China police, regulator target suspected violations of stock dealing rules

Chinese authorities are investigating four securities brokerages and one current and one former employee of its securities regulator for possible stock market offenses. After hitting a seven-year high in mid-June, the Shanghai stock index has dropped more than 40 per cent, erasing all this year’s gains.

Haitong Securities, GF Securities, Huatai Securities and Founder Securities all announced through stock exchange statements that they had received notices from the China Securities Regulatory Commission about the probe and that they would cooperate with the industry watchdog and fulfil all due information disclosure obligations.

August. 19: The Shanghai index declines 5 percent but rebounds in the last minutes of trading to close up 1.2 percent in what financial analysts say might have been the last major intervention by the China Securities Finance Corp. The other two firms made similar remarks.

Police in China have asked several individuals to assist the authorities in investigation of suspected trading violations, Xinhua learned Tuesday. It ends the day down 38 percent from its June 12 peak and just under 1 percent below its close on December 31. The downturn triggered complaints politically favored insiders profited at the expense of small investors.

Huatai Securities, China’s largest brokerage by trading volume, raised US$4.5 billion in Hong Kong in May in what was the city’s biggest initial public offering this year.

Phone calls to Citic Securities’ headquarters in Beijing weren’t answered.

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 is best known overseas for its 2012 purchase of Hong Kong-based brokerage CLSA Asia-Pacific Markets from France’s Credit Agricole for $1.25 billion in the first major foreign acquisition by a Chinese broker. It gave no other details.

If that wasn’t enough, Wang Xiaolu, a reporter at business magazine Caijing is suspected, along with others, of fabricating and spreading false securities and futures trading information, said the agency.

July 1: Mainland China’s two stock exchanges in Shanghai and Shenzhen announce a 30 percent cut in trading fees.

Margin finance – the use of borrowed money to trade shares – was a key driving force behind the stock market rally in Chinese over the past year.