By staff reporter Su Dandan 

Regulators have penalized a highway construction company and a medical supplier for their roles in China’s first alleged case of insider trading involving a securities broker. 

The China Securities Regulatory Commission (CSRC) announced plans to slap an administrative penalty on Shenzhen-listed Yan Bian Highway Construction Co. Ltd. and its largest shareholder, Shenzhen-listed Jilin Aodong Medicine Industry Group Co. Ltd., for allegedly failing to disclose timely and accurate information about their ties to Guangfa Securities. 

The securities watchdog cited evidence of insider trading and other illegal activities following a year-long investigation into Guangfa’s attempt to seek a stock listing by buying Yan Bian shares. 

Guangfa, China’s sixth largest securities firm, is the first broker to seek a backdoor listing in China.  

Evidence of alleged criminal activity has been forwarded to China’s public security bureaus, according to the CSRC announcement posted on its Web site May 30.  

A Guangfa spokesperson told Caijng that the firm’s operations have not been affected by the CSRC decision, and that their management team is working as usual.  

“We are still waiting for approval from CSRC for a backdoor listing through Yan Bian,” the spokesperson said. “Guangfa Securities will actively cooperate with CSRC and other government bodies in their probe into this case.” 

Yan Bian announced in June 2006 that Guangfa was seeking to be listed by buying into Yan Bian.  

However, unusual fluctuations in the trading of Yan Bian stock before the announcement was released caught the attention of regulatory authorities. Shortly after the announcement, CSRC and the Shenzhen Stock Exchange started a formal investigation into Guangfa’s attempted backdoor listing.  

If the suspicions are verified by the government, the case will be the first involving insider trading in China’s brokerage industry. 

Earlier this month, CSRC disciplined an executive at J.P. Morgan Chase’s Chinese venture. He also was dismissed, becoming the first Chinese fund manager sacked in connection with insider trading. 

“Regulatory authorities pay close attention, not just to listed companies, but also to securities firms,” a broker in China’s Guangdong Province told Caijing. “We always receive documents of warning from regulators. Under the current conditions of an overheated market, regulatory authorities may want to strengthen supervision to prevent market risks.”