TOKYO (CNNfn) - The president of Nomura Securities, Japan's largest brokerage, may soon resign over a scandal with apparent links to organized crime.
Hideo Sakamaki is reported to have offered to step down after company officials admitted making "irregular payments" to a client with shady business connections.
The case involves at least two managing directors at Nomura and may have broader implications for Japan's stock market.
The brokerage firm is mostly keeping quiet about details of Japan's latest scandal but did say that other executives were unaware of the transactions.
Nomura is currently being investigated by Japan's Securities and Exchange Surveillance Commission.
The alleged ties to organized crime involve "Sokaiya," gangsters who disrupt corporate shareholder meetings. They also may take money to guarantee a quiet gathering. Typically, Sokaiya try to extort money from firms by threatening to expose dubious business practices.
Japanese media report the beneficiary of the Nomura stock deals was a real estate company headed by a relative of a Sokaiya specialist.
The newspaper Nihon Keizai Shimbum reported one such deal involved the shares of Fuji Bank. According to the paper, Nomura sold 7.5 million shares of Fuji Bank the morning of March 15, 1995, driving the price down by nearly nine percent.
Nomura then bought back four million shares, including 500,000 for their unnamed client. When Fuji Bank shares rebounded in late trading, the client's one-day profit topped $400,000.
Following a cabinet meeting Friday, Japanese Finance Minister Hiroshi Mitsuzuka said Nomura could face severe penalties pending further investigation. "The ministry will take strict action to prevent the re-emergence of cases like this," he said.
Sakamaki's predecessor stepped down over a similar scandal in 1991 over improper compensation of elite clients and links between Nomura affiliates and organized crime.
The scandal had no immediate impact on the overall Tokyo stock market Friday. The Nikkei 225 ended 157.41 points, or 0.87 percent higher, at 18,198.74. Shares of Nomura fell more than 3 percent.
The news will not encourage individual investors to return to Tokyo's stock market. Analysts say it could lead to a broader investigation to see if similar actions take place elsewhere in the industry.