THE securities regulator is cracking down on the fast-growing hedge fund industry, investigating 10 cases of alleged wrongdoing.

Officials are probing private fund practices including market manipulation, misappropriation of client funds, insider trading and trading by managers using their personal accounts, Bloomberg quoted a China Securities Regulatory Commission (CSRC) statement as saying yesterday.

Some funds used the Hong Kong-Shanghai stock connect program to manipulate prices and some employees sought personal gain by exploiting the hedging mechanism for stock index futures, it said.

China’s booming money management industry includes private securities investment funds, which take money from wealthy investors and employ hedge fund-like strategies. They’re different from mutual funds, which are open to the general public, or vehicles that invest in private companies.

Already hit by scandals including the jailing of “hedge fund brother No. 1” Xu Xiang for market manipulation, the private funds industry is facing a rising tide of legal breaches, according to the CSRC.

In general terms, the regulator said many funds registered with false information, illegally raised money or misappropriated assets. Others manipulated markets and traded on inside information, the CSRC said.

The enforcement effort is intended to contain a “trend of rising legal violations in the private fund industry,” the regulator said, adding it was cracking down severely.

A total of 8,294 hedge fund companies managed about 2.3 trillion yuan (US$348 billion) as of Nov. 30 in private securities investment funds, according to data from the Asset Management Association of China. While assets under management slipped this year, the industry has had rapid growth after only beginning in 2004.

In March, the CSRC fined an individual for offences including using the Shanghai-Hong Kong stock connect program to manipulate a Shanghai stock.

Xu, general manager of Zexi Investment, was jailed for five-and-a-half years in January for market manipulation.

Xu was detained in November 2015. Between 2010 and 2015, Xu colluded with 13 listed companies in driving up their share prices, using non-public information, and made huge profit from such illegal activities, Qingdao Intermediate People’s Court said in a statement Jan. 23 this year. (SD-Agencies)