Governance | Compliance
Recognizing compliance and conduct risk management to be critical to overall management, Nomura Group has established the "Conduct Program", a fundamental document that contains the frameworks and initiatives targeting compliance and appropriate conduct. This document is a key part of the Group's framework for achieving a high level of compliance and conduct risk management that transcends legal compliance.
Nomura Group engages in a variety of initiatives based on the Conduct Program to ensure that each and every member of the Group can act appropriately in accordance with the Nomura Group Code of Conduct, the guidelines stipulating the behavior required of professionals in a financial services group.
Compliance is a top management priority for Nomura Group, and we emphasize the compliance with the laws and regulations and pursue appropriate behavior. In addition to incorporating compliance into daily business operations, Nomura Group has established the "Nomura Group Code of Conduct" as a guideline for concrete actions based on the common values of "Enterpreneurial Leadership" "Teamwork" and "Integrity".The management and employees of the Group pledge to abide by the Code once each year. Also, we have established “Nomura Founding Principles and Corporate Ethics Day” as a day for management and employees annually to reaffirm our corporate culture and corporate ethics, underpinned by Our Founder’s Principles, the lessons learned from past incidents, and renew our determination to prevent the recurrence of such incidents and to gain and maintain the trust of society. We will not limit ourselves to compliance with laws, regulations, and other rules. We will ensure that all executives and employees understand that “Compliance” is to act on a principles basis and with good sense in accordance with the norms and ethics required by society as a financial institution, and to fulfill the roles expected by society.
Compliance and Conduct Risk Management System
All Group companies and departments establish thorough compliance, and establish adequate control frameworks to ensure that their members do not engage in activities suspected of being in violation of laws or regulations. In the event that such issues arise, they are reported to members of senior management and handled appropriately.
Based on the Conduct Program, Nomura Group has a Group Conduct Committee comprising executive officers which deliberates on organizational aspects and important matters related to compliance and conduct risk management. The committee also verifies the effectiveness of the Conduct Program through monitoring and other measures.
Matters that have been discussed by the Group Conduct Committee are reported to the Executive Management Board. In addition, the Board of Directors periodically asks members of senior management to provide reports and provide opinions as needed, and otherwise manages the committee from both executive and supervisory angles, to ensure that initiatives are implemented appropriately in accordance with the Conduct Program.
A Chief Compliance Officer has been appointed to oversee compliance for Nomura Group as a whole. In addition, all Group companies and overseas regions have a Compliance Officer. The Chief Compliance Officer, through instructions to the Group Compliance Department, works with the Compliance Officers of each Group company and overseas region to strengthen internal controls in response to global business development, and to develop and maintain the respective compliance structures of each Group company, including overseas offices.
For its part, Nomura Securities has established the post of Internal Administration Supervisor to be responsible for managing conduct risk in line with Japan Securities Dealers Association rules, as well as Sales Managers and Internal Administrators for each sales unit.
Compliance Officers are also appointed in each branch and department, and are tasked with raising compliance awareness among employees and promoting legallycompliant business operations. The Compliance Division, which is responsible for conduct risk management, formulates internal rules and makes sure that all employees understand them, and monitors the status of compliance with rules at each department and branch. If problems are found, improvement measures such as re-educating employees or correcting rules are implemented. Through this entire process, the Compliance Division strengthens and improves legal and regulatory compliance as well as the internal control system.
Approach to Conduct Risk Management
- Compliance risk refers to the risk of incurring financial losses, including fines, or damage to reputation, as a result of violations of laws or regulations, actions that undermine the fairness and equality of financial markets, or improper conduct that adversely impacts client protection.
- Compliance risk includes conduct risk, which is the risk that the conduct of any member of Nomura Group deviates from the social norms and ethics required of a financial institution, and, as a result, adversely affects client protection and the soundness of the market.
Based on the non-financial risk management framework, Nomura Group has stipulated the approach and policies for conduct risk management in the Risk Appetite Statement and the Conduct Program.
Based on the three lines of defense approach, as the first line of defense, division heads are responsible for managing conduct risk in their respective divisions. Each division has a Senior Conduct Officer, whose job is to assist the division head in managing conduct risk and keep the division head in check.
