Chinese authorities step up probe in 'rat trading'

Updated 2017-07-10 10:00:36 Global Times

25 fund managers convicted so far for transaction crimes

Chinese authorities have stepped up their fight against "rat trading," a type of insider trading, in recent years and vow to further tackle what they describe as an increasingly common crime that endangers the nation's stock markets.

Rat trading occurs when fund managers, based on insider information or unpublished information mostly accessed through their companies, use personal accounts to buy shares cheaply and sell them at a higher price for personal gains. This was classified as a criminal offense in 2009.

In a statement on Friday, the Ministry of Public Security (MPS) said rat trading has been taking place at a higher rate across the country in recent years. Since 2014, authorities have launched more than 80 criminal investigations of alleged rat trading activities, according to the MPS.

The investigations, which cover transactions worth more than 80 billion yuan (.76 billion), have so far resulted in the conviction of 25 fund managers, the China Securities Regulatory Commission (CSRC) said in a statement also on Friday.

In addition to the criminal convictions, the CSRC has separately barred another 15 fund managers from practicing in the country's financial markets, according to the statement.

The cases show rat trading is occurring at some of the country's top securities firms, with cases now involving more and more people and capital, the CSRC said.

"At some institutions, 'coordinated cases' occur frequently, with many people in the same institution involved in the cases," the agency said, adding the illegal actions have also spread to insurance and trust funds.

In one of the latest cases, an employee of ICBC Credit Suisse Asset Management, a joint venture between Industrial and Commercial Bank of China and Credit Suisse, has been charged for rat trading, according to the MPS statement. Other people investigated include an investment director at China Life Insurance (Group) Co, a manager at Bosera Funds and a former vice president of E Fund Management Co.

Such unprofessional, illegal actions conducted by some financial professionals have "seriously damaged investors' legal interests, undermined market fairness … and seriously endangered the healthy and stable development of the financial markets," the MPS said in its statement on Friday.

"Such trends have drawn great attention from regulatory agencies," the CSRC said, adding the agency will further crack down on the illegal practice in coordination with law enforcement agencies to restore market order and fend off financial risks.

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