China’s bank regulator is probing the chairman of Kaisa Group Holdings Ltd. for possible rule violations in the sale of a trust company that he bought months before his property developer ran into financial trouble.
Kwok Ying Shing neglected to tell the China Banking Regulatory Commission about the sale of National Trust Co. to Kaisa’s second-biggest shareholder, Sino Life Insurance Co., according to the people. Kwok also sold it despite a CBRC rule requiring trust company shareholders to hold their shares for at least three years, the people said.
The CBRC may block the sale, according to the people, who asked not to be identified because the probe hasn’t been announced. That would be another blow to Kwok, whose developer defaulted on a $52 million interest payment last week after it became entangled in a corruption probe and sales of its units were halted in the southern city of Shenzhen where it’s based.
Kwok bought National Trust for about 3 billion yuan in mid-2014. Signs of trouble emerged at Kaisa in October after it denied rumors that Kwok was missing and unreachable. In January, people familiar with the matter said Kaisa was being investigated for links to a former Shenzhen official suspected of graft. The CBRC began looking into the National Trust sale after the Chinese business news website Moneyweek reported it in March.
According to the people, Kwok controlled four companies that owned most of National Trust. He then transfered ownership of three of those companies to Sino Life Chairman Jun Zhang or Sino Life employees, they said.
The move raised concerns at HSBC Holdings Plc., which has a life-insurance joint venture with National Trust. Kwok’s sale to Sino Life means National Trust’s 50 percent ownership of the venture is now controlled by an HSBC competitor, they said.
Kwok resigned as Kaisa chairman Dec. 31 but returned to the job earlier this month. That was shortly after Sino Life gave a 1.38 billion yuan loan to Kaisa that the developer said it would use to pay Shenzhen’s land and resources commission. In the meantime, Sunac China Holdings Ltd. is in the process of buying his family’s controlling stake in Kaisa.
The press offices of the CBRC and National Trust didn’t immediately respond to faxed requests for comment today, while an HSBC spokesman declined to comment. A call to Sino Life’s marketing department rang unanswered. A Kaisa spokeswoman declined to reach out to Kwok for comment.
— With assistance by Steven Yang