Legal Inside Information Used for Years in Japan Is Suddenly Taboo
- Earnings preview notes disappear as analyst tips scrutinized
- Japan lacks U.S.-style fair disclosure rules for listed firms
Pedestrians holding umbrellas walk past an electronic stock board outside a securities firm in Tokyo, Japan, on Wednesday, July 8, 2015. Japanese stocks fell, with the Topix index dropping by the most in more than a year, amid concern that ChinaÕs equity rout is spreading.
Photographer: Tomhoiro Ohsumi/BloombergFor years in Japan, it’s been one of the stock market’s biggest open secrets: By the time companies reveal their earnings to the public, the most plugged-in traders have known the numbers for weeks.
Their clairvoyance had nothing to do with superior analytical skills, but stemmed instead from the country’s lack of U.S.-style fair disclosure laws. Listed businesses in Japan can selectively share material information with whomever they want -- and it’s long been customary for executives to give analysts early peeks into their quarterly results. The tips flowed to brokerage clients via “earnings preview’’ reports, allowing investors to digest the numbers well before their official release.