Guotai Junan International and CITIC Securities Raided! HK$4 Million Bribery Implicates HK$300 Million Insider Trading Case?

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Source | Dujiu Finance

Author | Zheng Li

As the Hong Kong stock market recovers strongly, an unexpected regulatory storm is quietly sweeping through Chinese investment banks.

On March 11, media reports that at least two Chinese brokerage investment banking staff in Hong Kong were visited by the ICAC (Independent Commission Against Corruption). Among them, Guotai Junan Hong Kong’s ECM (Equity Capital Markets) head Pan Jupeng was taken away for investigation; another brokerage’s Hong Kong subsidiary was also searched, but no personnel were detained. Market expectations suggest that the raids are not limited to just these two firms.

On the morning of March 12, Guotai Junan International (1788.HK) announced that the Hong Kong Securities and Futures Commission (SFC) and ICAC visited the company’s main Hong Kong office to execute search warrants, and one employee was detained by ICAC. The company immediately suspended all operations, duties, and powers of the involved employee. The board confirmed that all business segments, including investment banking, are operating normally, with sound finances and compliant, orderly operations. Another brokerage, CITIC Securities, has not yet issued an official statement.

Source: Announcement. From the capital market performance, on March 12, Guotai Junan International’s Hong Kong stock closed at HKD 2.51 per share, down 4.2%, with a total market value of HKD 23.92 billion. CITIC Securities closed at HKD 24.86 per share, down 1.74%, with a market value of HKD 368.439 billion.

This raid coincides with the recovery of Hong Kong’s capital market. Over the past year, trading volume surged, and this joint law enforcement action is not an isolated incident. Since 2025, Hong Kong’s IPO regulation has been continuously tightening.

1

Eight people detained over two days—who are they?

On March 12, the SFC and ICAC jointly announced that they conducted operations on March 10 and 11 to crack down on senior executives of licensed institutions suspected of insider trading and corruption. They arrested six men and two women aged between 35 and 60, including senior managers from two brokerages and a licensed hedge fund, as well as an intermediary.

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During the operation, authorities searched a total of 14 locations, including offices of licensed institutions and the residences of the suspects. The authorities suspect that senior managers at licensed brokerages accepted bribes exceeding HKD 4 million from hedge fund owners to disclose confidential information about share placements of Hong Kong-listed companies.

According to Daily Economic News, using this insider information, the hedge fund managed to short-sell these stocks or enter into short equity swap contracts, establishing short positions. When the companies announced their share offerings, the stock prices fell, and the hedge funds reportedly profited about HKD 315 million from these short positions.

The joint operation originated from an initial investigation by the SFC into suspected insider trading, which uncovered potential corruption. The investigation is ongoing.

Source: Canned图库

The joint action by ICAC and SFC involves allegations of bribery and insider trading. Legally, does accepting bribes and leaking confidential information constitute one crime (corruption) or multiple crimes (corruption, insider trading, theft of secrets)? How will courts determine sentencing?

Sun Yuhao, senior partner and lawyer at Shanghai Hahai Yongtai Law Firm, explains that under common law, when senior managers of licensed institutions accept bribes and leak confidential information, the behavior is usually punished as multiple offenses.

Specifically, accepting bribes violates Section 9 of the Prevention of Bribery Ordinance (Chapter 201), which regulates private sector agents accepting benefits that breach their duties. In this case, the brokerage manager received HKD 4 million in bribes to disclose confidential placement information, fitting the criteria of “agents without lawful authority or reasonable excuse soliciting or accepting benefits as an inducement to act against their principal’s interests.” Using this leaked information for securities trading also violates Sections 270 and 291 of the Securities and Futures Ordinance (Chapter 571), which define insider trading and establish criminal penalties.

Sun Yuhao states that in sentencing, courts consider the overall circumstances. First, bribery and insider trading are separate crimes; the former breaches loyalty and integrity obligations, while the latter undermines market fairness and transparency. Second, courts set starting points for each offense based on severity, then consider whether the crimes stem from the same criminal plan or are independent. Finally, the total sentence is determined by weighing all factors, often resulting in heavier penalties due to premeditated commercial corruption and serious market fraud.

