After threatening for years to crack down on rogue traders, the mainland's securities watchdog is finally baring its teeth.
Li Xuli, a former fund manager at Bank of Communications Schroder Fund Management, is under criminal investigation for 'rat trading' - using inside information to trade using the brokerage accounts of relatives or friends - after a probe by the China Securities Regulatory Commission (CSRC).
This saw Li labelled as the biggest rat trader caught to date, with allegations that he pocketed gains of about 10 million yuan (HK$12.21 million).
But market watchers expect that dubious distinction to be swiftly awarded to other rogue traders, as Guo Shuqing, the newly-appointed top securities regulator, has stressed 'zero tolerance' of insider trading in his message to fund managers.
Last week, the CSRC invited several state-owned news organisations to a presentation, where it revealed the details of Li's illegal trades. The regulator said Li was guilty of front-running trades between February 28 and May 25, achieving illegal gains of more than 10 million yuan.
It is believed that front-running is common among fund managers tasked with investing their firm's funds. It involves the covert purchases of a targeted stock before using company funds to invest in the stock, thereby pushing up the share price, and allowing rogue traders to cash out and make a fast buck.
'The regulator's briefing was not only aimed at informing us of Li's case,' said a Beijing-based reporter who attended the press conference.