CSRC nabs 3 'rat traders' in renewed crackdown
The mainland's securities regulator yesterday said it had uncovered three fund managers who it alleged had conducted insider trading, in a renewed bid to weed out illegal practices in China's volatile stock market.
Three Shenzhen-based money managers - Tu Qiang of Invesco Great Wall Fund Management, and Han Gang and Liu Hai of Great Wall Fund Management - were found to have conducted insider trading through so-called rat accounts, the China Securities Regulatory Commission said yesterday.
The fund managers traded shares worth up to several million yuan through suspicious accounts and the CSRC was conducting further investigations into the cases, it said.
The activities were exposed after CSRC chairman Shang Fulin vowed recently to step up policing of the mainland's mutual fund managers. He said the so-called rat traders would be dealt a 'heavy blow' to ensure fairness in the market.
Rat traders are fund managers who open brokerage accounts for friends or relatives and profit illegally from inside information by trading shares through the accounts.
The CSRC waged a nationwide campaign recently, with its branches probing fund houses in a bid to spot suspicious deals by fund managers.
Under the mainland's criminal law amended in February, financial industry workers who use rat accounts to make illicit gains face up to 10 years in prison.
'Rat accounts are rampant in the market, and it won't be a surprise that the majority of the fund managers are found to have done insider dealing,' said Haitong Securities analyst Zhang Qi. 'It remains to be seen how many more will be unearthed as the campaign intensifies.'
The regulator started to crack down on rat accounts in 2007 when two notorious fund managers, Tang Jian and Wang Limin, were found to have used affiliated persons' accounts to profit from share trading.
They were each fined 500,000 yuan (HK$567,550), but the law at the time did not provide for jail sentences.
Investors and analysts criticised the CSRC for issuing strong condemnations of rat trading without backing those up with concrete steps to protect retail investors.
To date, fewer than 10 rat account cases have been made public.
The CSRC said last year that it had created a complete monitoring system to keep a close watch on the trading practices of institutions.
Top securities officials said they would intensify their crackdown. Shang said the regulator would not spare fund managers when their illegal deals were found out.
But a Beijing-based fund manager said Shang's remarks were just lip service, as it was difficult to ferret out all the rat traders.
'Even if the regulator managed to find all of them, the question is whether it will take action against all of them,' the fund manager said.
'After all, market stability will become a concern if lots of bad boys in the fund industry are to be removed and punished.'