One of those detained, Pan Jupeng of Guotai Junan International’s Equity Capital Markets department, graduated from Macau University of Business Administration and earned an MBA from Syracuse University in the U.S. He joined Guotai Junan International in June 2015. Prior to that, he worked at Morgan Stanley Hong Kong in sales and trading.

In June 2024, Pan was promoted to Managing Director and ECM head, responsible for overseeing underwriting projects including IPOs, secondary offerings, convertible bonds, and block trades.

ECM (Equity Capital Markets) mainly handles corporate equity financing, such as new share issues, rights issues, placements, or convertible bond issuance. It is one of the core departments of investment banking.

According to multiple authoritative media outlets, including 21st Century Business Herald, sources say Pan was taken from his home. The incident is likely related to suspected insider trading or other personal misconduct, rather than the company’s main investment banking business.

In terms of project experience, Pan has managed at least 18 Hong Kong IPOs, including CATL, Yuejiang Technology, Longpan Technology, Balle Palace, UBTech, Yihua Tong, Pule Shi, Mao Ge Ping, Youyishiguang, and four U.S. IPOs such as Xiao i Robot, Didi, Aihuishou, and Canggu. He has also participated in at least 26 placement projects and 11 block trades.

2

Hong Kong IPO fundraising surges, underwriting fees hit historic lows

Hong Kong’s IPO market in 2025 reached its highest point in four years, becoming the busiest market globally and setting a record for the most active start to the year.

Data from Wind shows that in 2025, the Hong Kong IPO market experienced explosive growth, with total funds raised reaching HKD 286.9 billion, a 225.49% increase year-over-year, returning to the top among major global exchanges after four years. Notably, leading Chinese companies like CATL, Hengrui Medicine, and Haitan Flavor, with market caps over HKD 100 billion, collectively contributed over half of the total funds raised.

Source: Canned图库

Among underwriters, China International Capital Corporation (Hong Kong) led with 47 IPOs, capturing 17.22% of the market share; CITIC Securities (Hong Kong) and Guotai Junan Securities (Hong Kong) underwrote 33 and 6 IPOs respectively, with market shares of 12.09% and 2.2%, ranking third and eleventh.

Guotai Junan International, a subsidiary of Guotai Haitong Group, forecasted a net profit of HKD 1.28 to 1.38 billion for 2025, a sharp increase of 265%-293% from HKD 351 million in 2024.

However, behind the boom, issues such as hasty applications, distorted pricing, and declining quality of sponsorship have emerged.

Media reports indicate that the investigation is related to the frenzy of Hong Kong IPOs in 2025, during which underwriting fees dropped to 1.5%, the lowest since 2000. Some brokerages rushed projects without sufficient due diligence, leading to imbalanced interests between institutional and retail investors—such as high retail subscription rates causing share price drops at listing. Overloaded sponsors had staff handling up to 19 projects simultaneously, resulting in superficial due diligence. Additionally, 16 listing applications have been suspended. These problems damage investor confidence and threaten market stability, prompting regulatory reforms.

This joint law enforcement is not an isolated event but part of a broader trend of tightening regulation since 2025, with a clear stance of “gradual tightening and targeted enforcement.”

In early August 2025, HKEX revised IPO pricing rules, requiring at least 40% of the book-building allocation to be distributed to price-setters and limiting over-allotment ratios. The goal was to improve IPO pricing efficiency, prevent institutional manipulation, protect retail investors, and reduce the risk of share price drops at listing.

By late January 2026, the SFC issued a letter expressing concern over issues arising during the surge of Hong Kong IPO applications in 2025 and began market rectification efforts. It also clarified that a single sponsor’s key personnel could oversee no more than six active listing projects to prevent superficial due diligence and declining quality of listing documents, thereby strengthening sponsor responsibilities.

Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, states that the new regulations in Hong Kong have comprehensively optimized the pricing mechanism, which will promote a shift toward value investing. Additionally, sponsorship will gradually shift from quantity expansion to quality prioritization, reducing the number of problematic listings and increasing market trust in IPOs.

The joint enforcement by ICAC and SFC not only corrects industry misconduct behind Hong Kong’s IPO boom but also signals a new phase of strong regulation and strict enforcement. This rectification will help the market transition from rapid expansion to high-quality development.