Governance | Compliance
Compliance is a top management priority for Nomura Group, and the Code of Ethics of Nomura Group defines our fundamental policy on compliance. The management and employees of the Group pledge to abide by the rules stated in this 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.
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 Ethics of 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.
We have appointed the Chief Compliance Officer to oversee compliance for the Group as a whole along with a Group Compliance Department that provides support. In addition, Compliance Officers, who report compliance-related matters in accordance with the instructions of the Chief Compliance Officer have been assigned to each Group company to strengthen our internal controls in response to global business development, and to develop and maintain the respective compliance structures of each Group company, including overseas offices.
Nomura Securities' Compliance Structure
In addition to Group-wide initiatives, Nomura Securities has established a Compliance Program as a detailed action plan, and put into place a compliance framework based on this program.
The Company has established a Internal Control Committee chaired by the President. The Committee oversees Company-wide initiatives and is in charge of establishing and deliberating on important issues related to internal controls. It also has established the post of Internal Administration Supervisor to monitor compliance issues in line with Japan Securities Dealers Association's rule as well as Sales Managers and Internal Administrators. To raise awareness of compliance among employees in each department and branch and to promote business operations that comply with laws and regulations, Administrative Compliance Officers have been also appointed. The Compliance Division, which strengthens and improves legal and regulatory compliance as well as the internal controls system by formulating internal rules and disseminating them throughout the Company, has been established. It also monitors the status of compliance with rules at each department and branch, and if problems are found, measures are taken to improve the compliance with laws and regulations and the internal control system.
The three lines of defense in risk management
Nomura Group has adopted the following layered structure on the grounds that all employees are accountable for proactively managing risk. As the second line of defense, compliance supports risk management measures taken by the first line of defense, independently monitor risks, and keep trading and sales departments in check as needed.
First line of defense Departments engaged in trading and sales
As the first line of defense, departments engaged in sales and trading manage the risks associated with their own business activities.
Second line of defense Departments engaged in risk management
Departments engaged in risk management establish frameworks to manage each type of risk, and support risk management measures taken by the First Line of Defense, such as sales and trading departments.
Second line of defense independently monitor risks, and keep trading and sales departments in check as needed.
Third line of defense Internal Audit
Internal Audit reviews and provides consulting from an independent, objective position, with the aim of adding value by improving the organization’s operations and frameworks, including risk management.
Managing compliance risk
Nomura Group defines compliance risk in its “Risk Appetite Statement”. We are aware that each and every executive and employee is responsible for compliance and risk management, and each of us strives to manage compliance and risk independently. We have also defined conduct risk in the “Risk Appetite Statement” and positioned it as a management theme that we will focus on. Furthermore, in order to disseminate throughout the Group, the concept of the Code of Conduct, which meets the roles expected by society as a financial institution, and to establish a system to maintain and improve self-discipline, we established the “Conduct Risk Management Policy.”
Definition of compliance risk
Compliance risk is the risk that a Nomura Group company incurs economic loss or damage to reputation through any of the following conduct by a Nomura Group executive or employee, regardless of legal or regulatory disposition.
- Violations of laws and regulations applicable to business activities
- Inappropriate behavior that deviates from social norms and ethics required of financial institutions*
In particular, any risk that a financial institution deviates from the social norms and ethics required of it, and as a result, adversely affects customer protection and the soundness of the market, is referred to as “conduct risk.”
Legal Compliance Measures
Maintenance of compliance framework and enhancement of management systems
In all Group companies and departments, Nomura Group complies with applicable laws and regulations and endeavors to prevent the occurrence of activities that may be construed as illegal by establishing effective control measures. In the event that such issues arise, they are reported in full to management-level officers without delay, and organizations and systems are structured to respond appropriately. Furthermore, in order to respond to the trust of society and clients in the Group and contribute to the further development of the financial and capital markets, we will continuously review and improve the effectiveness of our internal systems and rules so that all executives and employees can conduct business with a higher sense of ethics in addition to complying with laws and regulations.
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.
Fostering a corporate culture that pursues compliance
Nomura Group aims to earn the trust of its clients, be selected as a true partner, and contribute to the creation of an affluent society through the development of financial markets. To achieve this, we have established a Code of Conduct that protects clients and ensures market fairness. We are working to foster and establish a corporate culture that goes beyond legal compliance to pursue appropriate business practices and conduct.
Major Initiatives of Nomura Securities
- Top management sends messages on the company intranet as needed to raise compliance awareness and share information about misconduct.
- Recognizing desirable actions in order to foster employees' efforts to promote compliance
- Stimulating internal communications through initiatives such as promoting dialogue between executives and all employees to share the vision for Nomura's future.
- In order to reflect on past scandals and raise awareness of legal compliance, we set August 3 every year as “Nomura Founding Principles and Corporate Ethics Day” and implemented initiatives to reconfirm our ideals through discussions among employees.