Compliance and conduct-related departments are responsible for the second line functions. They provide advice and guidance with respect to the conduct risk management implemented by the first line of defense, keep the first line of defense in check, as well as monitor and verify the effectiveness of the first line's measures. As the third line of defense, from an independent position, the Internal Audit Department studies and verifies the conduct risk management frameworks put in place by the first and second lines of defense, and gives advice for making improvements. Conduct risk management is conducted in accordance with the PDCA cycle approach. Under this approach, risks are identified, then assessed using the Risk and Control Self-Assessment (RCSA), controlled to prevent risks from materializing, and monitored using various indicators such as Key Risk Indicators (KRI).
Strengthening the Conduct Risk Management Framework
Nomura Group believes that compliance is not limited to legal compliance, but is also a means of satisfying society's expectations and engaging in common-sense behavior. We continuously work to strengthen our internal control system in order to achieve a level of compliance and conduct risk management surpassing legal compliance alone.
When actions that may impair trust in the capital markets and major violations of legal regulations occur that may have a major impact on the Company's reputation and financial position, after due investigation and confirmation, related information is made available on the Company website immediately.
Compliance and Conduct Training
Nomura Group provides comprehensive compliance and conduct training for all executive officers and employees on topics such as combating money laundering and the financing of terrorism, managing conflicts of interest, preventing insider trading, complying with firewall regulations, and managing client information. We are working to raise the level of legal and regulatory knowledge among executives and employees, raise compliance awareness, and foster a corporate culture of pursuing appropriate business practices.
Nomura Securities' Primary Initiatives
- Training for sales 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 personnel, 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
- Compliance Hour* at branch offices and departments
To ensure that each and every employee throughout the Company understands the need for full compliance, training sessions are generally held once a month in the branches and offices of Nomura Securities.
In order to ensure that the compliance framework within Nomura Group is robust and effective, the firm has established and implemented a structure under which an employee may report a breach of the "Code of Conduct of Nomura Group", a potential legal/regulatory violation or a suspicious activity regarding accounting or accounting audits directly to the designated information recipients.
In Japan, under the Nomura Group Compliance Hotline, Nomura employees are able to raise their concerns through the external independent channel and anonymously). The hotline is available 24 hours a day, seven days a week, and is fully bilingual (English and Japanese).
Through internal communication channels such as the intranet, we make the employees aware of the Compliance Hotline and encourage them to use the system as necessary, and thereby try to build a healthy corporate culture where the employees feel free to speak up when they become aware of anything unusual.
In FY2019, there were 101 calls received via the Compliance Hotline. In all cases a thorough review is conducted and appropriate measures are taken.
In November 2019, Nomura registered its whistleblowing system under Japan's Consumer Affairs Agency's "Whistleblowing Compliance Management System ("WCMS")"
WCMS: Company evaluates its own whistleblowing programs and applies to its registration. Each program is reviewed by the designated registration organization to determine whether it meets the certification standards set forth by the Consumer Affairs Agency in its Guidelines. If the application is approved, the company is registered and granted the right to use the official WCMS symbol.
Customer Protection and Information Security
Under applicable laws and regulations, including the Financial Instruments and Exchange Act and the Personal Information Protection Act, Nomura Group works to properly protect customers' assets and information.
Proper Segregation of Customer Assets
Nomura Securities properly segregates the assets of its customers from the assets of Nomura Securities itself. Nomura Securities has requested that EY Shin Nihon LLC provide "Assurance related to legal compliance with segregated management of customer assets" in accordance with Practical Guideline No. 54 of the Industry Committee of the Japanese Institute of Certified Public Accountants. As of March 31, 2021, Nomura Securities had received from the auditor a written assurance to the effect that management's arguments in the management report on the segregation of customer assets were consistent with laws and regulations in all material respects.
Effective Protection of Clients' Personal Information and Other Information Assets of the Group
The Nomura Group Information Security Policy provides the basic principles for appropriately protecting information assets.
Nomura Securities Co., Ltd. appointed an Information Security Manager and a checker for each department to thoroughly safeguard personal information, including the Individual Number, by overseeing the management or handling of the following items.
- The status of personal information management before leaving the office
- Electronic files containing personal information
- Personal information ledgers
- Contractor pledge forms, statements, etc.
- Procedures controlling the removal of client information outside the company
- Responses to disclosure requests
- Training and other activities related to information management
- E-mail correspondence with parties outside the company and information terminals
- External recording media
- Information the company delivers by fax
- Access logs during late night hours and holidays
We are considering introducing and using various IT tools required in the course of promoting new work styles such as telecommuting and web conferencing, from the perspective of making sure that data are properly managed.
