RPAGF Chapter 185 Securities and Exchange Commission
Chapter 185 Securities and Exchange Commission
(This chapter is a long one with 5,700 words!)
Mid-August 1989.
The headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C.
The ventilation ducts of the central air conditioning system emitted a dull hum, continuously spewing out dehumidified cold air, forcibly suppressing the temperature in this spacious office to an almost freezing point that made one's pores shrink.
The dark gray slats of the blinds cut through the harsh morning light outside, transforming it into pale, sharp beams that shone directly onto the scratched walnut desk.
A burst of chaotic and rapid keyboard typing broke the silence of the room.
With the rustling sound of papers turning, a white cotton shirt with a slightly open collar and full of wrinkles came into view.
Arthur Vance leaned forward, his arms crossed, knuckles pressed firmly against his stubble-covered chin. His gaze was fixed on the massive cathode ray tube monitor in front of him. High-frequency scan lines flickered on the screen, and green trading log data cascaded down like a waterfall, casting flickering light in his pupils.
The leather shoes made a dull slurring sound as they stepped on the synthetic carpet.
A steaming cup of black coffee was placed on the walnut wood table, the ceramic cup making a dull thud as it struck the tabletop.
"You've been sitting in front of these logs for eight hours now, Arthur."
Charles, the deputy director of the SEC's enforcement division, pulled out a folding chair next to him and sat down.
"The two-week period of stagnation has just ended." Arthur didn't turn his head, his fingers rapidly tapping the Enter key. "There's an anomaly in the Nasdaq secondary market order book. It's extremely minor, but under the law of large numbers, such high-frequency micro-fluctuations seem far too deliberate."
Charles leaned closer to the screen, looking at the flashing stock codes.
"Two plasma extreme ultraviolet light source laboratories in California, and three top-tier precision machine tool manufacturers in Ohio," Charles read out the company names behind the code, his brow furrowing slightly. "These are all capital-intensive, low-liquidity hardware companies. How could the transaction volume suddenly surge?"
"Because someone is buying up all the goods."
Arthur extended his index finger and tapped on a list of offshore fund registration locations on the screen.
"Cayman Islands, Virgin Islands, Luxembourg. In the past 48 hours, 100 unrelated shell fund accounts have made intensive purchases of these five target companies."
"What's more coincidental is that the purchase amount of each account was precisely controlled to be 4.89 percent of the total share capital."
Charles gasped.
Four point eight nine percent.
It is only 0.11 percentage points away from the 5% threshold for disclosure required under Section 13(d) of the SEC's Securities Exchange Act.
"This is a textbook example of an umbrella trust splitting and accumulation of funds," Charles's voice turned serious. "This kind of tactic of fragmenting funds and circumventing regulations is definitely the style of those old foxes on Wall Street. Should we investigate Goldman Sachs or Morgan Stanley's proprietary trading desks?"
"No, generally speaking, Wall Street capital only seeks highly liquid financial returns."
Arthur shook his head slightly.
"Extreme ultraviolet light sources and multi-axis machine tools. These are the fundamental industrial technologies that hold the semiconductor industry's lifeline. Wall Street hedge funds have no interest in these dry hardware components. The only ones in the world with a morbid thirst for these technologies are the Japanese semiconductor giants, who are trying to break through the Coordinating Committee for Multilateral Export Controls (COCOM) blockade."
He stood up, walked to the whiteboard behind him, and picked up a black marker.
"Japan's industrial giants have the motivation to acquire. However, Japan's traditional trading companies and zaibatsu system is extremely rigid. They are used to open and straightforward business negotiations and are simply not good at this kind of covert splitting of Cayman Islands umbrella trusts."
Two circles were drawn on the whiteboard with a marker. One read "Japanese Semiconductor" and the other "Wall Street Methods".
Arthur connected the two circles together.
"An entity that combines the industrial acquisition motives of Japanese zaibatsu with the top-tier financial management capabilities of Wall Street."
Arthur recalled the "Black Monday" that shocked the world two years ago.
"Charles, do you remember that account that made billions of dollars by precisely shorting US stock options during the 1987 stock market crash, and was known on Wall Street as the 'Oriental Ghost'?"
Charles's expression changed instantly: "SA Investment?"
"That's right, a perfect match for the criminal profile."
Arthur slammed his pen down on the whiteboard.
"We need to apply for a court injunction immediately to freeze the trading permissions of these hundreds of offshore accounts," Charles said urgently, standing up.
"It won't work."
