Chasing Nidec: How Can Investors Be Compensated?

Nidec announced on September 3, 2025, that it would establish a third-party committee to address allegations of improper accounting. Since then, the company's share price has plunged. After trading at ¥3,120 JPY ($21.00 USD), the stock fell as low as ¥1,883 ($12.20) at the close on October 31 of that year. As of March 16, 2026, it remained at ¥2,261 ($14.20) at the close, and has yet to recover.

In this article, we explain how investors who suffered losses due to a decline in stock price caused by accounting fraud may be compensated. For more detailed information and past court precedents, please refer to the Securities Litigation Support Team / Ushijima & Partners.

What Can Shareholders Do?

Shareholders who suffer losses because of false statements in securities reports or other disclosures may seek damages from the company that issued the shares, as well as from its officers/directors. In many cases, such claims are brought under the Financial Instruments and Exchange Act (FIEA) or under the tort provisions of Japan's Civil Code. Lawsuits of both kinds are generally known as securities litigation.

*Shigenobu Nagamori, former CEO and founder of Nidec, in June 2024.*

How Do FIEA Claims Differ From Tort Claims?

To pursue damages based on tort, plaintiffs must generally prove four elements. First, they must demonstrate that a securities report or other disclosure contained false statements. They must also show that the false statements were made intentionally or negligently. In addition, they must prove that damages occurred and can be quantified. Finally, they must show a causal relationship between the false statements and the losses suffered.

By contrast, a damages claim under the FIEA faces less demanding requirements than a tort claim under the Civil Code. Shareholders do not need to prove intent or negligence by the company or its officers/directors, which is the second element in a tort claim. Instead, the company and its officers/directors must assert and prove that they were not negligent.

The FIEA also contains provisions that presume the amount of damages. When shareholders rely on those provisions, they do not need to prove either the amount of the loss or the causal relationship between the false statement(s) and the loss, which correspond to the third and fourth elements of a tort claim.

At the same time, damages claims under the FIEA are subject to statutory caps on liability, including those found under Article 21-2, Paragraph 1, and Article 19, Paragraph 1 of the FIEA. Because of those limits, a tort claim under Article 709 of the Civil Code may, in some cases, yield a larger recovery.

In practice, plaintiffs often bring both types of claims.

What Is the FIEA's Presumption of Damages?

In claims brought under the FIEA, shareholders may rely on a statutory presumption of damages if they bought the shares within one year before the disclosure of the false statement(s) and continued to hold them on the day that disclosure was made. This is provided for under Article 21-2, Paragraph 3 of the FIEA.

The presumed amount of damages is calculated using the disclosure date as the benchmark. It is the gap between the stock's average market price in the month before the disclosure and its average market price in the month after it.

Even so, the company may seek to reduce the amount of damages. It can do so if it proves that all or part of the loss was caused by factors other than the decline in the value of the securities attributable to the false statement. This is set out in Article 21-2, Paragraph 5 of the FIEA.

What Losses Are Causally Related to False Statements?

Shareholders who do not rely on the FIEA's presumption of damages must prove the amount of their loss and the causal relationship. The same is true for claims brought under the tort provisions of the Civil Code.

A loss that has a legally sufficient causal connection to a false statement(s) is measured by the value of the gap between the economic position the shareholder would have been in if the false statement(s) had not existed and the shareholder's actual economic position. In practice, that means analyzing how much of the decline in the stock's market price was attributable to the false statement(s).

Why Securities Litigation Is Difficult

Securities litigation requires complex and highly specialized arguments and evidence. It includes evidence on causation and damages arising from false statements in securities reports and similar filings. Reaching a satisfactory outcome requires more than legal analysis alone. It also demands expert knowledge in accounting and economics. As a consequence, choosing the right law firm is especially important in securities litigation.

What Kind of Law Firm Should Investors Choose?

Listed companies sued in securities cases are usually defended by major law firms or teams of highly experienced lawyers. Their defense is often systematic and carefully prepared. To achieve a satisfactory result, shareholders need the right representation. Generally, that is a law firm which has deep practical experience and a strong grasp of financial regulation. It must also be able to match or surpass the other side's litigation strategy.

At the same time, many large law firms already represent listed companies. Because of existing client relationships, they often cannot take on cases in which shareholders sue the companies they represent. Conflicts of interest are a common obstacle.

*Nidec President Mitsuya Kishida holds a press conference, Chiyoda, Tokyo, January 28. (©Sankei by Takumi Kamoshida)*

For that reason, shareholders should look beyond the biggest firms and choose a law firm with strong expertise in financial law within the broader field of corporate practice. Securities litigation is complex and highly specialized. It is important to choose a firm with substantial litigation experience, particularly in disputes involving stock prices.

Substance of Nidec's Misconduct

On March 3, 2026, Nidec released a report outlining the third-party committee's findings to date in its investigation. The report said that numerous instances of accounting fraud were discovered.

It also said the effect of such fraud on Nidec's consolidated net assets as of the end of the first quarter of 2025 amounted to about ¥139.7 billion (roughly $930 million).

Shareholders who suffered losses should not simply swallow their losses. They should engage the right law firm and assert their rights.

(This article is sponsored by Ushijima & Partners, Attorneys at Law, a JAPAN Forward supporter.)

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Authors: Masaki Fujii, Hiroyuki Yamauchi, Hirotaro Momota