Two of Japan’s most powerful financial watchdogs are probing BNP Paribas over allegations that the French securities house engaged in improper share trading.

The investment bank, which fell foul of Japanese regulators in 2008 and has been operating under a humiliating business improvement order since last November, is facing a “significant” fine and a temporary suspension of its operations by way of punishment.

The Securities and Exchange Surveillance Commission confirmed that BNP Paribas was the subject of an ongoing six-month probe into trading activities and was awaiting the findings of its investigators. If stock manipulation rules were violated, said a spokesman, the Financial Services Agency (FSA) has the power to suspend the bank’s business.

It is understood that the regulatory investigation into BNP relates to shares in Softbank, the telecoms and internet conglomerate whose stock is a traditional favourite of both retail and institutional investors. Leaks to Japanese media suggest that BNP may have timed a “buy” order just moments before the close of trading on a particular day in order to avoid booking paper losses on its holding in Softbank. Reports hinted that a BNP trader may have put in an “extreme” buy order at a far higher price than Softbank shares were trading at to prevent the closing price registering as a loss for the day.

BNP said that it had not yet been notified of the result of the FSA’s investigation, and declined to comment on Japanese media reports.

The French bank’s reputation in Japan was badly shaken last year when it was accused of false reporting and ordered to improve its internal controls after a financing deal with a collapsed property group. The Japan Security Dealers Association (JSDA) has not yet decided on its own punishment for that incident but is thought to be considering issuing a fine of $1 million and may temporarily remove the bank’s JSDA licence.

Japan Security Dealers Association said that it was holding a meeting at the end of this month to determine the penalty.

Last month, Luc Vansteenkiste, a director of BNP Paribas Fortis, was arrested in Brussels on suspicion of being involved in a €19.5 million insider dealing scam in shares of Fortis in the Belgian bank's final days as a standalone business.

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