New developments in asset mismanagement case


Of the 13 people working at AIJ, 10 were unaware that $2 billion was unaccounted for, claims AIJ president.

TOKYO (majirox news) — The mystery of the missing billions deepens, and once again, the problem of amakudari (ex-bureaucrats who have moved to private practice) rears its ugly head.

The president of Japan’s AIJ Investment Advisors Co., Kazuhiko Asakawa, claimed to the Securities and Exchange Surveillance Commission that only three people, including himself, were privy to the fact that false information was provided in the reports sent out to the pension fund clients and that the other 10 employees and executives in the fund who were involved in making investments were unaware of the window-dressing. Neither, he asserts, was ITM Securities Co., which acted as AIJ’s service marketer, aware of the massive disconnect between the reports and reality.

In other related news, it seems that a former bureaucrat from the former Social Insurance Agency, working for a consultancy that “advised” pension funds, and signed a contract with AIJ worth several million yen annually, may have been involved.

This ex-bureaucrat, who claims he received no fees for recommending AIJ to pension funds, which were often staffed by his former colleagues from the Social Insurance Agency, often attended sales meetings by AIJ to the funds “to help provide information”.

The scandal has also brought to light the weakness of issuing non-binding guidelines by government agencies. Although the Welfare Ministry encourages pension funds to mitigate risk by diversifying their investments, these are non-binding. One fund, for example, had nearly 60% of its assets managed (or rather mismanaged) by AIJ.

In addition, it is planned to reduce the permissible value of assets under management handled by investment advisors who fail to meet disclosure and reporting requirements.

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