Citic Securities president hit by probe

Cheng Boming is being questioned by police for alleged insider trading and leaking inside information, the highest-ranking Chinese brokerage official investigated so far.

Citic Securities president Cheng Boming is being questioned by police for alleged insider trading and leaking inside information, the company said on Tuesday evening, making him the the highest-ranking Chinese brokerage official to be investigated since Beijing intensified a clampdown on market malpractice.

In a filing with the Shanghai Stock Exchange, Citic said three executives are under investigation for the same alleged offences including Yu Xinli, in charge of operations, and Wang Jinling, vice manager of the information technology centre.

Citic and the Ministry of Public Security could not immediately be reached for comment.

The latest investigation comes after state media reported late last month that four other senior executives at Citic, including executive committee members Xu Gang and Liu Wei, had confessed to insider trading.

The executive committee, Citic's top governing body, currently comprises eight people, including Cheng and chairman Wang Dongming. Half of its members have so far been placed under police investigation.

China’s recent regulatory and police investigations come against a backdrop of tumbling stock markets, with the benchmark Shanghai Composite index losing more than 40% since mid-June, wiping out all of this year’s gains.

Since the market tumble, the Chinese government has initiated probes of so-called “culprits”, hoping to stabilise A-shares and “purify” the market. Its measures include cracking down on “malicious” short sellers, probing into the country’s major brokerages and detaining Wang Xiaolu, a journalist from the respected business magazine Caijing.

Broker in crosshairs

On August 25, on the day of the announcement of the first probe into Citic senior executives, the official Securities Times ran a front-page piece criticising “some core investment bank” in China for failing to help stabilise the stock market.

“Since the plunge on June 26," the front-page item said, "the stock market has given a lukewarm response to the [overall sound] economic fundamentals, and pessimism continues to rise…[Because] some [financial] institutions have given up analysing the fundamentals and is instead focused on making money from the government’s funds deployed to stablise the market.”

“Their practice has become an important element [which has caused] harm to market stability,” the piece said.

Set up in 1995, Citic Securities, the full-service investment banking unit of Chinese conglomerate Citic Group, has for years held a leading market position in brokerage services, investment banking and asset management.

Cheng Boming, 53, joined the Beijing-headquartered broker in 2001. He rose through ranks and became president in 2010, according to the company’s website.

Cheng is known in financial circles for his ability to hold liquor and a passion for brisk walking.

“Every time the company organises the 40-km walking race, he always wins," a Citic staff member told FinanceAsia. "It’s not because we let him win because he’s boss; no one can really pass him.”

Cheng was also a student of Liu Hongru, the first chairman of the China Securities Regulatory Commission, when Liu taught at the graduate school of the People’s Bank of China during his tenure as vice-governor of the central bank, the school’s website showed.  

Caixin, a well-regarded Chinese media outlet, reported on Tuesday that under Cheng’s leadership, Citic strengthened ties with the securities regulator and brought in a large number of projects related to state-owned enterprises, which greatly enhanced its business.

In an interview with the detained Caijing reporter Wang Xiaolu in mid-July, Cheng said Chinese brokers “had shouldered the responsibility” during the market rescue operation since early July.

“The stable development of the stock market is [of] vital interest to securities houses,” he said. “To save the market is to save ourselves.”

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