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Three Major Players in Market Bailout Now under Investigation

On Thursday, November 26, and Friday, November 27, three brokerage firms that were major players in this summer’s market bailout announced that the China Securities Regulatory Commission (CSRC) had placed them under investigation.

Beijing Youth Daily noted, in a report widely cited by other state media and web portals, that China’s A-share market booked the steepest single day drop in three months on Friday, with shares of many financial firms triggering their daily limit.

The three leading brokerages, Citic, Guosen, and Haitong, all rank among China’s top 10 securities firms. It was the national regulator CSRC that initiated this most recent round of investigations.

Earlier in August, local regulators initiated investigations into Haitong and three other major brokerage firms, GF, Huatai, and Founder, for allegedly failing to identify clients properly. Regulatory authorities are now officially probing a total of six top players of the so-called National Team, which consists of 21 brokerage firms the government relied on exclusively to bail out the financial market this summer.

Cheng Boming, Citic general manager, and Chen Hongqiao, president of Guosen, are reported to have had close ties with Zhang Yujun, the former CSCR assistant chairman.

Zhang coordinated the massive intervention during this summer’s market rout. On September 16, he became a target of the Central Commission for Discipline Inspection for "severe violations of discipline." Cheng, along with a dozen or so of Citic’s top managers, was arrested a day earlier. On October 23, Chen, who served as Zhang’s deputy before joining state-owned Guosen Securities, hanged himself in his Shenzhen home.

Citic was also implicated in a case involving a star private equity fund manager, Xu Xiang, who was detained in early November on suspicion of insider trading.

Source: Beijing Youth Daily, November 29, 2015