A JP Morgan salesman is said to have been the source of the leak about a share offering by Nippon Sheet Glass Co in 2010, to a Tokyo-based fund, Asuka Asset Management. JP Morgan was underwriting the deal, along with Daiwa Securities, which has said it had no involvement in the case.

The Japanese Securities and Exchange Surveillance Commission has issued a recommendation that the Financial Services Agency impose an "administrative monetary penalty" against Asuka Asset Management on "charges of insider trading committed prior to the public announcement of Nippon Sheet Glass Co.’s equity offering in August 24, 2010", according to a statement.

While Asuka gained Y60.5 million, or about $760,000, from the trade, the watchdog has only reportedly recommended a fine of Y130,000, or about $1,600, because of the low fees earned from its clients on the trades. It is not yet clear whether JP Morgan will face a fine.

A JP Morgan spokeswoman said in an emailed statement: "The announcement indicated that the SESC concluded that the non-public information was provided by an employee of one of the lead underwriters."

"To date in connection with this matter JPMorgan Securities Japan has not received any indication from the authorities that suggests JP Morgan’s involvement either by the company as a whole, or by any department as a whole."

She added: "We take this matter extremely seriously and will continue to take measures to enhance our internal control. We are cooperating fully with the authorities on this matter."

It is the latest headache for the Wall Street lender, which recently came under heavy scrutiny following a trading loss of at least $2 billion from its London credit derivatives office - in the so-called 'London Whale' case. Reports say JP Morgan is the first foreign bank to be instigated in an investigation by Japanese officials, that has highlighted what is considered a widespread practice in the Tokyo market. 

Japanese regulators have been criticised for levying overly light punishments on financial institutions, compared with for example, the US. Recently Japanese lender Sumitomo Mitsui was reportedly fined just 50,000 yen for an insider trading issue.

Asuka could not immediately be reached for comment.