disclosures of compensation enraged small investors who were not compensated.

After the ministry action Monday, the big four brokerages announced their own penalties against themselves. Nomura said it would cut the pay of 42 executives by 20% for up to one year for the Tokyu case.

Nomura’s vice president and director resigned to take the blame for Nomura’s role in the Tokyu stock trading.

Earlier this year, top officials of Nomura and Nikko resigned to take responsibility for their roles in the scandal.

Finance Minister Ryutaro Hashimoto has announced that he will also resign.