China’s Founder Securities says it cannot reach director amid probe by regulators

Zhao Dajian, honorary chairman of China Minzu Securities and a director of parent Founder Securities, has not been contactable by both firms since September 22, Founder said in a Monday filing to Shanghai’s stock exchange.

“The company will continue to coordinate efforts by various parties, including China Minzu Securities, to get in touch with Zhao Dajian, check on the relevant situation and make disclosures in a timely manner,” Founder said.  

Founder’s shares lost 1.6 per cent to 6.29 yuan at 9:59a.m in Shanghai after trading as low as 6.25 yuan. The Shanghai Composite Index slid 1.1 per cent.

Minzu has been investigated by the mainland’s securities regulator on a matter involving 2.05 billion yuan, Founder said in a stock exchange filing on September 9.

Founder, along with Haitong Securities, GF Securities and Huatai Securities, said in late August the China Securities Regulatory Commission had launched probes into their operations for failing to review and verify client identities. The CSRC has increased its scrutiny of securities firms as markets went into near free-fall.

State media blamed ‘malicious short-selling’ as a major reason for the market crash since mid-June.

Three top executives at the nation’s biggest brokerage Citic Securities have been probed for suspected insider dealing and the leaking of inside information, the company said in a statement to Hong Kong’s stock exchange on September 15.

They include president Cheng Boming, head of operations Yu Xinli, and Wang Jinling, a senior manager of its information technology centre.

Four other senior executives of Citic Securities, including managing director Xu Gang, were taken away last month by police investigating suspected insider dealing. The official Xinhua News Agency reported they “admitted criminal facts” on August 30.

The brokerage’s two other members of its executive committee Ge Xiaobo and Liu Wei, were also asked to assist in investigations on suspected market irregularities, as was Liang Jun, the secretary of chairman Wang Dongming, the South China Morning Post reported last month.

Others being probed included 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.

The alleged irregularities included suspected market manipulation, falsification of government documents and insider trading, sources said.

Besides brokerage executives, regulators and a financial journalist were also caught up in the scandal. They include CSRC assistant chairman Zhang Yujun, CSRC former head of the investor protection department Li Lang and Caijing financial magazine reporter Wang Xiaolu.

Some analysts said that Citic Securities, which was given a major role in a state-ordered effort to stem the market rout by buying shares, was suspected of taking advantage of inside information to boost its own profits.

It was a joint effort with other brokerages and mutual fund houses, after the nation’s stock markets fell almost 30 per cent in three weeks in June.

Other major brokerages such as Haitong and Huatai Securities were fined for directing unofficial margin loans to the market, which was partly to blame for the stock market’s dramatic surge before the spectacular nosedive.

The benchmark Shanghai Composite Index has lost 40.8 per cent since peaking at 5,166 in mid-June.