CITIC Securities and Guotai Haitong (GTHT) both issued announcements on the evening of March 12 in response to media reports regarding investigations into their subsidiaries by Hong Kong's Securities and Futures Commission (SFC) and the Independent Commission Against Corruption (ICAC).
CITIC Securities stated that, upon verification, on March 10, the Hong Kong SFC and ICAC, armed with a search warrant, visited the business premises of its Hong Kong subsidiary and took away some documents. An employee of the Hong Kong subsidiary was questioned by the ICAC. The company stated it attaches great importance to the matter and will continue to monitor its progress closely.
The company's board confirmed that, as of the date of the announcement, operations at both the parent company and its Hong Kong subsidiary remain normal, with all business activities continuing as usual and being conducted in an orderly and compliant manner.
GTHT indicated that, following verification, on March 10, the Hong Kong SFC and ICAC, with a search warrant, visited the business premises of Guotai Junan International and removed some documents. An employee of Guotai Junan International was taken away by the ICAC to assist with the investigation. The company said it views the situation seriously and will keep a close watch on developments.
GTHT stated that, up to the announcement date, the company's operations are normal, all business activities are proceeding as usual in a compliant and orderly fashion, and the incident is not expected to have a significant impact on the company's production and operations.
On March 12, the Hong Kong ICAC issued a statement announcing a joint operation with the SFC, codenamed "Fuse," conducted on March 10 and 11. The operation targeted suspected insider trading and corrupt practices. The entities involved include two securities firms and a hedge fund management company.
During the joint operation, law enforcement officers searched 14 locations, including the offices and related residences of the two securities firms and the hedge fund management company. A total of six men and two women, aged between 35 and 60, were arrested. Those detained include senior personnel from the two licensed securities firms and the licensed hedge fund management company, as well as a middleman.
The ICAC stated that senior staff at the licensed securities firms are suspected of accepting bribes exceeding HK$4 million from the owner of the licensed hedge fund management company. The bribes were allegedly given in exchange for disclosing confidential information concerning private placements of shares for several Hong Kong-listed companies before such information was made public.
After obtaining this confidential information, the licensed hedge fund management company allegedly took short positions in the relevant stocks for its hedge fund by short selling the shares and/or entering into short equity swap contracts. When the share placements were announced, the stock prices fell, and the hedge fund purportedly profited approximately HK$315 million from its short positions.
The ICAC also mentioned that the joint operation stemmed from an earlier SFC investigation into suspected insider trading activities, which uncovered potential corrupt practices. The case was subsequently referred to the ICAC to investigate the alleged corruption, while the SFC is focusing on investigating insider trading and other misconduct under the Securities and Futures Ordinance.
The investigation is currently ongoing.
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