Carrying out Compliance Training
Nomura Securities conducts comprehensive compliance training for all executive officers and employees on topics such as anti-money laundering and combating the financing of terrorism, conflict of interest management, insider trading prevention, firewall regulations, and guidelines for managing customer information. We are working to raise the level of legal 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 an effective compliance framework at each Nomura Group company, the firm has established and implemented a robust structure that includes a point of contact that is independent from management. This is to ensure any disclosure of activities by Nomura Group employees that infringe on the "Code of Ethics of Nomura Group" or relate to malpractice including potential legal/regulatory violations or suspected activities regarding accounting or accounting audits are received and dealt with in line with internal policies, procedures and regulatory requirements.
Nomura employees who have become aware of potential legal or regulatory violations are able to report their concerns to persons designated by Nomura Holdings, including outside attorneys, through the Nomura Group Compliance Hotline (informants may report through external and independent channels and have the option of remaining anonymous). The hotline is available 24 hours a day, seven days a week, and is fully bilingual (English and Japanese).
We use internal communication channels such as the intranet to ensure that employees are familiar with the Compliance Hotline and encourage them to use the reporting system as necessary. We believe this will contribute to building a healthy corporate culture and further enhance awareness of ethics and professional conduct.
In FY2019, there were 84 calls received via the Compliance Hotline, and in all cases a thorough review was conducted and appropriate measures were taken.
Offering High-Quality Financial Services
Nomura Securities 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
Eliminating Anti-Social Forces
In order to eliminating anti-social forces, the Nomura Group outlines in "Code of Ethics of Nomura Group", Nomura must reject all transactions with anti-social forces or groups, and our fundamental policy is to eradicate all ties with anti-social forces. The "Code of Ethics of Nomura Group" is applicable to all management and employees globally.
Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)
Nomura group has established the Code of Ethics, which requires all employees to understand and comply with the letter and spirit of all applicable laws, rules and regulations including AML. Nomura has also established the Nomura Group Anti-Money Laundering and Combating the Financing of Terrorism Policy which is a global regulation on AML/CFT, and specified the common rules to be established in each region and subsidiary, such as customer management programs. The firm continues to enhance its group-wide governance framework through observing international regulatory trends such as the Financial Action Task Force's (FATF) recommendations on AML/CFT.
In addition, while giving due consideration to the laws and regulations of each country, we have established specific standards that must be complied with. These standards are applicable to the entire Group covering important areas such as customer due diligence and measures against sanctions.
In April 2018, Nomura Group established the "Anti-Money Laundering Department," a department dedicated to AML/CFT. The department was reformed into "Financial Crime Department" in April 2019 with the aim of establishing an integrated governance structure on the initiatives undertaken by Nomura Group as a whole, and establishing an effective compliance 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.
Anti-Bribery and Corruption
As outlined above, Nomura Group’s Code of Ethics 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 Ethics 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 as appropriate 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.
Measures to prevent conflicts of interest
Nomura Group provides global financial services through a number of Group companies, including securities companies and banks. Since conflicts of interest may arise as a result of transactions by each Group company, we have established a conflict of interest management system based on the “Nomura Group Conflicts of Interest Management Policy” so that customers can conduct transactions with peace of mind throughout the Group. Specifically, each Group company develops its own system to appropriately manage conflicts of interest, and Nomura Holdings’ Group Compliance Dept., which is the department in charge of managing conflicts of interest, examines whether there is a risk of conflicts of interest within Nomura Group. If a conflict of interest is found, the Group Compliance Dept. appropriately manages such transactions that involve conflicts of interest by, for example, setting up information barriers and implementing measures to block information, changing terms or methods of transactions, discontinuing transactions, disclosing information to customers, or monitoring those who share information regarding transactions.
Examination of Unfair Market Manipulation
At Nomura Securities, we examine transactions on a daily basis to determine whether there is a risk that transactions conducted by us or on behalf of us could constitute unfair trading, such as market manipulation, intentional market formation, or insider trading. Trading examinations are conducted in two stages. In the first stage, data extracted based on laws and regulations are added to our own standards to extract transactions suspected of unfair trading. In the second stage, transactions extracted in the first stage are examined from various angles, including account information and market information. Based on the review, we interview and give warnings to those who engage in transactions that are suspected of being unfair, and report suspicious transactions to the authorities. The audit results are recorded and monitored on an ongoing basis when it is determined that a recurrence is likely. In addition, we regularly analyze the examination results and verify the effectiveness of the examination process in order to build and maintain an appropriate trading management system.
Prevention of insider trading
Based on laws and regulations, Nomura Securities prohibits accepting orders knowing that they have violated or are likely to violate insider trading related 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, etc. (insider), we first confirm that there are no undisclosed material facts and then report the content of the order to the Internal Administrators and obtain his/her approval. Also, we regularly check whether there are any changes or omissions in the content of the insider registration card and whether transactions by insiders are properly approved and reported. Furthermore, Nomura Securities has established the “Regulations on Corporate Confidential Information Management” which provides for the management and reporting systems of corporate information, etc., as well as prohibited acts such as solicitation of securities in the case of corporate information, etc.
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, 2019, 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
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.
Nomura Group Tax Policy
Nomura group sets out Nomura Group Tax Policy for the appropriate tax governance.