Per a Reuters article, Nomura Holdings NMR has launched an internal investigation relating to the projected $2 billion financial impact from Archegos Capital Management’s failure to respond to margin call, late last month.
An internal team has been appointed for the job. Japan’s biggest brokerage firm is likely to reveal details of the loss on Apr 27.
A margin call requires a client to add funds to its account if the value of an asset declines below a specified level. Archegos failed to respond to the call, which led banks like Credit Suisse CS and Deutsche Bank DB, which provided service to the hedge fund, to dump large quantities of ViacomCBS and Chinese tech cos.
The event has raised concerns among investors regarding the lack of proper supervision by regulators. Bill Hwang, who runs Archegos as a family office, has a history of wrongdoings. In 2012, he settled a civil lawsuit that accused him of insider trading and manipulating Chinese banks stocks. Hwang and the firms paid $44 million and was barred from the investment advisory industry.
Per a Bloomberg article, the Wall Street firms involved in the event were summoned on Mar 29 by The Securities and Exchange Commission to discuss about what triggered the forced sale of stocks linked to Archegos.
Also, the scandal blowout is expected to force Japanese regulators to take a closer look at the case, as the country’s another bank Mitsubishi UFJ Financial Group MUFG expects to bear a loss related to an unnamed U.S. client, likely Archegos, of around $270 million.
Shares of the company have gained 15.5% on the NYSE over the past six months compared with 61.4% growth recorded by the industry.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Nomura Holdings Inc ADR (NMR): Free Stock Analysis Report
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Mitsubishi UFJ Financial Group, Inc. (MUFG): Free Stock Analysis Report
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