Toshiba Listing Tests Ability of Tokyo Stock Exchange to Protect Investors

The Nikkei Asian Review writes that the recent decision to allow Toshiba to continue to be listed on the Tokyo Stock Exchange — by a single vote — raises questions about its ability to protect investors.

The TSE’s philosophy on how to handle corporate wrongdoing has changed considerably over the past 15 years. When Seibu Holdings unit Seibu Railway and cosmetics maker Kanebo were kicked out in 2004 and 2005, punishment was seen as the best way to protect the principles of the market, and delisting was often the first response to severe infractions. But shareholders did not take kindly to the strategy. On top of a sliding stock price, delistings robbed them of the opportunity to trade their shares at all, the argument went.

The exchange now does all it can to avoid giving companies the boot, instead supporting their rehabilitation. The “securities on alert” system was introduced in 2007 as a means of enforcing regulations without imposing undue harm on shareholders, giving companies a period of time to turn themselves around under the bourse’s supervision — 18 months, under the latest rules.

While the designation limits such activities as fundraising, shareholders can continue to trade. Major companies with the resources to make improvements “hardly ever end up delisting,” a former Financial Services Agency official said.

Toshiba pushed limits of TSE’s rehab regime

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