April 13, 2012
SMBC Nikko Securities Inc.

Recommendation for Administrative Action by the Securities
and Exchange Surveillance Commission

Today, the Securities and Exchange Surveillance Commission (“SESC”) issued a recommendation tothe Prime Minister and the Commissioner of the Financial Services Agency (“FSA”) to takeadministrative action against SMBC Nikko Securities Inc. (“SMBC Nikko”), based on findings resulting
from recent inspections by the SESC.
We express our deep regret and hereby apologize to our customers and all related parties for theconcerns and inconveniences we have caused in connection with this incident.
We take the contents of the recommendation very seriously, and will strive to enhance our internal
information controls, continue taking preventive measures against recurrences, and will further
strengthen sufficient internal control systems.
The background of the recommendation and our remedial action are as follows:

1. Background leading to the Recommendation(1) Contents of the Recommendation
Pursuant to Article 20, paragraph 1 of the Act for Establishment of the Financial Services
Agency, today, on April 13, 2012, SESC issued a recommendation that the Prime Ministerand the Commissioner of the FSA take administrative action against SMBC Nikko. Thisrecommendation is based on the findings of an inspection, whereby the following breaches oflaws and regulations by SMBC Nikko were identified.
(2) Summary of the Findings
Business practices related to control of undisclosed corporate information (hereafter,“Corporate Information”) which insufficiently address the necessary and adequate measures
to prevent fraudulent trading; and inappropriate solicitation, including regulation violations.
Sales Division Directors within SMBC Nikko, who obtained Corporate Information related tothe Public Offering of Company A (hereafter, “Related Information”), transmitted such RelatedInformation to subordinate branch general managers without following internal proceduresand failed to issue clear instructions on strict Related Information control. In at least 21 branchThis material is an English translation of Japanese announcement made on April 13, 2012. Although the company
intended to faithfully translate the Japanese document into English, the accuracy and correctness of this translation are
not guaranteed and thus you are encouraged to refer to the original Japanese document.

offices, Company A Public Offering solicitations were executed before public announcement,
as directed by sales branch managers; 23 sales employees from eight branch offices
provided this Related Information to 34 clients, resulting in solicitation activity before publicannouncement of the Related Information.
Thereafter, SMBC Nikko recognized these activities as inappropriate, then initiatedawareness programs related to Corporate Information control, executed multiple corporate
training sessions, and other measures directed at management and employees. While acertain level of improvement is recognized, these efforts were insufficient.
Furthermore, a department of SMBC Nikko that was in possession of Corporate Information
related to the Public Offering of Company B, transmitted such Corporate Information to thegeneral managers in charge of sales without following internal procedures.
Among the aforementioned actions, solicitation while providing Corporate Information is
acknowledged to fall under Article 38 (vii) of the Financial Instruments and Exchange Act(hereafter, “FIEA”) and Article 117, paragraph 1 (xiv) of the Cabinet Office Ordinance on
Financial Instruments Business, etc.
Additionally, the aforementioned control system of Corporate Information, which insufficiently
addresses the necessary and adequate measures to prevent fraudulent trading, isacknowledged to fall under Article 40 (ii) of the FIEA and Article 123, paragraph 1 (v) of theCabinet Office Ordinance on Financial Instruments Business, etc.

2. Remedial Actions
We have implemented training and awareness programs to management and employees in an effort
to improve the situation. In addition, we will conduct the following measures as follows and will also
continue to strive for further improvement through voluntary actions.
(1) Establishment of a Task Force to Enhance Management of Corporate Information
In April 2012, we established a “Task Force to Enhance Management of CorporateInformation”, a subordinate body to the Compliance Committee which is an advisory function
to the Board of Directors. We will monitor and enhance further reliable Corporate Information
controls.
(2) Enhancement of Securities Trading Supervisory Operation Division
We established a new Corporate Information Control Department within the Securities
Trading Supervisory Operation Division in March, 2012 to research relevant laws andregulations concerning Corporate Information, to fully establish management and supervisorysystems regarding Corporate Information, and to enhance the monitoring capabilities withadditional staff.

2(3) Provide More Sophisticated Training
We have provided all management and employees with annual training to reinforce andimprove training on Corporate Information management. And awareness program wasinitiated through training sessions from January 2012. We will continue to provide highly
effective training programs to enhance the understanding of Corporate Information by all
managers and employees and increase their awareness of the importance of appropriate
control of Corporate Information.
(4) On-going Monitoring
After the incident subject to the Recommendation by the SESC, for public offeringtransactions we have monitored all transactions where SMBC Nikko assumed a role as leadmanager and found no problematic cases. We will continue to perform such on-going
monitoring of all the public offering transactions whenever we act as a lead manager.
(5) Clarifying Responsibilities
We will take appropriate actions with respect to the relevant persons involved pursuant to ourinternal rules.

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