Financial Services Agency

August 10, 2012 Financial Services Agency SMBC Nikko Administrative actions against joint-stock companies 1. Criminal indictment by the Securities and Exchange Surveillance Commission on suspicion of insider trading and prosecution by judicial authorities SMBC Nikko Reviewed the stock transactions, etc. of former executive officers of a stock company (hereinafter referred to as "our company") based on the contents of the report from our company based on the provisions of Article 56-2, paragraph 1 of the Financial Instruments and Exchange Act. As a result, the following problems were recognized. (1) The suspect visited the leak destination and the leaked affiliates extremely frequently from October 2009 to September 2011, when he was involved in the business of handling corporate information as an executive officer of the Company. The investigation by the Investigation Committee has revealed that officers are not included in the audits conducted by the internal audit department at the Company, and a system has been established to ascertain the actions of officers on a daily basis. It is recognized that the internal control system is inadequate. (2) The suspect was seconded from the parent company to the Company without any experience in securities business, was assigned to a department that acquires corporate information as an executive officer, and was suspected of insider trading with respect to the corporate information he obtained in the course of his duties. As criminal charges and prosecutions have been filed, the Company has asked officers and employees appointed from outside the parent company, etc., who have no experience in securities business, to raise awareness of compliance with laws and regulations regarding the management of corporate information, which is important for deterring insider trading. It is recognized that the compliance system is inadequate, such as not securing sufficient opportunities for fostering. (3) Effective management and supervision of the Company's corporate information management system was not adequately carried out, in that it was not possible to grasp the problems of (1) and (2) above and deal with them appropriately. Therefore, it is recognized that the business management system was not sufficient. Due to the above-mentioned situation of our business, it is recognized that we have not taken necessary and appropriate measures to prevent unfair dealings related to corporate information, and It is recognized that it falls under Article 123, Paragraph 1, Item 5 of the Cabinet Office Ordinance on Financial Instruments Business, etc. 2. Based on the above, the following administrative actions were taken against the Company today pursuant to Article 51 of the Financial Instruments and Exchange Act. ○ Business Improvement Order (1) In response to the recommendations of the Investigation Committee Report, ensure the implementation and establishment of recurrence prevention measures formulated by the Company. (2) Periodically report the implementation status of recurrence prevention measures. (3) Regularly verify the effectiveness of recurrence prevention measures and report the verification results. (Note) If any items are found to be inadequate as a result of the verification, the reason and improvement policy shall be reported. (4) Regarding (1) to (3) above, the deadline for the first report shall be Friday, August 17, 2012. Thereafter, the deadline shall be within 15 days after the end of the quarter. Regardless of the deadline above, reports should be submitted as needed.