Chinese broker tried in insider trading

BEIJING - The former president of a major Chinese stock brokerage has gone on trial on insider-trading charges in connection with the company's 2006 stock market debut, a state news agency reported Saturday.

Dong Zhengqing, former president of Guangfa Securities, the country's sixth-largest brokerage, denied any wrongdoing and rejected an earlier confession at the trial Friday in China's southern business capital of Guangzhou, the Xinhua News Agency said.

Dong is accused of tipping off his brother about Guangfa's plans to obtain a stock market listing by acquiring a company that already was publicly traded. Investigators say Dong's brother, Dewei, and a former schoolmate, Zhao Shuya, profited by buying the second company's shares in advance of an announcement.

Chinese regulators are trying to clean up financial markets that are marred by accusations of insider-trading, poor corporate governance and other abuses.

Reinforcing investor trust has become especially urgent for Beijing after the main market index plunged by some 50 percent since hitting a record high in October.

Guangfa debuted on the Shenzhen Stock Exchange in southern China on June 2, 2006, by acquiring Yan Bian Road Ltd. Chinese companies use such "reverse mergers" to obtain a market listing without having to meet government requirements to list on their own.

The government launched an investigation of the merger in June 2007 and Dong was arrested the following month.

Dong Dewei and Zhao Shuya began to amass shares in Yan Bian in February 2006 but denied in court on Friday that they acted on a tip from Dong's brother, Xinhua said. It said they withdrew earlier confessions of wrongdoing.

Yan Bian shares soared by more than 180 percent in value between March and June 2006, Xinhua said. It said Dong Dewei was accused of making 50 million yuan ($7 million at current exchange rates) in improper profits, while Zhao Shuya was accused of making 1 million yuan ($130,000).

Dong Zhengqing said the stock market listing was conducted by two of his partners and he only heard about it in June 2006, the report said. But it said several Guangfa executives testified that Dong played a key role in making decisions about the deal.