He turned around and tossed the marker onto the desk. The plastic barrel struck the walnut wood surface with a crisp sound.
"Legally, these funds are completely independent entities. We lack any written evidence to prove that they have signed a 'concerted action' agreement. Requesting a freeze will only invite lawsuits from top Manhattan lawyers on the grounds of 'interference with free trade.' The cost of losing such a case would be hundreds of millions of dollars in damages and transnational diplomatic disputes."
Charles stopped moving.
"So we're just going to watch them hollow out America's technological foundation?"
"You really can't win by going through the conventional securities law procedures."
Arthur crumpled the dirty tissue into a ball, his eyes revealing a cold, vulture-like glint.
"This involves semiconductor extreme ultraviolet light sources and precision multi-axis machine tools, which crosses the red line of the Coordinating Committee for Multilateral Export Controls (COCOM). We went through the channels of the Committee on Review of National Security (CFIUS). As long as the words 'national security' are mentioned, the court proceedings will give way to law enforcement."
"However, relevant evidence is still required to initiate the CFIUS process," Charles cautioned.
"So I'm not going to court now."
Arthur stood up, grabbed his dark gray suit jacket hanging on the back of his chair, and strode toward the oak door of his office.
"I'm going to knock on the door."
"I'm going to confront that rat hiding in Manhattan. People are bound to make mistakes when they're in a state of extreme fear. As soon as they panic and transfer funds or issue cancellation orders, I can immediately catch them red-handed."
The heels of leather shoes tapped against the terrazzo floor of the corridor, producing a dull echo.
Destination: New York.
……
Midtown Manhattan, New York.
Inside SA Investment's luxurious penthouse office, enormous floor-to-ceiling windows offer panoramic views of Central Park's lush greenery and the distant skyscraper skyline. Sunlight streams through the glass, casting a warm golden glow on the floor.
Frank sat behind a large mahogany desk. He was holding a sterling silver paper cutter, slowly and methodically disassembling a stack of offshore trust statements from Luxembourg.
The silver blade sliced through the edge of the thick kraft paper envelope, making a faint "slicing" sound.
Suddenly, the brass intercom on the corner of the table emitted a rapid beeping sound. The red indicator light cast flashing spots of light on the wood grain surface.
Frank extended his index finger and pressed the answer button.
"speak."
"Mr. Frank," the receptionist's voice came through the line, accompanied by a barely perceptible electrical hum and barely concealed panic, "SEC Chief Arthur Vance, along with two federal agents, forcibly opened your private elevator. The security chief was unable to stop them."
Frank's fingers paused slightly on the metal button.
Arthur Vance. Senior Investigator, Enforcement Division, SEC; former CFIUS Commissioner.
Just 48 hours after the Cayman Islands account completed its first round of accumulation, this Washington hound came knocking.
The other party completely bypassed the standard legal inquiry process. The accompanying personnel consisted of only two agents, and they lacked the federal search warrant required to execute a full seizure. This highly unusual raid setup… it seems the SEC is currently running out of options.
The other party has absolutely no substantial evidence to prove any connection with the offshore fund. Clearly, this is merely a psychological pressure tactic based on abnormal trading data, intended to force SA Investment into issuing a panicked fund transfer order through unannounced intimidation, thereby completely exposing the underlying network.
"What's the panic?"
Frank's voice was steady, carried back to the lobby on the radio.
"Notify the chief lawyer in the legal department to take the highest level of confidentiality agreement and wait in the conference room next door. No one is allowed to enter my office without my permission." He raised his eyelids, his gaze falling on the mahogany door. "Prepare three cups of freshly ground Mandheling black coffee and bring them in."
"Yes, sir."
Frank released his index finger. The beeping of the walkie-talkie stopped abruptly.
He casually tossed the silver paper cutter onto the table. The metal handle struck the mahogany with a crisp sound.
He stood up, grabbed the hem of his suit jacket with both hands, and pulled it down forcefully to smooth out the fine wrinkles in the fabric. His leather shoes made a steady sound on the marble floor. He walked slowly to the bar in front of the floor-to-ceiling windows, picked up a slender Baccarat crystal glass with his right hand, and tilted the bottle with his left.
The pale golden Dom Pérignon champagne flowed into the glass from the bottle's neck.
Fine bubbles continuously surged upwards from the bottom of the cup, bursting into extremely tiny splashes on the surface of the liquid.
He faced the enormous floor-to-ceiling windows, with the entire Manhattan skyline at his feet.
