Watchdog orders Nidec to submit documents over accounting fraud

2026-06-12

Accounting fraud probe takes priority

It was learned on the 12th that the Securities and Exchange Surveillance Commission had issued Nidec an order to submit documents under the Financial Instruments and Exchange Act. The commission will examine whether the company violated the law with administrative action in mind, and will also consider a criminal complaint if it deems the case malicious.

Evidence gathered from related parties

The accounting fraud at issue is considered the starting point of the Nidec scandal, which also led to the discovery of quality misconduct. The surveillance commission has moved to an investigation aimed at an administrative surcharge order, and the company is believed to have already voluntarily reported the violations under a system that allows a reduction request when violations are disclosed before an investigation.

According to people familiar with the matter, the commission ordered Nidec to submit documents and reports in order to obtain evidence collected by the third-party panel. The procedure is based on Article 26 of the Financial Instruments and Exchange Act and is positioned as a disclosure inspection for administrative action. Refusal to submit the materials or filing a false report can be subject to criminal penalties.

Unusual advance step

Investigations into accounting fraud normally begin with an on-site inspection. A former surveillance commission official said that ordering document submission before an on-site inspection is extremely unusual. In general, authorities first launch an on-site inspection after the company has announced a correction to the accounts for the fiscal year in which the false entries were found.

Because of the accounting fraud, Nidec has delayed the announcement of its fiscal 2026 March results and past corrections. The surveillance commission appears to have judged that waiting for the accounts to be finalized would make the timing of administrative action harder to foresee, and therefore advanced a procedure that would have less impact on accounting work than an on-site inspection. Nidec said on the 12th in response to questions from reporters that it was 'not in a position to comment.'

Probe likely to take time

The fraudulent acts identified by the third-party panel span multiple sites, including headquarters and subsidiaries. The surveillance commission's investigation is expected to take considerable time. If it concludes that the misconduct was highly malicious, it will shift to a criminal investigation premised on a complaint. It will also continue interviewing employees and carefully examine the involvement of management.

The Financial Instruments and Exchange Act prohibits false statements in disclosure documents filed by listed companies in order to protect fair markets. If false statements in securities reports are confirmed, the commission calculates the surcharge based on factors such as the relevant period and the company's stock market capitalization at the time, then recommends that the Financial Services Agency issue an order for payment.

In a report released by April, Nidec's third-party panel found years of deferred expenses, impairment losses and avoidance of recognizing valuation losses. The cumulative negative impact of the accounting fraud on net profit reached 160.7 billion yen through the April-June quarter of 2025, with fiscal 2025 March posting the largest annual hit at 95.7 billion yen. That equals 60% of the net profit the company had already disclosed.

The panel said the fraud stemmed from 'excessive pressure to meet operating profit targets,' centered on founder Shigenobu Nagamori. While it found no evidence of direct instructions or leadership by him, it said Nagamori was 'the one who should bear the greatest responsibility.' It also pointed out that other senior executives may have known about or tacitly approved some of the accounting fraud.

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