【Regulatory Action】ICAC and Securities Regulators Raid 14 Locations, Arrest 6 Men and 2 Women; Funds Profited 315 Million Using Insider Information; Allegedly Involving CITIC Securities Hong Kong, Guotai Junan International, and Wuji Capital

Market reports indicate that the Independent Commission Against Corruption (ICAC) and the Securities and Futures Commission (SFC) have launched a joint operation to investigate China CITIC Bank International and Guotai Junan International (01788). Foreign reports suggest that Infini Capital, under Qian Tao, has been involved.

ICAC and SFC issued a statement midday stating that on March 10 and 11, they conducted a joint operation called “Fuse” to combat insider trading and corruption. They searched 14 locations, including licensed corporate offices and residences of suspects. ICAC also arrested six men and two women aged between 35 and 60. The arrests included senior management from two licensed securities firms and one licensed hedge fund management company, as well as an intermediary. Authorities disclosed that a hedge fund profited approximately HKD 315 million using insider information.

Bloomberg quoted sources saying that JPMorgan Chase and UBS had ceased providing prime brokerage services to Infini Capital months ago.

Latest update on March 13

Infini Capital issued a statement on its website, noting that it has taken note of market rumors. The company states that all information should be based on official announcements from ICAC and SFC. “We do not comment on unverified information.” The company emphasizes its compliance with Hong Kong laws and regulations and its full cooperation with regulators.

Infini Capital states that its overall business and operations are currently normal, with no impact on investment management and decision-making processes. The team remains focused on creating long-term value for investors and partners.

The company also warns that it will gather evidence and reserve all legal rights against media, social media, and individuals spreading false information or misleading the market about “investigation details.” It calls on all parties to view market information rationally, avoid rumors, and work together to maintain a healthy and stable market environment.

Latest update on March 12

ICAC and SFC confirmed midday that they are investigating senior executives of licensed firms suspected of insider trading and corruption. The investigation involves three licensed firms, including two securities companies and one hedge fund management firm.

Authorities suspect that senior executives at licensed securities firms accepted bribes exceeding HKD 4 million from hedge fund owners. They allegedly disclosed confidential information about stock placements in Hong Kong-listed companies before the information was publicly released.

Using this insider information, the hedge funds shorted the relevant stocks or entered into stock short-swap contracts, establishing short positions. After the stock placement news was announced, the stock prices fell, and the hedge funds profited about HKD 315 million from their short positions.

This joint operation originated from an initial investigation by the SFC into suspected insider trading, which uncovered potential corruption. The case was then transferred to ICAC for further investigation into corruption, while SFC continues to focus on insider trading and violations under the Securities and Futures Ordinance. Both agencies stated they would not comment further as investigations are ongoing.

It is noteworthy that Infini Capital has experienced personnel changes recently, with Qian Tao resigning from his role as Responsible Officer at the end of last year.

Cathay Securities International confirms employee detention

Cathay Securities International announced this morning that on March 10, SFC and ICAC visited its main Hong Kong office to execute search warrants and took some documents. They also learned that an employee (not a board member) was detained for investigation. The company emphasizes its high regard for the matter and will continue to monitor developments closely.

The company states that, following the investigation, it immediately suspended all operations and duties of the involved employee as of March 10 until further notice. All business segments, including investment banking, remain operational. The company maintains financial stability and conducts all activities in compliance and order. It reaffirms its commitment to compliance and prudent management.

CITIC Securities confirms office search

CITIC Securities (06030) (Shanghai: 600030) issued a notice on the Shanghai Stock Exchange stating that on March 10, SFC and ICAC executed search warrants at its Hong Kong subsidiary, seizing some documents. An employee of the Hong Kong subsidiary was also questioned by ICAC.

The company states it attaches great importance to this matter and will continue to monitor the situation. The board confirms that as of March 12, the company and its Hong Kong subsidiary are operating normally, with all business activities proceeding in an orderly and compliant manner.

It also states it will fulfill its disclosure obligations according to the listing rules and advises investors to be aware of investment risks.

News on March 11

Bloomberg, citing sources, reported that Hong Kong authorities raided the offices of CITIC Securities Hong Kong and Guotai Junan International (01788) on March 10, and at least one senior executive was taken for questioning. Caixin also reported that at least two Chinese investment banks were searched this week, including Guotai Junan International’s ECM head, Samuel Pan, who was taken by ICAC for assistance in the investigation.

LinkedIn shows that Samuel Pan joined Guotai Junan International in June 2015 and was promoted to Managing Director and ECM head in June 2024. Previously, he worked at Morgan Stanley as an analyst and manager, accumulating extensive investment banking experience.

SFC declined to comment, and ICAC has not responded to requests. CITIC Securities Hong Kong and Guotai Junan Hong Kong also did not immediately comment.

Sources: Guotai Junan International announcement; CITIC Securities announcement