【Regulatory Action】ICAC and SFC joint operation raid 14 locations, arrest 6 men and 2 women. A fund profited 315 million yuan using insider information. Suspected involvement with 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, “Fuse,” to investigate offices of CITIC Securities Hong Kong and Guotai Junan International (01788). Foreign reports suggest that Infini Capital, under Qian Tao, has been involved.

The ICAC and SFC issued a statement at noon, stating that on March 10 and 11, they conducted a joint operation targeting insider trading and corruption, resulting in searches at 14 locations, including licensed corporate offices and residences of suspects. They also arrested six men and two women aged between 35 and 60. Those detained include senior executives from two licensed securities firms, one licensed hedge fund management company, and an intermediary.

Latest updates as of March 12

The ICAC and SFC confirmed that the joint investigation involves senior executives of licensed corporations suspected of insider trading and corruption. The investigation targets three licensed firms, including two securities companies and one hedge fund management firm.

It is suspected that senior officials at a licensed securities firm accepted bribes exceeding HKD 4 million from a hedge fund manager to disclose confidential information about stock placements in multiple Hong Kong-listed companies before the information was publicly released.

Using this insider information, the hedge fund managed to establish short positions by selling related stocks and/or entering into short stock swap contracts. After the stock placement news was announced, the stock prices fell, and the hedge fund reportedly profited approximately USD 315 million from its short positions.

Guotai Junan International issued a statement this morning, saying that on March 10, the SFC and ICAC visited the company’s main Hong Kong offices to execute search warrants and seized some documents. It was also learned that an employee (not a board member) was detained for investigation. The company takes this matter seriously and will continue to monitor developments closely.

Guotai Junan International stated that, due to the investigation, all operations and responsibilities of the affected employee were immediately suspended on March 10 until further notice. The group’s overall business, including investment banking, remains operational, with stable financial health and compliant, orderly business activities. The group remains committed to compliance and prudent management.

Updates as of March 11

Bloomberg, citing sources, reported that Hong Kong authorities raided the offices of CITIC Securities Hong Kong and Guotai Junan International (01788) on Tuesday (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, with Guotai Junan International’s ECM head, Samuel Pan, being taken by the ICAC for assistance with the investigation.

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

Market speculation suggests that the searches may be related to IPO activities. Both CITIC Securities Hong Kong and Guotai Junan International have previously served as sponsors for Hong Kong IPO applications, such as the recently approved logistics robotics company CaloR, and the January-listed Stand Robotics.

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

The raid comes at a time of notable recovery in Hong Kong’s capital markets. Over the past year, trading volume surged, and a wave of IPOs worth billions of dollars occurred. While the specific nature of the investigation remains unclear, authorities have intensified their focus on investment activities.

Source: Guotai Junan International Announcement