Tokyo Asset Management Agency AIJ Investment Advisors Co has been raided by the Securities and Exchange Surveillance Commission (SESC) today after news that the company has been hiding losses for a decade. The SESC said it was looking for materials that may help shed light on the company’s dealings and provide evidence in the case against the company. The news of the company’s fraudulent dealings were made public today by the regulator who had the company deregistered as an investment adviser earlier. The magnitude of the losses sustained seems to have been over $1 billion, though exact figures have yet to be released.
The company informed clients that it was consistently earning unusually high yields from its investments despite the losses it was actually incurring. The information is likely to cause great tension in the investment market in Japan as worries over the handling of the country’s pension funds escalate. More than one fifth of Japan’s population is over the age of 65 and so retirement funds are key to the country’s long term success. Today’s news will surely increase scrutiny on the management of those assets and shake confidince in projections of the country’s future.
The news follows a similar story from the Olympus Corporations (PINK:OCPNY) last year. That company’s losses were revealed last October. Olympus, an optical device manufacturer, predicted loss in the hundreds of millions for this year following the scandal. The scandal at Olympus was enumerated to have been in the region of $1.7 billion. The company is facing prosecution in Japan for the accounting fraud. The case started just two weeks ago when prosecutors charge Olympus and six key figures in the scandal with fraud. The company’s directors now face up to ten years in prison and millions in fines if the prosecution is successful. Olympus itself is suing several of its own directors for mismanagement. The company’s shares have lost over half their value since the scandal become public last year.
If the same procedures are followed at AIJ the company’s directors could face a similar criminal probe into their fraudulent dealings. The Investment firm is no longer allowed to trade and is essentially an evidence museum at the mercy of the SESC. The information continues to pile in on the subject and it will be the cause of fierce debat in the weeks ahead.