Mizuho Securities USA will pay a $1.25 million penalty to settle claims that it failed to safeguard information pertaining to stock buybacks by its issuer customers, the Securities and Exchange Commission announced Monday.
Mizuho failed to maintain and enforce policies and procedures to prevent the misuse of material non-public information, including maintaining effective information barriers between different trading desks and requiring employees to keep client information confidential, the SEC stated in a news release.
Mizuho did not admit to or deny any of the SEC's findings.
"Confidential information concerning issuer stock buybacks can be material to institutional investors, particularly when such trading comprises a significant portion of the daily trading volume in the stock being repurchased," said Antonia Chion, associate director of the SEC enforcement division, in the release.
According to the SEC's order, from approximately December 2012 to December 2014, Mizuho traders regularly disclosed material non-public customer buyback information to other traders and Mizuho's hedge fund clients.
That information, which the SEC said was "routinely communicated across trading desks," included the identity of the party placing the order, the order size, limit price, and indications that the orders were buyback orders.
Eleonora Zlotnikova, a securities attorney with Sam P. Israel PC, said the $1.25 million settlement amount indicates the SEC most likely didn't catch any insider trading, but rather found that Mizuho's policies and procedures in this area were insufficient. Or, Mizuho didn't have "the adequate information barrier to protect other desks from knowing when these trades were happening," Ms. Zlotnikova said. "Certainly this is fairly important information and it's valuable information to have if you're a trader."
A Mizuho spokesman could not immediately be reached for comment.
