Mizuho Financial Group's brokerage division is under investigation by Japan's Securities and Exchange Surveillance Commission over suspected insider trading by staff in its investment banking unit, the firm confirmed on Monday after the Nikkei newspaper first reported the probe.

The brokerage said it was fully cooperating with regulators but declined to comment further whilst the investigation remains active. The SESC, Japan's financial watchdog, also declined to provide details.

The investigation centres on employees within Mizuho Securities' investment banking division, according to the Nikkei, which did not disclose its sources. The exact nature of the alleged trading violations has not been made public.

The probe threatens to damage confidence in Japan's financial sector during a period of exceptional market strength. Domestic equities are trading close to record highs, whilst investment banks are enjoying increased activity from stock offerings and merger transactions.

Mizuho shares fell 5.3 per cent on Monday, marking their steepest decline since April, though broader weakness across banking stocks followed disappointing economic growth data that reduced expectations for Bank of Japan interest rate rises. Japan's third-largest bank has been expanding its investment banking operations domestically and internationally to diversify its revenue base.

The case adds to a growing list of insider trading scandals affecting Japan's financial industry in recent years. Tokyo prosecutors arrested a former senior executive at Mita Securities earlier this month over alleged insider trading connected to Nidec's hostile bid for Makino Milling Machine.

Last year saw multiple cases emerge across different institutions. Sumitomo Mitsui Trust Group dismissed a manager in November 2024 following insider trading allegations, whilst the SESC filed a complaint against a former Tokyo Stock Exchange employee in December under similar circumstances. A Tokyo court convicted a former Financial Services Agency judge in March 2024 for trading on confidential information obtained during his tenure.

The most significant regulatory action came in 2012, when authorities uncovered systematic information leaks at several major brokerages regarding planned equity offerings. Nomura Holdings' chief executive resigned after the firm acknowledged employees had provided advance notice of share sales they were managing.

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