Chinese watchdog probing Citic, Guosen over alleged violation of securities regulations

China’s securities regulator has launched investigations into the country’s largest stockbroker, Citi Securities Co and its third largest broker, Guosen Securities, for alleged violation of securities regulations.

Both brokerages said they would cooperate fully with the investigations – which are part of a broader clampdown on how brokerages finance their clients’ stock purchases – adding that there would be no impact on their current operations.

Shares in Citic and Guosen fell 10% on Friday, which is the maximum a stock is allowed to drop in one day.

On Wednesday, Citic said it had overstated equity swaps by about 26 times. Between April and September, Citic reported doing swap deals of 1.1trn yuan, when the real figure was actually closer to 40bn yuan.

It was also reported that brokerage Haitong Securities was being investigated. It issued a trading halt in Shanghai and Hong Kong after the market opened without giving any reasons for the move.