Information Security Management
Under the Nomura Information Security Management Regulations, Nomura appoints a Chief Information Security Officer from the executive officers. The Chief Information Security Officer takes responsibility as personal data management supervisor defined by the Financial Services Agency and strives to ensure Information Security.
All Nomura Holdings, Inc., Nomura Securities Co., Ltd., Nomura Asset Management Co., Ltd., and The Nomura Trust and Banking Co., Ltd. department and branch office heads serve as Information Security Managers and are responsible as personal data controllers. These Information Security Managers are responsible for the security and proper management of information assets handled by their work area and for properly providing their staff with advice and guidance in this regard.
Security Measures for Online Services
In order to accommodate the diverse needs of its clients, the Nomura Group provides a wide range of its services over the Internet. These services use the latest, most advanced encryption technologies to ensure that important client information is always safeguarded. Furthermore, we have strengthened surveillance of our in-house systems and implemented new security systems in order to prevent illegal access from external parties or information leakages caused by cyberattacks, which have become increasingly threatening in recent years.
Offering High-Quality Financial Services
Nomura Group seeks to enhance the quality of financial products and services offered to customers under the Guidelines for Financial Instruments Business Supervision. To this end, the firm has implemented various initiatives which include the following:
Nomura Securities' Primary 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 examinations 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 status
- Structuring systems that establish guidelines for sales to senior customers and requiring compliance with these guidelines
- Ensuring thorough compliance with laws, regulations, and internal rules through compliance training
Ensuring Fair Financial Business Practices
Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)
The Nomura Group Code of Conduct sets forth the basic policy of preventing money laundering and combating the financing of terrorism (AML/ CFT) with a high level of control to prevent proceeds from criminal activity from flowing into the financial and capital markets or to be used to finance terrorism. Nomura has also established the "Nomura Group Anti-Money Laundering and Combating the Financing of Terrorism Policy", a global policy on AML/CFT that stipulates the common rules to be established in each region and at each subsidiary. We have also established specific standards that apply across the entire Group in areas of particular importance, such as client due diligence and responding to economic sanctions. Nomura Group is working to strengthen its AML/CFT management system throughout the Group by complying with the laws and regulations of each country and by closely monitoring international regulatory developments, including recommendations by the Financial Action Task Force (FATF).
The Group AML/CFT Head is responsible for establishing and maintaining the effectiveness of Nomura Group's AML/CFT management system. The Financial Crime Department was established to assist the Group AML/CFT Head in maintaining an effective AML/CFT management framework. Each Nomura Group company designates an Anti-Money Laundering Compliance Officer who is responsible for that company's AML/CFT management framework. Nomura Securities appoints AML/CFT Officers in each department and branch to oversee the planning and implementation of the AML/CFT management framework.
Concrete Measure on Anti-Money Laundering
Nomura Securities Co., Ltd. (NSC), in accordance with "Act on the Prevention of Transfer of Criminal Proceeds" and NSC's risk assessment based on a risk-based approach, conducts a customer due dilligence including (but not limited to), for individual customers: the name, address, date of birth, purpose of the transactions, occupation, etc. or for corporate customers, the name, the location of the head office or principal office, purpose of the transaction, nature of the business and beneficial owners, etc. In addition, NSC requires obtaining additional information from the customer and/or the approval of senior management according to the risk inherited in the transaction. Where online transactions occur, additional due diligence is conducted to mitigate risks.
Furthermore, enhanced due diligence based on a risk-based approach is conducted for high-risk transactions, such as transactions with foreign Politically Exposed Persons (PEPs) and those who reside in designated high-risk countries from an AML perspective.
Moreover, the Firm conducts transaction monitoring using a specific system on a daily basis for potential unfair trading in relation to money laundering, financing of terrorism, market manipulation, intentional market making, transactions using fictitious names and insider trading. If a potential unfair transaction is detected through the transaction monitoring, we will request for additional information as necessary and take appropriate steps such as; alerting the customer, request for additional information, restricting transactions and/or terminating the contract.
Overseas offices are also working on preventing unfair trading by taking AML/CFT initiatives based on a risk-based approach through measures such as customer due dilligence, suspicious transaction reporting and enhanced due dilligence on high-risk transactions.
AML/CFT-related documents such as records of verification at the timing of transaction and transaction screening are kept in line with regional policies and procedures (for Japan, the retention period is seven years in principle.).