"bite."
The metal doors of the private elevator slid to both sides along the slide rails, making a slight mechanical friction sound.
Arthur Vance stepped out of the sedan chair with two expressionless federal agents. The heavy soles of his leather shoes slammed onto the gleaming Italian marble floor, creating a chilling thud in the hall.
Frank, holding his wine glass, slowly turned around, following the rhythm of the footsteps.
Sunlight shone on his impeccably tailored suit. A flawless business smile graced his face as he slowly raised his crystal glass, offering a slight nod to the newcomer.
"Commander Vance, welcome to New York." Frank's tone was calm and unhurried, even carrying a hint of hostility. "I've long admired your reputation. Your ruthless methods during your tenure on the National Security Review Board are well-known throughout Wall Street."
Arthur skipped all the business pleasantries. He strode across the spacious office area and went straight to the floor-to-ceiling windows.
His gaze was fixed intently on Frank's eyes.
"One hundred shell funds registered in the Cayman Islands and Luxembourg."
Arthur spoke quickly, with a condescending and oppressive air about him.
"Mr. Frank, you precisely avoided the 5% threshold for disclosure of shareholding, and diversified your acquisition of shares in extreme ultraviolet light source and multi-axis machine tool companies. Your umbrella trust play was truly brilliant."
Frank's smile remained unchanged.
He carried his wine glass and walked slowly to the large mahogany desk, placing the stemmed glass on a cork coaster. The bottom of the glass struck the cork surface with a very faint, muffled sound.
"Commander Vance, I don't understand what you're accusing me of."
Frank clasped his hands together and leaned forward slightly. He met Arthur's gaze without flinching.
"SA Investments has always adhered to federal securities laws, and all fund flows and equity acquisitions have been conducted within a compliant legal framework. If you have any doubts about free market transactions, you can apply for a formal investigation order in the Southern District of New York. As is happening now, barging into the private office of a legitimate tax-paying company with agents seems to violate procedural justice."
Arthur turned his head and glanced at the neatly stacked bills on the desk.
"Ordinary securities law procedures simply can't deal with the kind of trickery that Wall Street uses."
Arthur placed his hands on the edge of the mahogany table, leaned forward, and closed the distance between the two into a highly aggressive zone.
"However, your transactions involve semiconductor extreme ultraviolet light sources and precision multi-axis machine tools, which crosses the red line of the Coordinating Committee for Multilateral Export Controls (COCOM). If we submit an investigation report to the court and initiate special concern procedures with the Committee on Foreign Investment in the United Nations (CFIUS)..."
He stared intently at Frank.
"The SEC will immediately freeze these hundreds of billions of dollars in offshore funds on the grounds of national security. Those rats who attempt to steal core American technologies will not be able to take a single cent away."
A brief silence fell over the office.
The central air conditioning vents continuously spewed out cold air, emitting a monotonous humming sound.
Frank picked up the sterling silver paper cutter he had just used to open letters from the table.
His slender fingers gently caressed the metal blade, reflecting the sunlight streaming through the window. One of his eyebrows was slightly raised.
"National security? What a convenient excuse."
Frank laid the paper cutter flat on the table. The metal handle struck the wood grain with a crisp sound.
"Commander Vance, if you truly possess solid evidence of a connection, or a freezing order signed by a federal judge, you can seize this place right now and take away all the ledgers. Instead of standing here and using verbal speculation to exert so-called psychological pressure."
He leaned back in his leather chair and gestured for him to go ahead.
"Without a search warrant, SA Group's legal team is ready to issue you a summons at any time."
Arthur straightened up. He gave Frank a deep look.
He reached into his suit pocket and pulled out a business card with the national emblem embossed in gold.
My wrist feels slightly heavy.
The business card slammed onto the heavy solid wood table, making a crisp sound.
"See you in court, Mr. Frank."
Arthur turned and strode out with two agents. The dull echoes of their leather shoes on the marble floor gradually faded in the empty hall. With a "ding," the elevator doors closed again, completely shutting out all other noises outside the blast doors.
……
Marunouchi, Tokyo.
The encrypted communications room on the top floor of the Saionji Industrial Headquarters Building.
Under the dim spotlight, the red security telephone indicator light on the corner of the solid wood conference table was flashing rapidly at an extremely high frequency. The glaring red light cast intermittent patches of light on the dark tabletop.
Upon receiving the notification, Satsuki rushed over and pressed the speakerphone button.
"Boss."
