Former Tokyo Stock Exchange employee and father convicted of insider trading

Japan Times

09-05-2025

A former employee of the Tokyo Stock Exchange (TSE) and his father were convicted of insider trading Friday in a rare case that prosecutors say severely damaged public trust in the nation's financial markets.
The Tokyo District Court handed suspended prison sentences to Keito Hosomichi, 27, and his 58-year-old father, Masato, after finding them guilty of violating the Financial Instruments and Exchange Act, in one of the few insider trading cases in the nation involving a stock exchange employee directly.
They were each sentenced to 18 months' jail, suspended for three years, and fined ¥1 million ($6,880). The father was additionally ordered to forfeit approximately ¥21.16 million in illicit profits.
'Their actions severely damaged investor trust and shook the foundations of fairness and soundness in the securities market,' Presiding Judge Takao Okawa said as he delivered his verdict.
The trial revealed not only regulatory lapses, but also a fraught father-son dynamic.
According to a report by the Asahi Shimbun, Keito Hosomichi joined the Japan Exchange Group, the operator of the TSE, in 2021 and was assigned in September 2023 to the stock exchange's corporate disclosure department, which supports companies preparing timely disclosures. The role granted him access to confidential information related to about 180 listed firms, including details on earnings reports and upcoming takeover bids (TOBs) — events that typically trigger share price surges.
According to court documents, his father, who operates a pachinko equipment business and actively trades stocks, pressured him for insider tips after learning about his assignment.
He initially resisted, citing insider trading laws he had studied during corporate compliance training. But in November 2023, he caved and began passing along earnings data and other sensitive corporate information to his father.
Prosecutors said the younger Hosomichi, between January and March 2024, gave undisclosed information on TOBs to his father, who used the tips to invest about ¥17 million on 15,200 shares across three companies.
In court, Hosomichi admitted that his motivation stemmed from a desire to repair a distant relationship with his father, although he added that he was aware that the illegal stock trading would eventually be discovered.
'This was a grave abuse of his position and should be strongly condemned,' Judge Okawa said. He rejected Hosomichi's explanation that he acted to mend his relationship with his father, calling the motive 'naive and unworthy of leniency.'
Masato Hosomichi, in turn, admitted to misleading his son, while saying he wanted to make a profit because he had been worried about the state of his finances when he retires.
Okawa also sharply criticized the older man, saying his actions were 'driven by greed' and 'immoral.'
Despite the father-son duo avoiding leaving a digital trail by speaking only in person or via voice calls, the scheme unraveled. Following an investigation by the Securities and Exchange Surveillance Commission, Keito Hosomichi was dismissed from the exchange in December for violating internal compliance protocols.
Prosecutors argued that the case constituted a serious breach of trust not just within the TSE, but across the country's entire financial system.
Both men admitted to the charges during their first hearing in April and expressed remorse for their actions. The defense argued they were 'deeply regretful' and asked the court to consider their cooperation in seeking suspended sentences — requests that were ultimately granted.
Translated by The Japan Times