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Author | Zheng Li
Source | Dujiao Finance
As the Hong Kong stock market is experiencing a revival, a sudden regulatory storm has quietly swept through the circle of Chinese investment banks.
On March 11, Caixin reported that at least two Chinese brokerage firms in Hong Kong had personnel from the Independent Commission Against Corruption (ICAC) visit, among them, Pan Jupeng, the head of the Equity Capital Markets (ECM) at Guotai Junan Hong Kong, was taken away to assist in the investigation; another brokerage firm, the Hong Kong subsidiary of CITIC Securities, was searched, but no personnel were taken away. The market expects that the surprise inspections are not limited to the aforementioned two.
On the morning of March 12, Guotai Junan International (1788.HK) announced that the Hong Kong Securities and Futures Commission and the ICAC visited the company's main business location in Hong Kong to execute a search warrant, and one employee was detained by the ICAC. The company has immediately suspended all operations, executive duties, and powers of the relevant employee. The company's board confirmed that overall business and operations, including all business segments such as investment banking, are continuing normally, the company's finances are sound, and all operational activities are being conducted in compliance and orderly; another brokerage firm, CITIC Securities, has not yet issued an announcement.
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From the performance of the capital market, 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, while CITIC Securities' Hong Kong stock closed at HKD 24.86 per share, down 1.74%, with a total market value of HKD 368.439 billion.
This surprise inspection comes at a time when the Hong Kong capital market is recovering, with trading volume in the city surging over the past year. This joint law enforcement action is not an isolated incident, as IPO regulations in Hong Kong have been continuously tightening since 2025.
On March 12, the Hong Kong Securities and Futures Commission and the ICAC jointly announced that they conducted a joint operation on March 10 and 11 to combat insider trading and corruption involving senior executives of licensed institutions, involving two brokerage firms and a hedge fund. The ICAC arrested a total of 6 men and 2 women, aged between 35 and 60, including senior executives from the two brokerage firms and the licensed hedge fund, as well as an intermediary.
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During the joint operation, personnel from the Hong Kong Securities and Futures Commission and the ICAC searched a total of 14 locations, including the offices of licensed institutions and the residences of those arrested. The Hong Kong Securities and Futures Commission and the ICAC suspect that senior executives of the licensed brokerage firms accepted bribes exceeding HKD 4 million from the owners of the licensed hedge fund management company to disclose confidential information regarding the share placements of various Hong Kong-listed companies
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According to the Daily Economic News, with confidential information, licensed hedge fund management companies established corresponding short positions in these stocks by shorting them in the market or engaging in equity swap contracts. When the relevant companies publicly announced share placements, the stock prices of these companies fell, and the hedge funds reportedly profited approximately HKD 315 million from their short positions.
This joint action originated from the initial investigation by the Hong Kong Securities and Futures Commission into suspected insider trading activities, during which potential corruption was discovered. The investigation is still ongoing.
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The Hong Kong Independent Commission Against Corruption and the Hong Kong Securities and Futures Commission conducted a joint operation, with the crime suspected to involve bribery and insider trading. When confidential information is leaked after receiving bribes, does it legally constitute one crime (corruption) or multiple crimes (corruption, insider trading, and theft of confidential information)? How will this be determined in actual sentencing?
Sun Yuhao, a senior partner and lawyer at Shanghai Haihua Yongtai Law Firm, pointed out that under the common law framework, when a senior executive of a licensed institution receives bribes and then leaks confidential information, this behavior typically constitutes multiple offenses subject to cumulative penalties.
Specifically, the act of receiving bribes violates Section 9 of the Prevention of Bribery Ordinance (Chapter 201)—this provision specifically regulates the behavior of private institution agents receiving benefits to act against the interests of their employers. In this case, the broker's supervisor received HKD 4 million in bribes to disclose confidential placement information of the employer (the brokerage), which meets the criteria of &#34;an agent without lawful authority or reasonable excuse soliciting or accepting benefits as an inducement to act in relation to the principal's business.&#34; Using the leaked confidential information for securities trading violates Sections 270 and 291 of the Securities and Futures Ordinance (Chapter 571), where Section 270 defines insider trading, and Section 291 explicitly establishes the criminal offense of insider trading.
Sun Yuhao stated that in actual sentencing, the court would adopt a holistic principle for consideration. First, bribery and insider trading are independent offenses; the former infringes on the employee's loyalty and integrity to the employer, while the latter undermines the fairness and transparency of the securities market. Secondly, the court would set the starting point for sentencing based on the severity of each offense, then consider whether the offenses stemmed from the same criminal scheme or were completely independent acts. Finally, all factors would be taken into account to determine the total sentence, which would typically result in harsher penalties due to the premeditated commercial corruption and serious market fraud involved.
One of those taken away, Pan Jupeng, head of the equity capital markets department at Guotai Junan International, graduated from the University of Macau with a degree in business administration and obtained an MBA from Syracuse University in the United States. He joined Guotai Junan International in June 2015. Prior to this, he worked in the sales and trading department of JP Morgan in Hong Kong.
In June 2024, Pan Jupeng was promoted to Managing Director and Head of ECM, primarily responsible for coordinating the underwriting of projects at Guotai Junan International, including IPOs, secondary market placements, convertible bonds, and block trades.
