Every time former fund manager Tu Qiang entered his office at Invesco Great Wall in Shenzhen, he was subject to a series of security measures. He would have to hand over his mobile phone. His email and phone calls were monitored, and video cameras tracked his every move. All this to ensure that he did not dabble in insider trading.
But the rules didn’t stop him from taking his laptop into work. So he was able to fire up his own trading software and speculate on his account via a wireless internet connection.
As one of China’s leading fund managers, Tu occupied a powerful position. He managed Rmb8 billion, equivalent to the annual revenue of some of China’s poorer provinces. So he may have been somewhat surprised when officials from Shenzhen Securities Regulatory Bureau turned up to seize him. They made sure they took the computer with incriminating software too.
Tu was one of three fund managers caught in Shenzhen for insider trading as a part of a raid on 14 fund companies in the city.
The checks were notable for the fact that there was no forewarning and for their thoroughness. Computers of fund managers and their employees were subject to minute investigations, reports the Southern Weekly.
The accused are suspected of front-running, or buying a stock that is about to rise in value because of knowledge that a large order is about to be placed. As a fund manager, Tu was in a position to know when those types of trades might be about to happen.
Any convictions would be the first for fund managers in China engaged in this kind of illicit trading. China forbids fund managers from engaging in any private speculation, (other countries usually allow it as long as no non-public information is used, and trading is reported to the employer). But the local rules are often broken, says Southern Weekly: “In the fund industry, it is not uncommon that practitioners are involved in stock trading, inquiring about insider information or even engaging in front-running.”
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