U.S. Yamaichi Unit Also to Close

WASHINGTON — Yamaichi Securities Co.’s U.S. unit on Monday said it plans to follow its Japanese parent’s lead and shut down, meaning U.S. regulators will probably ask other companies to take over millions of dollars in American customer accounts held by the subsidiary.

“We are working to ensure that U.S. investors’ interests are protected as Yamaichi is unwound,” said Richard Lindsey, who heads the Securities and Exchange Commission’s market regulation division.

Lindsey’s comment reflected the fact that the SEC would oversee the transfer of Yamaichi’s U.S. customer accounts to other brokerage firms, an agency spokesman said in an interview.

Yamaichi Securities, Japan’s fourth-largest brokerage, said early Monday it would shut down because of massive liabilities and funding difficulties. It is the largest failure of a business in Japan since World War II.

In an emotional Tokyo news conference, Yamaichi President Shohei Nozawa apologized for the new stain on Japan’s business record and at one point began crying.

“This unexpected situation in our 100th anniversary is heartbreaking, and we don’t know how to beg the pardon of our customers, shareholders and many related people who care for us,” Nozawa said.

The company’s U.S. unit--Yamaichi International (America) Inc., based in New York--said it would soon close its doors as well.

As they have done in the past when a company is in trouble, U.S. financial regulators will coordinate the process of transferring customer accounts that are affected.

While the SEC has already begun to act, officials at the Commodity Futures Trading Commission were unable to confirm whether steps were being taken to find new homes for the customer accounts at Yamaichi’s U.S. unit.

Earlier Monday, the CFTC said it was keeping close tabs on Yamaichi.

“We routinely monitor firms that are experiencing financial difficulties if they have futures positions in the U.S,” CFTC Chairwoman Brooksley Born said.

Yamaichi has a futures commission merchant registered with the CFTC for accepting customer orders to buy and sell futures contracts traded on U.S. commodity exchanges.

Yamaichi’s American futures commission merchant had 197 customer accounts as of Sept. 30, according to information filed with the National Futures Assn.

The CFTC said the merchant had $74.6 million in segregated customer account funds and $168.6 million in adjusted net capital as of Aug. 31.

The National Futures Assn. said the merchant is a member of three U.S. futures exchanges--the Chicago Board of Trade, the Chicago Mercantile Exchange and the Mid-America Commodity Exchange.

The size of Yamaichi’s securities operations in the United States is more difficult to gauge. The company remains in good standing as a broker at the New York Stock Exchange, a NYSE spokesman said.

However, the spokesman could not say how much business Yamaichi did at the exchange.