Corporate Governance | Compliance

Compliance is a top management priority for the Nomura Group, and the Nomura Group Code of Ethics represents our fundamental policy on compliance.

Code of Ethics and Compliance

Nomura Group established a Code of Ethics in March 2004 that covers all of its executives and employees around the world. Every year each of our executives and employees must renew their pledge to abide by the Code of Ethics. Employees with divisions at an operational level that often come into contact with corporate-related information and confidential information are required to sign a confidentiality pledge twice each year.

Our personnel management also places emphasis on compliance awareness and professional ethics. At the time of hiring, the compliance awareness of all prospective employees, regardless if they are new graduates or midcareer hires, is carefully scrutinized. Professional ethics and compliance is an important indicator for personal evaluations for performance assessments or job transfers after joining the company. Our executives and employees always set their challenges related to professional ethics and compliance as part of the issues they plan to address determined at the outset of each fiscal year. If problems are found, the assessor provides proper guidance and reflects evaluation results in their pay scale.

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Compliance Framework

We work to eliminate behavior that could result in legal or regulatory violations. Should such suspicions arise, corporate structures and systems have been put into place to effectively handle them, including the prompt delivery of all related information without exception to management.

Specifically, we have appointed a Group Compliance Head to oversee compliance for the group as a whole along with a Group Compliance Department that provides support. A Wholesale Compliance Head has also been designated to strengthen our internal controls due to international business expansion.

Compliance Officers are also assigned to each group company, including overseas offices, to develop and maintain their respective compliance structures and report on compliance-related issues under the direction of the Head of Group Compliance.

Compliance framework

Nomura Securities' Compliance Structure

In addition to group-wide initiatives, Nomura Securities has also established a Compliance Program as a detailed action plan and put into place a compliance framework based on this program.

A Compliance Committee chaired by the President oversees company-wide initiatives and is in charge of establishing and deliberating on important issues related to internal controls. In addition, the company has assigned an Internal Administration Supervisor to monitor compliance issues and set up the Compliance Division.

The Compliance Division strengthens and improves legal and regulatory compliance as well as the internal controls system by formulating internal rules and disseminating them throughout the company. It also monitors the status of compliance with respect to these rules at each department and branch office. Should any problems arise, the division takes remedial action such as increasing awareness of the rules or revising them as needed.

Nomura Securities' Primary Initiatives

• Protocols for preventing money laundering, including the identification and reporting of suspicious transactions
• Protocols for eliminating all transactions associated with criminal or unethical organizations or activities in violation of applicable laws, such as not allowing organized crime groups to participate in trading with Nomura Securities
• Managing conflicts of interest and insider information from a global perspective by concentrating information in the Group Compliance Department

Compliance Hotline

Employees in Japan who have become aware of potential legal or regulatory violations are able to directly report their concerns to staff designated by Nomura Holdings through the Compliance Hotline.

Information can be provided anonymously, and employees have been informed that systems are in place to ensure that individuals who give their name when reporting violations will not suffer any negative consequences.

Compliance Training

We conduct comprehensive compliance training for all executive officers and employees on topics such as the prevention of money laundering and insider trading, firewall regulations, and guidelines for managing customer information.

Examples of Nomura Securities' Initiatives

• Training for operating officers, internal controls officers, and employees of internal controls departments, as well as quality improvement training for securities sales representatives
• Training for branch managers, general administration managers, new employees, newly appointed managers and others, aimed at increasing knowledge and deepening the understanding of compliance
• Supplementary compliance education and drills during various training sessions and meetings
• Training for Compliance Officers
• Monthly Compliance Hour at branch offices and departments

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Fair Business Practices

Nomura Securities seeks to enhance the quality of financial products offered to customers through the following initiatives under the Guidelines for Financial Instruments Business Supervision.

Examples of Nomura Securities' Initiatives

• Appointing officers to oversee internal controls, compliance, etc. and developing systems to ensure compliance and the appropriateness of operations
• Thoroughly screening account openings and conducting proper examination when underwriting securities
• Carefully reviewing product details and taking action to provide accurate and comprehensive information
• Conducting sales and solicitation activities in compliance with the Financial Instruments and Exchange Act and laws and regulations governing each operation with an overall understanding of the customer's knowledge of financial instruments and financial conditions
• Ensuring thorough compliance with laws, regulations and internal rules through compliance training

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Restoring Trust and Credibility

On March 21, May 29 and June 8 of this year, the Securities and Exchange Surveillance Commission recommended orders for administrative monetary penalties against certain entities for insider trading. On findings that these entities had received inside information from Nomura employees, an Investigation Committee of external attorneys commissioned by Nomura has conducted an extensive investigation to identify the facts and analyze the causes of these incidents. On June 29, we released a report from the Investigation Committee on problems found in the management system for corporate-related information and institutional investor sales at Nomura Securities as well as on preventative measures. We also announced improvement measures at this time. On July 26, we released an additional internal report based on the findings of the Investigation Committee and in conjunction with a report on the implementation status of the improvement measures.

On August 8, Nomura Securities submitted a report on the following business improvement measures as well as progress it has made to Japan's Financial Services Agency in accordance with the business improvement order issued on August 3.

We established an Improvement Measures Implementation Committee to monitor the implementation of improvement measures. The committee reports directly to the President of Nomura Securities, Koji Nagai, and includes the company's Internal Control Supervisory Manager, Shoichi Nagamatsu, as well as relevant executive officers and department heads.

Going forward, we will continue to further enhance our internal controls by continually conducting self-led inspections and investigations while working to prevent similar incidents and regain the trust of the capital markets by thoroughly implementing improvement measures.

Outline of Improvement Measures

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