BEIJING (BLOOMBERG) - Citic Securities Co. President Cheng Boming is being probed for insider trading, the state-run Xinhua News Agency reported Tuesday.
A Citic spokesman said it has no comment.
The investigation of Cheng comes after Xinhua reported last month that four executives at Citic, China's biggest brokerage, had admitted to alleged insider trading. The firm is part of Citic Group, the nation's first state-owned investment corporation, which was set up in 1979 as part of paramount leader Deng Xiaoping's push to modernise the country.
After a US$5 trillion (S$ 7.04 trillion) stock rout, Chinese officials have been hunting for culprits, from so-called "malicious" short sellers to a journalist from business magazine Caijing whose report was alleged to have caused market panic. The government has also squeezed out some of the leverage that fueled the boom and intervened in the market by purchasing shares.
"The rumour of this investigation had already been on the streets for some time," said Castor Pang, the head of research at Core-Pacific Yamaichi Hong Kong, referring to the Cheng probe. "The central government may use this case to accelerate its probe into insider trading and tighten regulation further."
The Citic executives caught up in the investigation include managing directors Xu Gang and Liu Wei. The brokerage's shares have tumbled more than 60 per cent from an April peak in Shanghai on the market collapse, failed government efforts to prop up stocks, and the widening crackdown.
"Citic Securities should come out and clarify what's happening and tell investors if they have any management changes," said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities Ltd. "That's the only way to calm investors down."
The market collapse put an abrupt end to Citic Securities's ascent among the world's biggest brokerages by market capitalization. Less than a year ago, the firm came close to matching Switzerland's UBS Group AG. Now, it's sinking closer to Japan's Nomura Holdings Inc.
Since its inception, Citic Group has been the "pilot of national economic reform and an important window on China's opening to the outside world," the company said on its website.