Japan aims to bolster M&A disclosure after Olympus scandal

TOKYO (Reuters) - Japan has signaled plans to strengthen disclosure rules on mergers and acquisitions after a $1.7 billion accounting fraud at Olympus Corp, one of the nation's worst corporate scandals, which involved a series of shady deals.

Financial Services Minister Shozaburo Jimi told reporters that Japan's financial regulator and the Tokyo Stock Exchange would both look for ways of improving disclosure on M&A deals.

"As the resolution of this (Olympus) case proceeds, there is a need to check the workings of the system and discuss policies to prevent a recurrence," Jimi told reporters.

Earlier, the Nikkei business daily said the Financial Services Agency would review regulations to bolster disclosure about takeover targets and fees paid to intermediaries.

Jimi declined to give specifics, saying these had yet to be worked through. He did not give a timeframe.

Olympus, a maker of cameras and medical equipment, has been found to have spent millions of dollars on dubious M&A deals as part of an accounting deceit which hid investment losses from investors for 13 years.

The M&A payments included an exorbitant $687 million advisory fee paid mostly to a now-defunct Cayman Islands firm, which did not come to light until former CEO Michael Woodford blew the whistle on the deal after he was sacked two months ago. Worth about a third of the deal value to which it related, it ranks as the world's largest takeover advisory fee on record.

The scandal has sparked criticism of Japan's corporate governance and disclosure practices and has also spurred major political parties to consider possible reforms.

Olympus has lost more than half its market value since the scandal broke in October, when Woodford went public with his concerns over the massive advisory fee and other deals.

Woodford now wants to be reinstated and to replace the entire board with his own slate of candidates. The current board plans to resign soon but wants to choose its own successors before standing down, setting up the prospect of a proxy war over who will lead Olympus out of the crisis.

After restating its accounts this week, Olympus is under pressure to repair its balance sheet by forging an equity alliance, selling assets or raising fresh capital.

The stock fell 5 percent to 989 yen on Friday. It has fallen by nearly one-third since it released its restated accounts and is down more than 60 percent from pre-scandal levels.

Olympus will meet with its creditors on Friday afternoon to discuss its restated accounts and its financial situation.

(Reporting by Noriyuki Hirata and Lisa Twaronite; Writing by Edmund Klamann)

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Olympus won't get extension on reporting deadline: sources

TOKYO (Reuters) - Japanese regulators will not extend a deadline for Olympus to report its financial results, sources with knowledge of the matter said, leaving the scandal-hit company with less than two weeks to correct two decades of accounting and avoid delisting.

Olympus and its auditors are scrambling to correct past earnings statements and submit its latest results after the company admitted to a cover-up of securities losses dating back to the 1990's. If they cannot meet the December 14 deadline Olympus will automatically be delisted under stock exchange rules.

As the deadline nears some stock market participants have speculated that Japan's Financial Services Agency might extend the deadline, reflecting the view that regulators are keen to keep Olympus listed to limit the blow to small investors and the markets.

The regulator has extended reporting deadlines in the past but only in cases where the company was hit by a natural disaster or some other factor seen to be out of its control.

In principle, Olympus would have had to apply for an extension by November 14, which it did not, and the regulator is not eager to break with precedent and offer leniency to a firm that cooked its books, the sources said.

"If Olympus had come clean earlier about the loss cover-up, it could have started investigating earlier and would have had enough time to meet its deadline," said one of the sources, speaking on condition of anonymity.

"A special exception will not be made for Olympus," another source close to the regulator said.

By law Olympus only has to restate earnings for the last five years. But to allow auditors to present an accurate account of present financial conditions about two decades of statements will have to be redone, auditing sources have told Reuters.

That puts the bulk of the work on KMPG AZSA LLC, which audited Olympus until 2009 when the company switched to Ernst & Young ShinNihon LLC.

Meeting the deadline will hinge in large part on how quickly a third-party panel charged with investigating Olympus' past dealings can issue its findings. The panel is expected to submit its report next week.

KMPG AZSA and Ernst & Young are working together and coordinating with the panel to ensure the process is as smooth as possible. But it remains unclear whether they will be able to finish in time, auditing sources said.

Olympus has until 5:15 p.m. (0815 GMT) on December 14 to submit its results for the April-September first half.

"There is no question this is going to come down to the wire," one auditing source said.

(Additional reporting by Nathan Layne; Editing by Yoko Nishikawa)

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