(Yicai) March 12 -- Hong Kong regulators have launched a crackdown on alleged corruption and insider trading at financial institutions, with the probe reportedly involving Guotai Junan International Holdings and Citic Securities. Both brokerages' shares fell today.

Guotai Junan [HKG: 1788] dropped 4.2 percent to HKD2.51 (32 US cents) today, while Citic Securities [HKG: 6030] closed down 1.7 percent at HKD24.86 (USD3.20).

The Securities and Futures Commission and Hong Kong's Independent Commission Against Corruption said today they had conducted a joint operation on March 10 and 11, arresting eight people, including senior executives at two licensed securities firms, a licensed hedge fund management firm, and a middleman.

The investigation is focused on suspected bribery and the disclosure of confidential information related to share placements of Hong Kong-listed companies before those deals were publicly announced.

It is suspected that senior executives of the licensed securities firms had accepted bribes of more than HKD4 million (USD512,000) from the owner of the licensed hedge fund management firm in exchange for disclosing confidential information about share placements by various Hong Kong-listed companies before the information was publicly announced, the SFC said, adding that the investigation is ongoing.

The SFC did not identify the people or institutions involved. Bloomberg reported yesterday that Hong Kong authorities had carried out unannounced inspections at the Hong Kong offices of Citic Securities and Guotai Junan and had taken at least one senior manager in for investigation.

Guotai Junan said in an announcement today that one of its employees had been detained for investigation by the ICAC and that some company documents had also been taken away. The firm said the employee had been suspended until further notice and that its operations remain normal. It added that it will disclose further information on the investigation in due course.

Citic Securities has not yet responded to the matter.

Hong Kong regained its position as the world’s largest financing market last year amid a surge in listings by mainland companies. A total of 117 firms completed initial public offerings on the Hong Kong Stock Exchange last year, raising HKD285.7 billion (USD36.5 billion), up 67 percent and 224 percent, respectively, from the previous year, according to Wind data.

Editor: Emmi Laine