In accordance with the audit plan formulated using the risk assessment method, the internal audit department periodically examines the effectiveness of AML/CFT initiatives and compliance with AML/CFT program.
Eliminating Anti-Social Forces
In order to eliminating anti-social forces, the Nomura Group outlines in "Code of Conduct of Nomura Group", we make the policy to decide to eliminate anti-social forces or groups, and our fundamental policy is to eradicate all ties with anti-social forces. The "Code of Conduct of Nomura Group" is applicable to all management and employees globally.
Prevention of Bribery and Corruption
Nomura Group’s Code of Conduct requires all employees to understand and comply with the letter and spirit of all applicable laws, rules and regulations, which include anti-bribery and corruption and tax evasion.
Employees are able to report potential legal/regulatory violations such as bribery, as well as any activities that infringe on the Code of Conduct of Nomura Group through the Nomura Group Compliance Hotline.
Nomura Securities has established policies and procedures for providing gifts and entertainment to individuals including public officials and private sector groups. These policies and procedures are disseminated throughout the company to ensure fair business practices and prevent bribes. Gifts and entertainment are not provided to public officials and private sector groups in Japan who may have a vested interest. Where gifts or entertainment is provided to non-Japanese public officials, we determine the appropriateness in advance based on applicable local laws and regulations. Expense accounts are subject to regular monitoring to ensure they are used appropriately. In addition, training is conducted countinuously to reinforce our corporate policies and procedures regarding gifts and entertainment.
Internal Audit division regularly investigates and assesses internal control on anti-bribery and corruption to ensure its effectiveness from a framework and appropriateness of operation perspective, and recommend business improvement based on the results.
Overseas offices also implement a report, approval process and procedures for gift and entertainment to public officials to strictly prohibit any unfair or suspicious transactions.
Prevention of Insider Trading
In accordance with laws and regulations, Nomura Securities prohibits accepting orders knowing that they violate or are likely to violate insider trading laws and regulations. Also, in order to prevent insider trading, we have prepared an insider registration card. When accepting an order from a related party of a listed company (an insider), we first confirm that the order will not be an insider trade or the party in question does not possess undisclosed material information. Furthermore, Nomura Securities has established the "Regulations on Corporate Confidential Information Management", and the "Regulations on Material Nonpublic Information obtained from Public Officials." These regulations stipulate the systems for managing and reporting undisclosed corporate information and undisclosed material information, as well as the prohibited acts such as soliciting securities if in possession of such information.
Measures to Prevent Conflicts of Interest
Nomura Group provides global financial services through numerous Group companies. We have established a conflict of interest management system based on the "Nomura Group Conflicts of Interest Management Policy" to ensure that conflicts of interest with customers do not materialize. Specifically, each Group company develops its own system to appropriately manage conflicts of interest. Nomura Holdings' Group Compliance Department, which is in charge of managing conflicts of interest, determines whether a risk of conflicts of interest exists within Nomura Group. If there is concern about a conflict of interest, the Nomura Holdings Group Compliance Department appropriately manages the situation to prevent any conflicts of interest from materializing.
Examining Market Manipulation and Other Unfair Transactions
Nomura Securities examines transactions on a daily basis to determine whether there is a risk that our own transactions, or those we execute on behalf of clients, could constitute unfair trading, such as market manipulation, intentional market formation, or insider trading. Based on the review, we interview and give warnings to those persons who have engaged in transactions that are suspected of being unfair. unfair. We continuously monitor transactions in accounts for which we deem there to be a risk of recurrence of suspicious trades. If no improvements are seen, we stop executing received orders, and take other appropriate measures. In addition, we periodically analyze the results of examinations, verify the effectiveness of the examinations and the soundness of the examination system as part of our effort to build and maintain an appropriate trading management framework.
Nomura Group Tax Policy
Nomura Group Tax Policy is approved by the Executive Management Board and sets out the firm's approach to appropriate tax governance.
You may report to us your concerns regarding our accounting, internal accounting controls or auditing matters via the feedback link below.
Request to Nomura Group Outsourced Service Providers
Nomura Group outsources various operations to outside providers. In order to fulfill our social responsibility, we are requesting our outsourced service providers to understand the purpose of the "Code of Conductof Nomura Group" and act in accordance with it. As such, we ask that you take the time to read the code by accessing the link below.
If after reading the code you become aware of any issues that you feel we should know about, please contact us via the feedback link below.