Nomura Holdings Inc’s former China head lost a Hong Kong court battle against the Japanese brokerage in which he sought about US$4 million in damages for wrongful dismissal.
 
Yang Zhizhong, who was also the former chairman of investment banking for Asia ex-Japan, claimed that the bank violated his contract by issuing a warning letter and forfeiting his bonus before terminating his employment in 2017. The Tokyo-based firm had disciplined him for arranging meetings between its research analysts and potential clients without obtaining compliance approval, according to the court judgment.

The Hong Kong High Court dismissed the claims, concluding that Nomura didn’t breach Yang’s employment contract by forfeiting his unvested bonus. It ordered Yang to cover the costs of the lawsuit, including legal fees.

The former chief executive officer and chairman of Nomura’s China operation was seeking payment of a US$1.9 million bonus and base salary of US$618,703, along with HK$12.8 million in unvested bonuses. 

“We are pleased with the court’s decision and glad that this matter is resolved,” a Hong Kong-based Nomura spokesperson said.

Yang, who now works at Ares Management Corp as a partner focusing on credit, didn’t respond to calls seeking comment.

Nomura began an investigation after Hong Kong’s Securities & Futures Commission (SFC) discovered that the bank’s head of China research had met with Yang and the CEO of Huatai Securities Co, a potential listing candidate. The meeting occurred in April 2015 and was discovered during an on-site inspection by the SFC in May 2016, the court document showed.

Three business days after the meeting, Nomura was verbally mandated as a book-runner of Huatai’s initial public offering (IPO) and the analyst was “wall-crossed” - a formal process of being given access to non-public information. The IPO took place in May 2015.

An internal investigation revealed that Yang had organised two other meetings with Nomura analysts and potential clients in May 2015 and August 2016 before the investment bank had clinched an IPO role. It didn’t find any breaches of confidentiality and Chinese Wall policy in any of the gatherings. 

However, the SFC identified “an array of control deficiencies” and non-compliance issues, and expressed “grave concerns” about potential conflicts of interest, according to the judgment. 

The regulator also found it “very worrying” that Yang, as a senior investment banker, arranged a three-way meeting with the listing applicant and the analyst when he was at the final stage of pitching for the bookrunner role. 

During the internal investigation, Yang explained to Nomura that as country head, he believed he could bring colleagues from both public and private sides to client meetings, something he had done many times to support various business divisions, according to the document.

Nomura issued a written warning to Yang in December 2016 and withheld his bonus. It removed his role as head of China in January 2017, on the grounds that it would be easier for Yang to run the investment-banking business going forward. 

Yang told the bank he couldn’t accept the penalties and would rather be let go than receive the written warning, according to the court document. The company later learned that Yang was in negotiations to join another bank. 

Both parties failed to reach a separation agreement in March 2017 as Yang’s monetary demands were unacceptable, the bank said. Nomura recommended zero bonus the following month, partly due to the warning letter, and offered him a severance package, which he didn’t accept in May. The bank later concluded Yang was “no longer a human resource” for the bank and terminated him in the same month due to redundancy, according to the court document.

The judge concluded that Nomura had reasonable cause to issue the warning letter and Yang’s termination wasn’t a breach of the employment contract. 

  - Bloomberg