Frank's voice came through the speaker. The subtle background noise of the electrical current was amplified along with his steady breathing.
"Arthur Vance of the SEC just left the Manhattan office. He uncovered the fund splitting scheme and has his sights set on us."
The sound of paper turning and rubbing came from the speaker.
"However, I believe the other side lacks substantial evidence, so they are prepared to go through the Committee on Foreign Investment in the United States (CFIUS) and use the provisions of 'acting in concert' and 'Coordinating Committee for Multilateral Export Controls (COCOM)' to exert administrative pressure. The current legal firewall is sufficient to handle routine securities law investigations. Once the SEC forcibly applies for a freeze order on the grounds of national security, the Manhattan legal team can only adopt delaying tactics. During this period, there is a risk that tens of billions of dollars in offshore funds will be completely locked up."
"Please instruct us on the next steps."
Only the hissing of white noise remained in the communications room.
Satsuki sat down in the large leather swivel chair. Her right index finger extended, the tip resting on the solid wood table.
The fingertips are slightly raised and then lowered.
"Tap, tap, tap."
The tapping sound was steady and rhythmic, penetrating the surrounding noise.
Her brain was rapidly processing information amidst white noise.
Retreat is tantamount to suicide. The hounds have already smelled the scent. Once a withdrawal order is issued to avoid risk, the abnormal fund flows will immediately provide the SEC with substantial data evidence linking all funds. A CFIUS freeze order will follow, not only locking up hundreds of billions of dollars in offshore funds, but also bringing the entire puzzle of the semiconductor supply chain, which lies four stories underground, to a complete standstill.
Washington's attention must be forcibly diverted.
The United States is extremely powerful now; it is a force in itself. To counter the United States, one can only "borrow" its strength.
Memories of a past life surfaced in his mind. In the original timeline, also in the autumn of 1989, the Sony Group spent a huge sum of money to buy Columbia Pictures in Hollywood. This transnational acquisition directly stung the sensitive pride of Americans, triggering a huge wave of panic and xenophobia across the United States that "Japanese capital is buying up the soul of America."
A ready-made and perfect script.
Intercept the target ahead of time. Throw a much larger, more provocative chunk of meat into the hunting grounds.
Once this audacious Hollywood acquisition is exposed, the anger of the entire American media, the public, and even members of Congress will be drawn to the film company's signboard. Under the cover of such deafening protests, regulatory agencies will be completely preoccupied. The dispersed accounts on the Nasdaq's underlying data network that bought up mundane machine tools will gain the most covert protection.
The knocking stopped.
Her gaze fell on the world map on the table. Her eyes moved from Washington, D.C., and finally settled on Los Angeles on the west coast of North America.
"Frank," Satsuki's clear voice cut through the background noise of the speaker, "Don't stop the offshore fund's accumulation of shares. Continue to operate in the shadows, and don't cancel any orders."
Frank responded with a very soft "Received" from the other end of the phone.
"at the same time."
Satsuki slightly rotated her wrist.
"SA Entertainment made a takeover offer to Columbia Pictures in Hollywood."
"The offer is five billion US dollars. In cash."
There was a two-second silence from the speaker. The faint breathing paused slightly.
"Five billion dollars in cash. Understood." Frank's voice remained steady, but his pace slowed slightly. "The PR team and M&A lawyers will be involved immediately."
"We should take advantage of Americans' extreme fear and xenophobia regarding the influx of Japanese capital."
Satsuki leaned back in her chair, her gaze still fixed on the coordinates of Los Angeles.
"Throw them a huge, eye-catching piece of meat. Once this audacious Hollywood acquisition is exposed, the anger of the entire American media, the public, and even members of Congress on Capitol Hill will be directed at the signboard of this film company."
"Under the cover of that deafening wave of protests, Washington's attention will be completely diverted from the boring machine tools that dozens of scattered accounts have bought."
"I see."
Satsuki extended her index finger and pressed the pad of her finger on the red button to end the call.
"Click".
The static from the speaker vanished instantly. The communications room was once again completely filled with monotonous white noise.
She stood up and smoothed out the fine wrinkles on her skirt with both hands.
He stepped onto the anti-static floor with his leather shoes and walked towards the door. With a push of his hands, he opened the heavy lead-plated door.
The wind was strong in the corridor, and the hem of the off-white silk shirt fluttered violently in the wind, making a slight rustling sound.
Outside the building, under the gray, low-hanging sky of Tokyo, a few muffled claps of thunder could be faintly heard.