Haitong Latest Chinese Broker to Come Under Regulatory Scrutiny

Haitong Securities Co. said it’s being probed by the China Securities Regulatory Commission for alleged rule violations, the third Chinese brokerage in two days to announce it is under regulatory scrutiny.

Haitong didn’t say what rules it is suspected of violating, and CSRC spokesman Zhang Xiaojun declined to elaborate when asked about the probe at a briefing today. The company said it is cooperating with the investigation and obeying orders to disclose information, according to a statement to the Shanghai stock exchange Friday. The brokerage’s operations were normal, the statement said.

China’s securities firms are in focus because of a crackdown by the police and regulators after a market slide in June, as well as events including the disappearance of the head of a Hong Kong-listed brokerage. Haitong declined Friday along with two other Chinese brokerages, Guosen Securities Co. and Citic Securities Co., that announced Thursday they were being investigated by the securities regulator for alleged rule violations.

China’s probes since the summer stock rout have included executives from Citic being arrested for alleged insider trading. No comment has been available from those under investigation. In Shanghai, Haitong and Guotai Junan Securities Co. are among state-owned enterprises that face checks by anti-graft inspectors, according a Communist Party discipline committee statement.

Haitong’s shares declined 3.8 percent in Hong Kong before the company suspended trading of its shares in the city and Shanghai. Shares of a listed unit, Haitong International Securities Group Ltd., fell 7.6 percent to close at 4.88 yuan, the biggest decline in more than three months. Citic fell as much as 7.7 percent in Hong Kong. Guosen fell as much as 10 percent in Shenzhen.

Hong Kong-listed Guotai Junan International Holdings Ltd. said on Monday that it had lost contact with Chairman and Chief Executive Officer Yim Fung.

Citic Securities had another setback this week. The Securities Association of China said this week that the firm had over-reported equity-swap data by 1 trillion yuan ($156 billion) between April and September. Numbers were inflated for new swaps business and for terminations, the association said. The brokerage blamed a system upgrade for the incorrect numbers.

— With assistance by Aipeng Soo

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