China’s stock market regulator has found evidence that the nation’s largest brokerage firm, CITIC Securities, engaged in insider trading connected to the government’s rescue of the stock market.
According to Bloomberg, people familiar with the investigation say a preliminary investigation by the CRSC concluded that CITIC used advance knowledge of government-orchestrated stock purchases to execute trades that benefited the firm.
The allegations, known as front-running, sees a firm or individual place trades to benefit from favourable market movements based on information not known by the broader market.
The investigation, having first come to light two weeks ago, has seen seven CITIC Securities executives, including the firm’s president Cheng Boming, come under investigation for offences including alleged insider trading, according to reports in Chinese state-run media.
CITIC is a member of China’s so-called “national team”, a group of government-backed entities encompassing brokerages, pension funds and insurers, that were tasked by the government to help underpin the nation’s stock market following a savage two-month, 40% decline in value.
A spokeswoman from CITIC told Bloomberg that the company hadn’t received any formal notification regarding the nature of the investigation, and the CSRC is yet to respond to requests for further information regarding the investigation.
In early trade on Wednesday, shares in CITIC Ltd listed in Hong Kong have fallen by 2.49% to 14.08 Hong Kong dollars.
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