Beijing crackdown nets five more fund managers

Market shake-up expected as Beijing shows zero tolerance for insider trading

PUBLISHED : Saturday, 05 July, 2014, 1:51am
UPDATED : Saturday, 05 July, 2014, 1:51am

Beijing's war on unscrupulous fund managers continues, with the securities regulator announcing yesterday that it had moved against five employees at HFT Investment Management.

The nationwide crackdown on the mutual fund industry was expected to shake up the stock market as dozens of rogue fund managers were netted in the coming months, said sources close to the China Securities Regulatory Commission.

The regulator said yesterday that the five asset managers - Jiang Zheng, Chen Shaosheng, Mou Yongning, Cheng Dong and Huang Chunyu - had been transferred to police custody for further criminal investigation. It also said they had been found to have conducted insider trading.

The CSRC's statement followed a report by that five employees at China Asset Management, the mainland's largest mutual fund firm, had been detained by police.

The regulator has yet to publish any information about the China Asset Management probe.

"This round of investigations is going to be tough," said a fund manager. "The regulator is living up to its promise of zero tolerance for insider trading."

Unlike previous crackdowns on the fund industry, nearly all asset managers, including those who have resigned from their positions, are in the radar this time.

"The CSRC will simply hand over the evidence of fund managers' wrongdoings to police for further investigations," said a source who was briefed by an official at the commission on the matter. "It has no intention of protecting the reputation of fund houses."

Insider trading in the mutual fund sector is rampant on the mainland. Powerful fund managers routinely take advantage of inside information to trade shares themselves by using the brokerage accounts of their relatives.

In the past, the regulator has been reluctant to crack the whip for fear of market stability. But chairman Xiao Gang, after taking the helm in March last year, strengthened the team of investigators to weed out irregularities.

A total of 3.55 trillion yuan (HK$4.4 trillion) of funds were managed by 90 mutual fund houses at the end of last month.