Nomura Holdings, a major global investment bank, is reviewing its India fixed-income business amid concerns that profits reported by its rates division may have been overstated in recent years. According to a Bloomberg report, the bank’s compliance team is examining how trades involving Strips were being valued.
What Are Strips?
Strips, or Separate Trading of Registered Interest and Principal of Securities, are created when a bond’s principal and interest payments are split and traded separately. Investors can buy these components individually instead of as a single security.
Why They Matter in Accounting:
The investigation is focused on whether traders marked their positions using theoretical prices that did not truly reflect market liquidity. If this occurred, it may have led to inflated profits, since Strips can show unrealised gains, especially when the underlying securities are illiquid.
The probe reportedly began a month ago, with compliance officials reviewing valuation methods and accounting procedures within Nomura’s India operations. The bank has not issued an official statement on the matter.