Facing a probe over China stock market rout, brokerage Citic 'unable to contact executives'

SHANGHAI (BLOOMBERG) - Citic Securities Co. said it has been unable to contact two executives, adding to deepening turmoil at a brokerage that is being investigated amid a government probe into China's stock-market rout.

Chen Jun and Yan Jianlin, both members of the brokerage's eight-person executive committee, its highest decision-making body, cannot be reached, the Beijing-based firm said in an exchange filing on Sunday (Dec 6). Chen is head of Citic Securities' investment-banking business, while Yan leads investment banking at its international unit. All operations are normal, it said.

Some media reports had mentioned that Chen and Yan were "suspected of being requested to assist in an investigation," Citic Securities said in its statement. The two were taken away by authorities and it was uncertain whether they were being investigated or assisting in a probe, the Caixin magazine reported on Dec 4 on its website.

Should their involvement with the market probes be confirmed, it would bring to at least 10 the number of Citic Securities executives including president Cheng Boming implicated in the investigations to determine the causes of the stock plunge that wiped out US$5 trillion of market value. Chen and Yan's involvement would mean six members of the firm's executive committee have been dragged into the probe.

Some employees who had been requested to assist in preliminary investigations have already returned to work, Citic said in its Sunday statement, without naming them. Cheng, who has not been at work since at least mid-September, is not among them, said a person with knowledge of the matter who asked not to be identified.

The China Securities Regulatory Commission is investigating the brokerage over alleged breaches of rules on short-selling and margin contracts, the company said on Nov 26. Its shares fell 0.1 per cent as of 11.21am in Hong Kong, extending this year's loss to 38 per cent, compared with the benchmark Hang Seng Index's 5.4 per cent decline.

The acceleration of the regulatory probes may have started to "significantly" hurt Citic Securities' earnings, Du Lijuan, an analyst at China International Capital Corp., wrote in a note on Sunday. Combined net income for Citic Securities and its brokerage affiliates tumbled 40 per cent in November from a month earlier, compared with an average of zero change at its publicly traded peers, Du said.

Seven executives at Citic Securities including Cheng have been under investigation for alleged offences including insider trading, according to reports in August and September by the official Xinhua News Agency. An eighth has been assisting with unspecified investigations and unable to perform his duties, according to a company filing in October. None of those named has commented on the allegations and no court proceedings have been reported.

Chen and Yan, the two investment-banking heads, were both 46 as of March, according to the annual report Citic Securities released that month. Chen, who joined the firm in 1997, graduated from Shandong University with a science degree in 1991 and obtained a master's degree in business administration in 2002, the annual report showed.

Yan joined the company in 2006 and graduated from Northwest University with a science degree in 1990. He obtained a doctorate in economics from Zhongnan University of Economics and Law in 2003, according to the annual report.