Japan's securities watchdog is investigating a small Tokyo-based broker, ITM Securities Co, over its possible role in a scandal involving the suspected disappearance of more than $2 billion in corporate pension funds, two sources with knowledge of the matter said.

Tokyo-based AIJ Investment Advisors was ordered to halt operations on Friday on suspicion that it has lost most of the roughly 210 billion yen in assets it managed on behalf of clients, mainly smaller firms.

The Securities and Exchange Surveillance Commission (SESC) is also investigating the role of ITM, which is located in the same small office building as AIJ in central Tokyo and acted as its agent in selling AIJ funds, the sources said.

The sources spoke on condition of anonymity because the investigation is not public.

As a policy the SESC does not comment on individual cases.

AIJ could not be reached for comment.

Yasuo Tsuneyoshi, an official at ITM Securities, said he could not comment about any potential investigation related to the AIJ scandal.

ITM Securities has 17 employees and was established in 1998 by Hideaki Yoshimura, a former executive at Yamaichi Securities before it collapsed in the late 1990's in one of Japan's largest bankruptcies, according to ITM's website.

(Reporting by Noriyuki Hirata; Editing by Ian Geoghegan and Muralikumar Anantharaman)

Japan