JP Morgan, one of two lead underwriters for the deal, said in a statement it had not been accused of any "organizational" involvement in the case, which is being investigated by Japanese securities regulators.

JP Morgan was not named by regulators but a person with direct knowledge of the probe said they had determined that the source of the Nippon Sheet Glass leak was the Wall Street firm.

Japan's securities watchdog said it was seeking to have a fine imposed on Tokyo-based asset manager Asuka Asset Management after finding the fund had engaged in insider trading ahead of the glassmaker's $505 million share offer in September 2010.

Asuka Asset said in a statement that a fund manager supervising Asuka Opportunities Master Trust fund had been involved in the insider trading.

The proposed fine is part of an escalating investigation of insider trading related to secondary share offerings which has put a spotlight on what insiders and regulators describe as a near-endemic practice in the Tokyo market.

Shares in the glassmaker fell by 15 percent in the two weeks before its board of directors approved a new share offering in August 2010. Proceeds from the stock sale were used in part to fund capital investment and expansion in China.

Around the time of the offering, Nippon Sheet Glass became aware that news of its planned stock sale had leaked and it asked both JP Morgan and Daiwa Securities, the other book runner for the issue, to conduct internal investigations, sources with knowledge of the matter have said.

Both brokerages reported back, saying they had found no evidence that information had breached the "Chinese Wall" meant to protect confidential information kept by their securities underwriting teams from reaching the sales staff.

Daiwa has said that its internal controls were sound and that there was no evidence anyone at the brokerage had been involved in any wrong-doing.

Asuka said it was setting up a committee to reinforce compliance efforts and would invite in outside advisors.

(Reporting by Chikafumi Hodo; Writing by Kevin Krolicki; Editing by Michael Watson, Muralikumar Anantharaman and Mark Bendeich)

• A Permanent Economic Emergency