Two more Citic Securities chiefs named in Chinese police investigation into ‘malicious short-selling’
Top executives are among eight employees of the brokerage being questioned by police, as sources say more industry casualties likely
Two more top Citic Securities executives were on Thursday named as having been taken away by mainland police as part of an investigation into illegal securities trading, as Beijing toughens its stance on what it calls "malicious short-selling".
Two sources revealed that in addition to managing director Xu Gang, two other members of the brokerage's executive committee, Ge Xiaobo and Liu Wei, were also "asked to assist in the investigation", as was Liang Jun, Citic Securities chairman Wang Dongming's secretary. Police were investigating suspected market manipulation, falsification of government documents and insider trading, they said.
They said the investigation into the Citic managers was a result of the leadership's determination to curb the short selling that had wreaked havoc on the A-share market since mid-June.
Read more: Citic Securities among five of China’s top brokerages under probe amid stock market slump
Police took away eight Citic officials on Tuesday, sending shockwaves through the stock market. Two China Securities Regulatory Commission officials and a reporter for magazine are also being questioned.
The reported yesterday that Xu was among the eight Citic officials detained and that the probe had begun several weeks ago.
"The severity of the problem and the depth of the investigations turned out to beat many people's expectations," one source with business ties with Citic said. "It is a sign more influential securities industry officials will be uncovered as the authorities deepen investigations."
Xinhua said on Tuesday that the police would "get to the bottom of things" and no one violating market regulations would be exempted from punishment.
Citic Securities is regarded as the mainland's top brokerage. It is well-connected to powerful mutual funds, foreign institutions, companies, and regulators.
Liu Lefei, the son of Liu Yunshan , a member of the Communist Party's Politburo Standing Committee, is a vice-chairman of the brokerage. Wang Dongming is the brother of Wang Boming, the editor-in-chief of magazine.
According to sources, Xu is a capable securities industry veteran who played an important role in helping Citic attract a huge number of qualified foreign institutional investor (QFII) clients over the years. Citic has the largest number of QFII clients of any Chinese brokerage.
Mainland police began to investigate "malicious short-selling" on July 9 after the benchmark indicator lost more than 30 per cent in three weeks. The detention of the regulatory officials, journalist and Citic officials came after the main gauge slumped 22 per cent between last Thursday and Tuesday.
Citic found itself in hot water early this month amid reports it was linked to a former joint venture with a US Citadel Securities subsidiary, whose account has been barred from Shenzhen's stock exchange for three months since the end of July.
Citic denied the reports and said it had ended its relationship with the trading firm.
The other four Citic officials under investigation are Xu Jun, chief of equity investments; Fang Qingli, in charge of securities financing businesses; Wang Dingguo, an alternative investment manager, and Yao Jie, a senior manager with the securities financing segment.