SEC starts investigating Nikesh Arora allegations, SoftBank may face enquiry

The controversial accusations and enquiries among which Nikesh Arora announced resignation as SoftBank president have now led the US regulators to examine his activities before he resigned.

According to sources, The Securities and Exchange Commission (SEC) office in Los Angeles has been investigating whether Arora had conflicts of interest or if he engaged in questionable behaviour as well as SoftBank’s disclosures to investors.

Although this investigation means nothing either for SoftBank or Arora as the opening of an SEC inquiry is typically a preliminary step. Neither of them has been accused of wrongdoing, will ever face an enforcement action.

The controversy started when an investor group of SoftBank called on the company’s board to investigate the executive over Arora’s qualifications, compensation and potential conflicts of interest due to his role as an advisor at a private equity firm. Though the committee of investors cleared Arora of any wrongdoings, on June 21st last month Arora announced his retirement plans.

This news of inquiry has however hit the stock trades of SoftBank Corp Group. The shares, which were up in the morning has dropped after the inquiry news broke. The stock was 0.8 percent lower as of 12:34 p.m. in Tokyo.

Hideki Yasuda, an analyst at Ace Research Institute in Tokyo, told media, “Some people are selling the stock on this news, but since the suspicions are directed at Arora, there is no chance this could damage the company’s value long term.”

Nikesh Arora in an interview last week said that his decision to step down was taken after Softbank founder Masayoshi Son told him that he wouldn’t be promoted to the CEO job at SoftBank next year as per the duo’s previous discussion.

Son, 58, in an interview, said, “I want to keep going until I lose confidence in my physical strength. And I’ll want to keep holding on to the rudder more and more as the day of retirement approaches.”

Son and the company even defended Arora when the investor group complaint letter was made public in April. He had said in a statement, “I have complete trust in Nikesh and one thousand percent confidence in him and know he will continue to do great things for SoftBank in the future.”

Son had recruited Arora from Google Inc. in 2014, promoted him to the president a year ago and publicly called him the heir apparent. SoftBank had also made Arora one of the highest-paid executives in the world, with compensation of 8.04 billion yen ($78 million) in the last fiscal year and 16.6 billion yen the year before. Hence, Arora’s resignation came as a big surprise to the world.