China detains Citic Securities managing director, three other senior officials and financial journalist over alleged inside trading

PUBLISHED : Monday, 31 August, 2015, 2:52am
UPDATED : Monday, 31 August, 2015, 7:13pm

The managing director of Citic Securities, Xu Gang, and three other of the brokerage’s senior officials have been detained for alleged inside trading, state-run Xinhua reported on Monday.

In addition to the four people from Citic Securities, the authorities have also held a journalist from Caijing magazine and an employee of the China Securities Regulatory Commission.

Xinhua said Xu, who is also an executive committee member of the brokerage, was taken into custody on Sunday. Also held were executive committee member Liu Wei; Fang Qingli, the head of the company's securities financing business; and company director Chen Rongjie.

The report said Caijing journalist Wang Xiaolu fabricated and spread false information related to securities trading.

In an article published on July 20 – soon after the government unleashed hundreds of billions of yuan to bail out the beleaguered market – Wang wrote that the CSRC was preparing an exit plan. The regulator denied the story.

Xinhua said Wang told investigators that his article was based on his personal assessment and information he had gleaned about the stock market, but he did not verify it.

Wang felt “remorse” that he had created chaos and panic in the market by “spreading an untrue report” that severely damaged market confidence.

He was quoted as saying that he was willing to cooperate with investigators. He also pleaded for leniency, the report said.

The CSRC employee detained was named as Liu Shufan, who was accused of taking bribes from a listed company in return for securing approvals from the regulator.

Liu also allegedly used 10 million yuan in funds borrowed from a friend to buy shares in the company via others’ accounts. The transaction generated a 3 million yuan return, of which Liu pocketed 1 million yuan. Liu also used inside information about the company to make several million yuan in illicit gains.

A statement released by Citic Securities on Sunday before the Xinhua report said several of its senior management members and employees were asked to assist in investigations, but added that the company's operations remained stable.

The company said it was proactively cooperation with the authorities.