GF Securities president resigns amid scandal
THE president of GF Securities Co has resigned after China’s stock regulator found irregularities during the broker’s proposed backdoor listing amid a get-tough crackdown on stock-related crimes.
Dong Zhengqing, who was in charge of GF’s daily operation, tendered his resignation letter on Friday and the board approved his quit on Saturday, the Shenzhen-based broker said yesterday.
Li Jianyong, former deputy president at the broker, will take over Dong’s post temporarily. Dong left because regulators discovered irregularities during the broker’s backdoor issuance, “which has cast negative influence on the broker,” GF said.
China’s stock-market watchdog said late last month that it plans to punish a raft of companies and executives involved in the listing of GF after it found improper disclosures and insider trading in the process.
GF, China’s fourth biggest broker by 2006 revenue, in September proposed to acquire Yan Bian Highway Construction Co via a stock swap for the purpose of a back-door listing.
The China Securities Regulatory Commission said it would punish Yan Bian and one of its shareholders Jilin Aodong Medicine Industry Group as well as several people involved for improper information disclosures.
Earlier media reports said Li’s brother made a profit of nearly 100 million yuan (US$13.1 million) by trading Yan Bian’s shares through acquiring the information in advance.
GF yesterday denied any wrongdoing involving its executives and declined to comment further.
China’s financial authorities are encouraging the country’s biggest brokerages to seek public funds for expansion before the nation opens the fledgling industry to overseas competitors.
However, the CSRC is taking tougher actions to combat insider dealings and market manipulation as stock prices of companies involved in the back-door issues fluctuated even before the plans were made public.
China’s mainland stock bourses only have two publicly traded brokers ¨C Citic Securities Co and Hong Yuan Securities Co.
GF, which is still awaiting approval for its listing, is set to become the third mainland-traded brokerage.
The resignation of its president won’t hinder the broker’s back-door issuance, GF said yesterday. It didn’t give an estimate on when it would likely gain regulatory green light for the listing.
A slew of other Chinese giant brokerage houses including Haitong Securities Co and Northeast Securities Co have announced proposals for back-door listings, which were believed to be easier for firms to go public than initial public offerings.
The CSRC requires IPO candidates to post profit for three years in a row. Brokers including Orient Securities and Everbright Securities Co have said they would like to pursue IPOs as early as next year when they can meet the threshold.