China E Fund Fires Fund Manager for Alleged Illegal Bond Trades

China’s E Fund Management Co. fired Ma Xide, a portfolio manager in its fixed-income department, for alleged illegal bond trading as regulators step up scrutiny of the debt market.

Ma was dismissed April 19 after disclosing to E Fund that he’d been tried for alleged misconduct, the fund management company, based in the southern city of Guangzhou, said in a statement dated April 21. The San Xiang Metropolitan newspaper in Hunan province reported that same day on the allegations against Ma, which included misappropriation of funds and illegal bond transactions.

E Fund, which employs about 400 people and manages approximately 200 billion yuan ($32 billion) of assets, said it wasn’t aware of Ma’s March 11 trial until the April 19 newspaper report. The fund management company said Ma had not informed it of his trial and had been on leave March 11 to March 13 for what he’d said was a family emergency. Ma was released on bail, it said.

“We are deeply sorry for not being able to uncover Ma Xide’s involvement in the trial in time and for the disturbances it caused investors,” E Fund said.

Ma was prosecuted in Ningxiang county in Hunan because the alleged illegal trades were conducted through a company he set up in the province, according to the San Xiang Metropolitan report.

Calls to the court in Hunan seeking comment today weren’t immediately answered. E fund’s press office didn’t answer a call seeking contact information for Ma.

Trading Probe

Chinese regulators are investigating illegal fixed-income transactions in accounts typically used by senior traders at financial institutions, the Shanghai Securities News reported last week. The government has sent teams to inspect trading records at companies in Shanghai, Beijing and Jiangsu province, the newspaper reported, without citing anyone.

The investigation focuses on trades executed for so-called Bing-grade investors, who borrowed from banks to buy bonds and had another institution hold the securities, according to the Shanghai Securities News. Holders of the accounts, often senior executives, can make profits without risking their own money when bond prices rise, according to the newspaper affiliated with the official Xinhua News Agency.

The China Securities Regulatory Commission said April 19 that fund companies are prohibited from holding bonds for others, the 21st Century Business Herald reported, citing an unidentified official at the agency.

Zou Yu, a former fixed-income investment director of Wanjia Asset Management Co., is the subject of an investigation related to so-called Bing-grade accounts, according to the official Xinhua News Agency. The company said last week that Zou is being investigated for personal conduct and is no longer an employee.