(Yicai Global) Aug. 20 -- Guangdong Golden Dragon Development, a Chinese investment firm which holds a majority stake in Zhongshan Securities and other brokerages, saw its shares crash by the exchange-imposed daily limit today on the news that it is to be investigated by the country’s securities regulators.

The China Securities Regulatory Commission will probe Golden Dragon for violating regulations regarding equity management, the firm said yesterday, without going into more details. Its stock price [SHE:000712] tanked 10 percent to CNY15.70 (USD2.27) today.

The investigation appears to be related to the proposed handing of control of the company from controlling shareholder Yang Zhimao to his wife Zhu Fenglin.

On Aug. 4, the Guangdong-based firm revealed a private placement plan worth around CNY3.6 billion (USD520 million) to issue not more than 264 million shares to Zhu. At the same time, Yang and institutional shareholder, Dongguan New Century Company Science and Education Development, agreed to waive their voting rights, worth 7.4 percent and 27.9 percent respectively, effectively handing control of the firm to Zhu.

The Shenzhen Stock Exchange has queried the relationship between Yang and Dongguan New Century, why the marital relationship between Yang and Zhu was not declared and if they are acting as separate individuals or in concert. Golden Dragon said it will reply by Aug. 14.

Another sticking point is Yang’s criminal record. He was sentenced to two years in prison in 2017 for bribing state officials during Golden Dragon’s acquisition of Dongguan Securities. Individuals with a criminal record may not hold more than 5 percent equity of any securities company within three years of being released, regulations say.

Editor: Kim Taylor