TOKYO -- Japan's securities watchdog may recommend surcharges against Nissan Motor Co. if the automaker corrects its financial reports, following the arrest of former Chairman Carlos Ghosn for allegedly underreporting his income, those linked to the body said.
The Securities and Exchange Surveillance Commission (SESC) will explore recommending that the Financial Services Agency (FSA) order the Japanese automobile giant to pay surcharges -- a kind of administrative penalty -- under the Financial Instruments and Exchange Act.
Under the legislation, individuals who make false entries in their financial statements can face criminal punishment of up to 10 years in prison or a fine of up to 10 million yen. Corporations involved in such illegal acts can be slapped with a fine of not more than 700 million yen. If they meet certain conditions, the law also requires violators to pay surcharges as an administrative punishment.
According to the SESC, the financial authorities can impose surcharges on companies only if false entries in financial statements constitute "serious matters" that could affect investors' judgment on putting money into the firm.
The SESC has apparently watched the development of prosecutors' investigation into Ghosn's alleged wrongdoing. Based on this, the commission is expected to carefully consider whether his suspected concealment of some 5 billion yen in income from fiscal 2010 to 2014 meets the law's definition of a "serious matter."
According to people familiar with the case, during a probe into a brokerage several years ago, the SESC found that Nissan had an in-house team that managed Ghosn's assets, and told the carmaker that the team was involved in inappropriate transactions.
At the time, however, the securities watchdog was apparently unable to get a full picture of how much of his remuneration Ghosn was concealing or other wrongdoing.
Under the law, a company that makes false entries in a financial statement can be slapped with a surcharge of between 6 million yen and six-100,000th of the firm's current aggregate value. If a company submits false financial statements for several years, it can be required to pay administrative penalties for the entire period. Nissan could thus be liable for surcharges totaling around 1 billion yen.
However, there is a system to adjust criminal fine amounts and administrative surcharges to avoid "double billing." If the fine amount is above that of the surcharge, the order to pay the surcharge can be nullified.
The first company to be hit with both a fine and a surcharge was optical device manufacturer Olympus Corp., over the firm's concealment of huge losses in 2012. Olympus was ordered by a court to pay a 700 million yen fine. The FSA subsequently revoked a some 170 million yen surcharge order, excluding a period when the court ruled the company was not engaged in a cover-up.
(Japanese original by Yoshihiro Sakai, City News Department, and Yuta Hiratsuka, Kyushu News Department)