Asset management firm in Tokyo under investigation
TOKYO: US asset management firm MRI International Inc. is suspected of violating the Financial Instruments and Exchange Law, as the firm allegedly lost some of its clients’ money but misrepresented its performance to attract new customers.
The Securities and Exchange Surveillance Commission ( SESC) on Friday searched the firm’s office in Tokyo and other places in question.
The Financial Services Agency ( FSA) also cancelled the firm’s registration as a financial instruments business to protect the remaining assets of its clients.
MRI sold financial products that consisted of investments in US medical accounts receivables ( MARS) through its Japan office. The firm is believed to have collected a total of more than 130 billion yen (about RM4 billion) from about 8,700 clients.
The company advertised on its website that its financial products were immune to economic fluctuations and yielded annual returns as high as six per cent to 8.5 per cent.
The company misled clients by overestimating the safety of the products, the commission said.
MRI had paid dividends to customers until the end of last year. However, payments have become irregular or stopped altogether in some cases, and an increasing number of clients have filed complaints with the FSA.
The commission started investigating MRI in March. The firm is suspected of losing part of its clients’ investments and diverting some clients’ capital to pay returns to others.
The commission said it would work with the US Securities and Exchange Commission to further investigate the situation.
The Japan office of MRI was opened in 1998 and registered in June 2008 as a financial instruments business operator. The office is also suspected of falsifying its performance in a business report that should be submitted annually to the Kanto Finance Bureau.
Since Friday morning, many people have visited MRI’s offices in Tokyo looking for information or seeking to cancel their investment contracts.
But a piece of paper taped to the office door read, “Closed for the day.” No employees of the company were seen.
A 70-year- old man from Chiba Prefecture rushed to the office after reading a news story about the company.
He invested part of his retirement bonus in 1999 and also bought 15 million yen worth of financial products from MRI. He said he later increased his investment, and he and his wife invested a total of about 50 million yen.
Yields on his financial products were about 7.5 per cent a year.
He said: “Over about 10 years, my annual yield money was always paid on time. I believed they were trustworthy because the company held explanation meetings about the products in hotels and organised tours to its US head office.”
But in July last year, his payment was delayed for the first time and he inquired about it over the phone.
The company explained that the US parent company was being audited, delaying the fund transfer.
A few days later, he received his payment, but a delay occurred again later in the year.
The man said: “I was about to cancel my contract as it will mature this year. If I don’t get my money, it’s fraud. I want my money back no matter what.”
A 57-year- old Tokyo man said he invested tens of millions of yen in financial products bearing 8.5 per cent annual yields since 2002 after he saw the company’s advertisement in a magazine.
Because a payment scheduled earlier this month was delayed, he called the company Thursday morning.
An employee of the company told him, “Payments are taking time to process because of a large number of investors.” When he asked if there was any problem, the employee said, “No” and promised a prompt payment.
Though MRI International promised high yields, an executive of a securities company that trades financial products linked to medical insurance fees said some in the securities industry had been sceptical. MRI trades similar products.
The executive said, “Although its advertising was flashy, we doubted whether the company really made such investments.”
In Japan, when hospitals and other medical institutions provide treatments covered by public health insurance, payment of the fees from the national health insurance system or other public entities are made about two months after demand. Hospitals can sell the securitised rights about 20 per cent less than the payments to be made.
By doing so, hospitals can procure funds immediately. — WP-Bloomberg