Top Japanese Hedge Fund Hit With Insider Accusation

Jul 18 2012 | 10:18am ET

Edward Brogan was called the "King of Tokyo" during his decade-long run as one of Japan's most prominent hedge fund managers. But he's been away from his kingdom for almost two weeks—after Japanese regulators rapped his firm for insider trading.

Brogan's Japan Advisory has been "temporarily closed" since Japan's Financial Services Agency revoked its license and levied a fine at the end of last month. Then, at the beginning of this month, the regulator issued a directive—the first in its history to single out an individual firm—to a dozen banks, seeking information on possible leaks of confidential corporate information to Japan Advisory.

Brogan, an American, left Japan three days later, Reuters reports. His wife told the news agency that he remains out of the country and that she hasn’t "heard when he's coming back."

"I think he's being made a scapegoat by the Japanese government," Junko Brogan said.

Brogan has not been charged with any wrongdoing. But the FSA found that Japan Advisory short-sold about US$6.8 million of Nippon Sheet Glass shares in August 2010, four days before the company announced it would sell new shares to raise capital. Regulators think that a former employee at Daiwa Securities Group—one of the Nippon Sheet Glass offering's lead bookrunners—passed the tip; Daiwa has apologized.

Japan Advisory isn't the only hedge fund in trouble over insider-trading of Nippon Sheet Glass shares. Asuka Asset Management was fined in the case.

In the Japan Advisory case, Japanese regulators followed the "bonus" or "tactical points" that the firm awarded to brokers, which could earn them extra commissions. The points allocated to Daiwa pointed regulators in that direction.

Japan Advisory's assets, once as high as US$1.3 billion, are down to just US$228 million. It is unclear what is happening with its funds, including its flagship Whitney Japan Fund, during its temporary closure and Brogan's absence.

Separately, J.H. Whitney Investment Management, Japan Advisory's former parent company, said it had spun off the firm in December to Brogan and others. It said that the current probe had nothing to do with that decision.


In Depth

Don’t Overlook These 6 Hybrid Cloud Concerns

Sep 14 2017 | 6:27pm ET

Cloud-based technology solutions have made tremendous inroads into the alternative...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Cash: An Asset In Adolescence

Aug 31 2017 | 3:34pm ET

If the investment industry has a rebellious teenager in the house today, that teenager...

 

From the current issue of