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Fund manager convicted of insider trading

By Jin Jing (China Daily)
Updated: 2007-05-17 09:36

The China Securities Regulatory Commission (CSRC) said yesterday a fund manager at a Shanghai-based joint venture fund management firm has been found guilty of insider trading.

The crackdown on illegal trading comes as the nation's securities regulator tries to cool the equity market.

An initial investigation by the CSRC found Tang Jian, a fund manager of China International Fund Management (CIFM) made use of undisclosed information to buy stocks through his family's accounts.

In an announcement yesterday, CIFM said it had dismissed Tang for profiting from insider trading.

CIFM said it has been informed by CSRC it will launch a formal investigation into Tang's dealings. The CSRC is not previously known to have taken any direct action against insider traders.

The investigation comes a few weeks after the Shanghai Stock Exchange suspended two individual investors accounts for alleged insider trading.

The involvement of CSRC in the Tang's case shows that the authorities are stepping up efforts in clamping down on such market irregularities.

The CSRC issued a statement last Friday that the government will pay close attention to illegal profit-making and price rigging activities.

The CSRC again warned investors about the risks stock markets posed and vowed to crackdown on insider trading and "rat trading" by fund management companies.

"Rat trading" occurs when a broker receives an order from a client to buy a share at a certain price. If the broker believes the share will drop, he may be tempted to wait and buy the stock at a lower price through his own account. He then sells the stock to the client at the client's original price and pockets the difference.

Tang was reported to have bought the stock of Xinjiang Joinworld Co Ltd through his family's accounts before buying it for his managed fund, China Growth. He was reported to have earned 1.5 million yuan from the trade.

Following a newspaper report of Tang's possible insider trading, the company released a statement last month that it had not been investigated by the government watchdog, but would keep a close eye on the case.

"CIFM and the Shanghai Stock Exchange had warned Tang for his short-term and frequent stock trading many times last year," the company's chief executive, Mandy Wang, said.

CIFM said the dismissal of Tang "will not affect the company's performance.

"We will strengthen supervision and improve business management to prevent a similar case happening," Wang said.

CIFM has about 40 billion yuan ($5.15 billion) under management.

The company is jointly owned by Shanghai International Trust and Investment Co Ltd with a 51 percent stake and JPMorgan Asset Management (UK) Ltd with 49 percent. The China Growth Fund, set up in September last year, has posted a total return of 102.14 percent up to now.