A former employee of Ernst & Young ShinNihon, the largest auditing firm in Japan, is under investigation by the government's Securities and Exchange Surveillance Commission for alleged insider stock trading.

The former employee admitted to the allegations and told officials of Ernst & Young ShinNihon that he was 'trying to make up for a loss from dealing in other stocks'.

The certified public accountant is expected of trading shares in a female acquaintance's name and engaging in margin trading, the Associated Press news agency reported.

According to Ernst & Young ShinNihon, the accountant is suspected of trading 300 shares of a company in the service sector, around the time its financial information was released to the public, while he was an employee of the firm involved in auditing the market.

He is also accused of trading 261 shares of a company that was listed on the Second Section of the Tokyo Stock Exchange, when its financial information was released.

The former employee joined Ernst & Young ShinNihon in 2001 and left in 2007 to start his own business.

The SESC is likely to recommend that the FSA fine the accountant 1 million yen.

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Ex-employee of major auditing firm investigated over insider trading