ECM is mainly responsible for corporate equity financing, such as new stock issuance, rights issues, or issuing convertible bonds, and this department is one of the core departments of the entire investment banking business.
According to several authoritative media outlets, including the 21st Century Business Herald, citing informed sources, Pan Jupeng was taken from his home, and this incident is likely related to his personal involvement in insider trading or other illegal activities, which is not directly related to the company's main investment banking business.
In terms of project experience, Pan Jupeng has been responsible for at least 18 Hong Kong stock IPO projects, including CATL, Yuantai Technology, Longpan Technology, Palace of Fun, UBTECH, Yihua Tong, Puleshi, Mao Ge Ping, and Friendship Time, as well as 4 US stock IPO projects, including Xiao i Robot, Didi, Aihuishou, and Cangu. In addition, he has participated in at least 26 placement projects and 11 block trade projects.
Hong Kong IPOs reached a four-year high in 2025, becoming the busiest market globally and setting a record for the busiest annual start ever.
Wind data shows that in 2025, the Hong Kong stock IPO market experienced explosive growth, with the total fundraising amount for Hong Kong IPOs reaching HKD 286.9 billion, a year-on-year increase of 225.49%, returning to the top of major global exchanges in fundraising scale after four years; among them, leading A-share companies with a market value of over 100 billion, such as CATL, Heng Rui Medicine, and Haitian Flavoring, collectively returned to Hong Kong, contributing over 50% of the fundraising amount.
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Among them, China International Capital Corporation Hong Kong Securities had 47 Hong Kong stock IPO projects, with a market share of 17.22%, ranking first; CITIC Securities (Hong Kong) and Guotai Junan Securities (Hong Kong) underwrote and sponsored 33 and 6 projects respectively, with market shares of 12.09% and 2.2%, ranking third and eleventh.
Guotai Junan International is a subsidiary of Guotai Haitong Group. According to the performance forecast released by Guotai Junan International on January 26, the group expects a net profit of HKD 1.28 billion to 1.38 billion in 2025, a significant increase of 265%-293% compared to the net profit of approximately HKD 351 million in 2024.
However, behind the prosperity, issues such as hasty applications, distorted pricing, and declining sponsorship quality have become prominent.
According to media reports, the background of this investigation is related to the crazy expansion of the Hong Kong stock IPO market in 2025, where underwriting fees have dropped to 1.5%, the lowest level since 2000. Some brokerage projects have neglected due diligence in order to rush progress, and the interests of institutions and retail investors in the pricing mechanism are imbalanced, such as the excessively high winning rate for retail investors leading to price breaks. Sponsors, due to project overload, have some personnel handling 19 projects simultaneously, leading to superficial due diligence, and the review process for 16 listing applications has been suspended
These issues not only undermine investor confidence but also threaten the long-term stability of the market, leading to the emergence of new regulatory rules.
This joint enforcement action is not an isolated incident but a continuation of the ongoing upgrade of Hong Kong's IPO regulation since 2025, demonstrating a clear enforcement attitude of &#34;gradual tightening and precise strikes.&#34;
Prior to this, in early August 2025, the Hong Kong Stock Exchange revised the IPO pricing mechanism, requiring that at least 40% of the shares in the book-building allocation be distributed to price setters, limiting the proportion of excess allocations by institutions. The core goal of this action is to enhance the effectiveness of IPO pricing, prevent institutions from manipulating prices, protect the interests of small and medium investors, and reduce the probability of new stocks breaking below their issue price.
At the end of January 2026, the Hong Kong Securities and Futures Commission sent a letter expressing high concern over the issues that arose during the surge in new stock listing applications in Hong Kong in 2025, and began to rectify the market; at the same time, it clarified that a single sponsor's main personnel could supervise a maximum of six active listing committee projects simultaneously, in order to address prominent issues such as the superficial nature of sponsor due diligence and the decline in the quality of listing documents, thereby tightening sponsor responsibilities.
Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, analyzed that the implementation of the new regulations in the Hong Kong market has comprehensively optimized the pricing mechanism, which will promote the market's transition to value investing in the long term; at the same time, sponsorship will gradually shift from quantity expansion to quality prioritization, reducing projects that are listed with issues and enhancing market trust in IPO projects.
The joint enforcement action by the Hong Kong Independent Commission Against Corruption and the Hong Kong Securities and Futures Commission not only corrects the industry chaos behind the prosperity of Hong Kong stock IPOs but also indicates that the Hong Kong capital market is entering a new phase of strong regulation and strict enforcement. This rectification will effectively promote the market's transition from rapid expansion to high-quality development

Guotai Junan International and CITIC Securities were searched by the Independent Commission Against Corruption in Hong Kong, involving HKD 4 million in bribery and a HKD 300 million insider trading case. Guotai Junan confirmed that an employee was detained, and business operations are normal. On March 12, Guotai Junan's stock price fell by 4.2%, while CITIC Securities dropped by 1.74%. This operation targets senior executives of licensed institutions suspected of insider trading and corruption, involving two brokerage firms and a hedge fund, with a total of 8 people arrested

Guotai Junan International and CITIC Securities were searched! HKD 4 million in bribes linked to a HKD 300 million insider trading case?