Two financial institutions confirmed Wednesday that they have bond fund managers who are being investigated by the police. They did not reveal the nature of the investigation, but some insiders alleged it was over illegal trading, and it might involve numerous people in the industry.

Shanghai-based Wanjia Asset Management Co announced Wednesday that the company's head of fixed income, Zou Yu, is being investigated by the police for "individual behavior."

"Mr Zou has resigned … and the investigation of Mr Zou has no connection with the firm," said a statement from Wanjia, which oversees assets under management that were worth 24.35 billion yuan ($3.94 billion) by the end of last year.

Beijing-based CITIC Securities Co also confirmed to the media Wednesday that Yang Hui, executive director of the firm's fixed-income trading department, has been "taken away" by police for "personal reasons."

CITIC said in its financial report that the trading volume of its fixed-income bonds reached 4.2 trillion yuan last year.

The two incidents came after speculation that the regulatory authorities, including the central bank, would carry out a massive investigation into illegal bond trading. According to a report Wednesday by the Shanghai-based Oriental Morning Post, citing insiders, the two fund managers are being investigated for illegal bond trading, which is a common phenomenon in China's financial sector.

The report said some employees of the country's Big Four banks, as well as at fund management and securities companies, have also been investigated recently. Currently, some financial institutions buy bonds and resell them to get money, and use the money to buy more bonds. Such a practice can leverage the original investment by several times. And during the reselling process, the buyer and seller negotiate a price, which creates room for siphoning profits.

Global Times