CSRC Chairman Pays Visit to Citic Securities Officials

(Beijing) — Citic Securities, the disgraced brokerage arm of state-owned Citic Group, last week got a private pep talk from China's top securities regulator, Caixin has learned.

The talk from Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC), possibly signals the end of a year of scrutiny over an insider-trading scandal that rocked the firm during last year's stock market meltdown.

Liu visited Citic Securities' headquarters in Beijing on Friday, according to people with knowledge of the matter. In a speech to senior officers, he urged the company to learn from last year's mistakes and return to being a pillar of support for China's capital market.

While there was little of actual substance in Liu's upbeat remarks, there was important symbolism in the personal appearance of China's top securities regulator to deliver a speech that appeared to put an end to a year of disrepute.

During last year's summer stock market rout, Beijing recruited a so-called "national team" of state-owned financial companies to help prop up the market by buying billions of dollars in stock. The summer market plunge wiped out about $5 trillion in previous stock market gains.

As part of the government-led bailout, Citic bought 21.1 billion yuan ($3.2 billion) in stock, according to the company's earnings report for 2015.

Several executives at Citic, including its general manager, Cheng Boming, were arrested in an investigation into "front running" — using their insider knowledge of what stocks would be purchased to first buy shares for their private accounts, benefiting from the subsequent rise. Citic Securities' long-time chairman, Wang Dongming, was forced to resign.

The message last week from Liu was relayed to the entire staff of the brokerage Monday afternoon.

Citic Securities reported 5.24 billion yuan in net profits in 2015, down by 57.96 percent from the same period a year earlier.

In July, the CSRC downgraded the rating of Citic Securities to BBB from AAA by CSRC, based on the company's general compliance management and risk control ability.

Contact reporter Dong Tongjian (tongjiandong@caixin.com); editor Ken Howe (kennethhowe@caixin.com)