An official at the China Securities Regulatory Commission confirmed the investigation yesterday, declining to comment further. Officials at Hangxiao Steel and China International Fund were not available for comment.

"The regulator is collecting evidence and plans to transfer anyone involved in illegal securities activities to the prosecutors," said a Shanghai-based source close to the watchdog.

The State Council last month approved the establishment of a joint task force among seven government departments to crack down on illegal securities activities.

Another firm that has been targeted for investigation for alleged insider trading is GF Securities Co, which in September proposed to buy control of Shenzhen-listed Yan Bian Highway Construction Co for a back-door listing, Caijing Magazine said on Wednesday.

The deal hasn't been approved because the regulator suspected some managers at GF illegally profited by buying Yan Bian shares before the transaction was made public, the magazine said.

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