Japan Imposes Sanctions On Merrill Lynch Two-Day Suspension Ordered For Stock-Trading Violations

In the first such action against a foreign brokerage, the Finance Ministry on Thursday imposed a limited securities trading ban on a Tokyo division of Merrill Lynch & Co.

The punishment of the largest U.S. brokerage firm for six years of stocktrading violations was viewed as relatively light.

Under the sanctions announced by ministry officials, one division of Merrill Lynch’s Tokyo office will be prohibited from trading stock on its own behalf for two days next week. It still will be able to trade on behalf of clients.

Some news reports Wednesday said regulators also would levy a small fine against Merrill Lynch, but no such action was announced Thursday.

The punishment was being taken seriously but was lighter than it could have been and was not expected to seriously harm the company, said a Merrill Lynch employee in Japan, speaking on condition of anonymity. Separately, a Merrill Lynch spokesman in Japan declined to say how much of the company’s business would be halted.

In New York, Merrill Lynch issued a statement saying it is pleased the matter was settled promptly “in an appropriate fashion.”

Merrill Lynch earlier acknowledged the branch broke Japanese stock-trading rules by purchasing stocks and bonds in companies whose shares it was underwriting, or handling as an intermediary for sale on the open market. But the firm said Japanese officials knew about the practices and that they met accepted international standards.