Japan's securities investigators on Tuesday urged a relatively light penalty on Nomura Securities and closed out a three-month investigation of the brokerage's role in leaks of company share issuance plans dating back to 2010.

The recommendation by the Securities and Exchange Surveillance Commission moves Japan's largest brokerage closer toward a resolution of a costly scandal that triggered the resignations of Chief Executive Kenichi Watanabe and his top lieutenant Takumi Shibata last week.

The SESC urged that Nomura <8604.T> be given a regulatory order to improve its compliance practices and safeguards on client information, the lightest penalty it could have sought.

In response, Japan's largest investment bank said it had taken steps to keep information collected by its underwriting operation from leaking to its trading desk and investors.

"We take the SESC's recommendation seriously and will further enhance and reinforce our internal control structure to regain the trust of the public," it said in a statement.

Japan's Financial Services Agency, which oversees the SESC, will decide on a final sanction for Nomura in the coming weeks, officials have indicated.

The resignation of Watanabe and Shibata helped clear the way for the SESC to recommend a relatively light sanction against Nomura, regulatory sources have said.

In a worst-case outcome, Nomura might have faced a far more costly order to shut down its trading desk or other operations for several weeks, people involved in the process have said.

"People in the international community will be surprised that there was no business suspension order," said Christopher Wells, a partner at White & Case LLP in Tokyo and an expert on Japanese securities law.

"It seems like a slap on the wrist in view of all of the public attention that has been given the issue."

The relatively light administrative sanction against Nomura would cap a special investigation that began in April as part of an effort by regulators to crack down on insider trading practices that critics say had become widespread in the Tokyo market in recent years.

Nomura has said it was involved in leaks of information on three share issues in 2010: by Mizuho Financial Group <8411.T>, energy firm Inpex Corp <1605.T> and Tokyo Electric Power <9501.T>.

Investors tipped off to those share issuance plans looked to profit by selling the shares in advance of the announcement since the deals dilute the stakes of existing shareholders.

Shares in Nomura have lost about a third of their value since mid-March but the stock has rallied since Thursday when the management shake-up was announced as investors bet that the move lessened uncertainties for the investment bank.

The insider trading scandal had become costly for Nomura as clients suspended trading or pulled back from underwriting deals with the bank. In the past two months, at least nine Japanese issuers dropped or demoted Nomura as a bond or stock underwriter.

Beyond the narrow investigation targeting Nomura, the FSA has not indicated when it will close out the investigation of insider trading practices in the Tokyo market.

Major brokerages face a deadline of Friday to report to the FSA on whether they leaked information on planned share issuance to Japan Advisory, a hedge fund advisory linked to the Whitney Japan Fund.

(Writing by Kevin Krolicki; Editing by Neil Fullick)