Nomura’s woes are compounded by a trading scandal and an attempted murder arrest

The scandals at Nomura Holdings are piling up, threatening to derail a turnaround plan at Japan’s largest brokerage just as it is starting to bear fruit.

Chief executive officer Kentaro Okuda and other top executives agreed Thursday to take a pay cut after the company admitted that an employee had manipulated the bond market, prompting several companies to stop trading with the brokerage.

Less than an hour later, a local news agency reported that a former Nomura employee had been arrested on suspicion of robbery and attempted murder of elderly clients.

The drumbeat of bad news is likely to overshadow financial results on Friday, when Nomura is expected to report that profits rose for a third straight quarter from a year earlier as Okuda’s overhaul gathers pace. That would mark the longest period of expansion in almost a decade.

“It’s about sentiment,” said Bloomberg Intelligence analyst Hideyasu Ban, adding that the brokerage will have to allay client concerns about the former employee’s arrest. “Their reputation is at risk.”

The scandals reinforce Nomura’s image as a company prone to missteps, including data breaches and a multi-billion dollar loss following the collapse of Archegos Capital Management.

Shares of Nomura opened lower in Tokyo trading on Friday, falling as much as 2.7 percent. The benchmark Topix index fell as much as 1.7 percent.

Okuda has tried to overcome these setbacks since he took the top job more than four years ago. Nomura has seen a flurry of deals and trading as Japan’s stock and bond markets recover from a years-long slumber. Okuda has set a target of doubling pre-tax profits by 2031.

Instead, after a bizarre few weeks, the bank is back in damage control mode.

The Japan Financial Services Agency’s research department reported in September that a Nomura employee placed misleading orders on the government bond futures market in 2021. The trader profited by placing large orders without intending to buy or sell them all, in a practice called layering. said the watchdog.

The FSA fined the company 21.8 million yen ($190,130) on Thursday. The trader is no longer with the company, people familiar with the matter told Bloomberg News.

The incident prompted clients to take their bond trading and underwriting activities elsewhere, hurting Nomura just as Japan is once again emerging as a key growth area.

At least 10 institutional investors have temporarily suspended some business with Nomura because of the breach, according to people familiar with the matter.

In addition, other clients have stopped the company from entering into debt deals. That has lowered Nomura’s ranking in the corporate bond market, where it fell to fifth place in October from third place the month before, according to data compiled by Bloomberg.

The broker also saw its “special rights” in primary dealer government bond auctions suspended for about a month.

“We take this matter very seriously,” the company said in a statement Thursday, as it apologized to customers and affected parties. “We will continue to improve our compliance framework and internal controls to prevent similar incidents in the future and regain trust.”

In response, Okuda agreed to give back 20 percent of his pay for two months, while Vice President Yutaka Nakajima and several other executives at the domestic securities unit will make similar or smaller cuts, a statement said.

After announcing the pay cuts and fines early Thursday, things unraveled further for Nomura when Kyodo reported that a former employee had been arrested on suspicion of theft and attempted murder of two clients. The 29-year-old man was working for Nomura Securities when the alleged crime took place in Hiroshima in July, Kyodo reported, citing an unidentified person involved in the investigation.

According to the report, he is suspected of drugging a customer and his wife, stealing about 26 million yen cash from their home and setting it on fire. The couple, in their 80s, escaped safely, the report said.

A spokesperson for Nomura Holdings confirmed that the person involved was a former employee who was dismissed for disciplinary reasons, without saying when he worked there.

“It is extremely regrettable that a former employee of ours has been arrested,” the spokesperson said. BLOOMBERG