The Tokyo Stock Exchange (TSE) and Osaka Exchange (OSE) have taken disciplinary action against Tachibana Securities Co., Ltd., following serious regulatory violations linked to unethical sales practices targeting elderly investors.
According to Japan Exchange Regulation (JPX-R), the company repeatedly engaged in misleading investment solicitations from April 2022 to August 2024, primarily through its 11-branch face-to-face sales network. The violations centered on false representations, excessive transactions, and inappropriate incentives.
Key Issues Identified:
- False and misleading statements to 31 elderly clients (75+ years old) regarding domestic stock performance.
- Repeated high-fee transactions to generate commissions, often resulting in client losses.
- Inadequate internal controls across all three lines of defense (front office, compliance, audit).
- Bonus structures heavily based on fees earned, incentivizing volume over client benefit.
- Ignored regulatory warnings from prior inspections, with no meaningful corrective action.
Despite prior scrutiny from self-regulatory bodies, Tachibana Securities failed to reform its internal systems or curb exploitative practices. The management team delegated compliance entirely to mid-level departments, fostering a culture that prioritized sales performance over investor protection.
The company’s behavior was found to violate Article 51 of Japan’s Financial Instruments and Exchange Act (FIEA), which allows authorities to intervene in the public interest or to protect investors.
Lessons for the Prop Trading Industry
While Tachibana is a traditional brokerage firm, the case has clear lessons for modern prop firms, especially those scaling globally:
- Incentive structures must align with trader and client success-not just volume.
- Robust internal controls are essential, even in lean or tech-driven setups.
- Regulatory tolerance for predatory or high-pressure sales tactics is shrinking, globally.
For any firm operating in the retail-facing trading space, this is a clear reminder: investor protection is not optional-it’s foundational.
