Back in the 1980s, R. Foster Winans, a Wall Street Journal columnist who wrote the newspaper’s much-vaunted “Heard on the Street” column, showed that reporters are as bad as anyone when it comes to insider trading. Winans was indicted by then US Attorney Rudolph Giuliani and convicted in 1985 of violating federal law by leaking advance word of the contents of his columns to a stockbroker.

China seems to be catching up with the US in similar not-so-good ways. State-run Xinhua news agency said on Aug. 30 that a reporter for Chinese financial news magazine Caijing who covered the government’s intervention in the stock market and an official from the country’s China Securities Regulatory Commission (CSRC) have been arrested by police. Both reportedly admitted to breaking the law in an insider trading scandal.

The Xinhua story also fingered four of the eight employees of Citic Securities that it previously reported had been taken away by police for questioning over suspected illegal securities investment. Chinese financial website Caixin Online, in a separate report, said the four had also admitted their crimes. But it was unclear if these offenders were tied to the reporter and the CSRC official.

Xinhua said the reporter for Caijing, Wang Xiaolu, admitted to colluding with others in “fabricating and spreading false information about the transactions of securities and futures.” “After a semicolon, the sentence continues, saying Liu Shufan, an official at the CSRC’s stock issuance department, admitted to ‘insider trading, forging official documents and stamps and taking bribes. The Xinhua article did not say how the two cases were linked,” Caixin noted.

“According to Liu’s confession during the investigation, he has taken advantage of his position to secure an approval from the securities authorities for a public company and help the growth of the company’s shares. In return, the head of the company offered bribes worth several million yuan to him,” Xinhua reported.

Wang is said to have published an article for Caijing on July 20 — in the midst of the government’s frantic efforts to halt to the side in Chinese stocks. The story, since denied by the government, claimed that Chinese stock regulators had begun to mull possible scenarios for state-backed investors to pull out from the market. The story said the scenarios included an end to government-supervised buying of stock or selling shares that had already been purchased by institutions. The report supposedly helped panic local investors and fanned the share meltdown.

“Wang confessed that he wrote fake report on Chinese stock market based on hearsay and his own subjective guesses without conducting due verifications,” Xinhua said. “He admitted that the false information have caused panics and disorder at stock market, seriously undermined the market confidence, and inflicted huge losses on the country and investors.”

Asia Unhedged is happy that officials have caught the alleged culprits. However, we wonder (in the absence of crucial details) if Wang’s “crime” really involved insider trading or whether he was just guilty of sloppy reporting and throwing a wrench into government efforts to calm the country’s financial markets? It also remains to be seen if the CSRC official is connected to Wang in any way.

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