Employees of one of China’s biggest securities firms and one current and one former employee of its market regulator are under investigation on suspicion of illegal stock trading, state media reported yesterday, amid the collapse of a stock price boom.
Three other brokerages announced they are under investigation for possible violations of rules on confirming the identities of customers.
The announcements come amid the collapse of a stock price boom that has seen China’s market benchmark lose more than 40 percent of its value since early June.
Authorities have accused securities firms of manipulating prices, suggesting the Chinese Communist Party (CCP) might be trying to shift blame for the collapse, which angered small investors.
Eight employees of state-owned Citic Securities Ltd (中信證券), including one surnamed Xu, are suspected of “illegal securities trading,” Xinhua news agency said. It gave no other details, but a leading Chinese business magazine, Caixin, reported on its Web site that Xu was the firm’s managing director, Xu Gang (徐剛).
The Chinese Ministry of Public Security announced on July 12 that investigators had found “evidence to suspect that individual trading companies are illegally manipulating securities and futures exchanges.”
It gave no details of which firms were targeted.
The country’s main stock index soared more than 150 percent beginning late last year before hitting a June 12 peak and plunging. The downturn triggered complaints that politically favored insiders profited at the expense of small investors. Beijing responded by barring large shareholders from selling and ordering executives to buy back any recently sold stock in their own companies.
In a statement through the Hong Kong Stock Exchange, Citic Securities said it had received no notice of an investigation.
Telephone calls to Citic Securities’ headquarters in Beijing were not answered.
The firm is part of Citic Group (中國中信集團), the Chinese Cabinet’s main holding company. It is best known abroad for its 2012 purchase of Hong Kong-based brokerage CLSA Asia-Pacific Markets from France’s Credit Agricole for US$1.25 billion in the first major foreign acquisition by a Chinese broker.
Meanwhile, a staff member from the China Securities Regulatory Commission surnamed Liu and a former staff member are suspected of “insider trading and forging official documents and seals,” Xinhua said. It gave no other details.
A journalist surnamed Wang and several other people also are suspected of fabricating and spreading fake securities and futures trading information, the agency said.
It gave no indication whether the cases were connected.
Separately, three brokerages said they were under investigation for violation “know your customer” rules. GF Securities Co (廣發證券), Haitong Securities Co (海通證券) and Huatai Securities Co (華泰證券) made their announcements through the Hong Kong Stock Exchange.
Last month, the securities regulator had accused brokerages of improperly allowing customers to trade without giving their real names or to subdivide accounts to allow others to use them to trade. It ordered brokers to end the practice and to sever ties with unlicensed companies that lend money to finance trading.
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