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Star securities analyst faces insider trading charges

(China Daily)
Updated: 2009-08-14 13:49

When audiences watched Hong Kong's three sexiest men - Louis Koo Tin Lok, Daniel Wu and Sean Andy in the Chinese film, Overheard, little may they have realized how true to life it was.

The actors played police officers assigned to investigate alleged stock price manipulation, something that is not unknown in the real world.

Ye Zhigang, a star securities analyst in the Shanghai-listed Haitong Securities Co, is currently under investigation for stock price manipulation.

He is accused of issuing favorable reports about some companies, causing the value of the stock to rise and allowing previous private investors to walk away with a handsome profit.

"The investigation is still under way," a spokeswoman surnamed Shu from Haitong Securities said. She indicated that Ye Zhigang has not been at work ever since the end of July.

The Chinese media estimate Ye realized a profit of 10 million yuan from the deal, considerably more than the 600,000 yuan he earned from his work last year.

Insiders speculate the manipulated stock was in Chongqing-based Zongshen Power Machinery, a motorcycle producer. Shares in the company soared to 13.11 yuan from 5.05 yuan five months after Ye issued four papers advocating the firm.

Ye was once the most promising analyst in his field. The 35-year-old studied mechanical engineering and received a doctorate from Shanghai Jiaotong University. He joined Haitong in 2006 and rose rapidly to become a key figure in the company within three years. His team won the Chinese "best analyst" ranking for three consecutive years.

Ye always kept a low profile and was a hardworking man, people familiar with him said. According to a media investigation, Ye Zhigang published 121 reports in New Fortune, a domestic financial magazine in 2007, the equivalent of two to three analyses a week.

Related readings:  Securities companies report rising profits  Minsheng exits from Haitong Securities  China says to strengthen regulation of securities trade

His good image and bright future are now under threat.

The first person to accuse Ye of underhand dealing was his former girlfriend. According to Caijing magazine, she went to Shanghai's securities regulator with certain allegations and the latter immediately began an investigation.

Though China's securities regulator forbids securities practitioners from making deals in the market and conducting wealth management business personally, nonetheless 80 percent of staff in securities firms reportedly do play in the market.

When asked whether it is a rare case or a common practice for analysts to break regulations in Haitong, Shu declined to comment.

It is widely believed that Ye was ordered to pay a penalty of 20 million yuan, double the profit he earned from the deal. No other punishment from either the regulator or Haitong Securities Co has so far been announced.

Two years ago, Tang Jian, a fund manager at China International Fund Management Co, was fired and prohibited to work in the securities sector for life, probably the first instance of being punished for insider dealing on the mainland.

"An analyst would be charged with financial fraud abroad, but it is not a crime, merely a moral question within China," said a source at a mutual fund who declined to be identified.