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Major Chinese brokerage Guosen under investigation

[SHANGHAI] One of China's biggest brokerages is being investigated by market regulators for suspected "rule violations", it said on Friday, weeks after its president hanged himself.

The confirmation of the probe into Guosen Securities came a day after the country's largest broker, Citic Securities, said it was being investigated, following inquiries into several of its executives for insider trading.

The investigations by the China Securities Regulatory Commission (CSRC) are part of a growing crackdown on the financial sector after a market rout spooked investors worldwide.

Guosen Securities' president Chen Hongqiao hanged himself last month after authorities prevented him from leaving the country. The firm is the eighth biggest brokerage in China by assets, according to a 2014 ranking by the Securities Association of China.

In a statement to the Shenzhen stock exchange, Guosen said it "will actively assist the investigation and release any progress in a timely manner", adding it was "operating normally".

The investigation is the latest in a national crackdown on price manipulation, short selling and insider trading in the financial sector following a stock rout that wiped trillions of dollars off the country's exchange boards.

After soaring 150 per cent in one year in a debt-fuelled bubble, the Shanghai and Shenzhen bourses went into a tailspin in June that extended into August, tumbling nearly 40 percent despite massive intervention by the authorities.

Securities stocks tumbled on Friday morning following the investigation's announcement, with Guosen Securities slumping 6.01 per cent in Shenzhen by midday.

Haitong Securities halted trading in its shares in Hong Kong and Shanghai, saying in an announcement to the Hong Kong exchange that the move was made "pending the release of an announcement which may constitute inside information".