Tokyo, July 1: Japan's securities watchdog is likely to give advice on administrative penalties against Nomura Securities Co Ltd to finance minister Hiroshi Mitsuzuka as within the next week, financial market sources say.

Under Japan's securities law, administrative penalties can be imposed after the watchdog, the Securities and Exchange Surveillance Commission (SESC), makes recommendations to the finance minister.

A spokesman at the SESC told Reuters it could not comment on the exact timing of such recommendations, but that it would be done in response to progress in prosecutors' investigation.

Administrative penalties are expected to follow soon after the SESC makes its recommendations, he added.

The SESC lacks the legal authority to take punitive action itself but can recommend that the finance minister mete out administrative punishment.The sources said the finance ministry was likely to give Nomura, Japan's biggest brokerage, about one month before any penalties actually take effect.The grace period would enable Nomura's thousands of institutional and individual investors to prepare for the punitive actions against the brokerage, which could cause inconvenience to investors.

The sources said, however, the timing of recommendations could be delayed by a few weeks because of recent revelations of Nomura's purchase of paintings that could be linked to illegal payoffs to a "sokaiya" corporate racketeer.In late June, local media quoted investigative sources as saying Nomura bought several paintings from a Tokyo art dealer around March 1995, when the company allegedly handed 320 million yen in cash and other illegal payoffs to a "sokaiya" corporate racketeer.

Japan's Commercial Code bans companies from making payments to sokaiya, who extort money from companies by threatening to disrupt shareholders meetings.A widening saga of dubious deals and illegal payoffs in which Nomura and one of Japan's top city banks, Dai-Ichi Kangyo Bank Ltd, have been linked to a sokaiya has dealt a big blow to the image of the nation's financial sector as Tokyo begins a "Big Bang" reform of its financial markets.

Financial markets have speculated that the finance ministry may suspend part of Nomura's business for up to six months.

Allegations that three other big Japanese brokerages also did illegal deals for Koike, however, have prompted speculation that Nomura may get off more lightly, since punishing all four severely and at the same time could hurt market liquidity.

An executive from the Japan Securities Dealers' Association said on Tuesday that the three other brokerages -- Nikko Securities Co Ltd, Daiwa Securities Co Ltd and Yamaichi Securities Co Ltd -- had told the body their internal checks had not so far revealed any illegal deals with sokaiya .

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.