The Henan police have detained Xiao Shiqing, former president of Galaxy Securities, in connection with a graft investigation.

The local police have also cordoned off Xiao's office and his house in Beijing, according to reports. Officers of the Henan justice department took Xiao into custody on May 13.

"He was taken into custody in Henan instead of Beijing to avoid potential influencing," said Fu Yong, a lawyer from Dacheng Law Office.

Rumors of the police probe began to circulate in the stock market after Galaxy Securities, China's second largest stock brokerage firm after CITIC Securities by the number of securities offices, announced that Xiao was removed from his posts at the company. Neither the police nor the China Securities Regulatory Commission have issued any statement relating to Xiao or the investigation.

Born in 1964, Xiao has a PhD in management and joined the CSRC in 1996. In 2001, he was appointed chairman of Orient Securities, but was recalled to CSRC in 2004 to serve as the deputy director of the department for listed company supervision. In 2007, he was appointed president and legal representative of Galaxy.

The case is also linked with the bribery scandal involving Wang Yi, the former vice-chairman of the CSRC and vice-president of the China Development Bank.

Wang, who was arrested in January on graft charges, reportedly confessed to accepting bribes worth 10 million yuan.

He worked at the CSRC between 1995 and 1999 and was at one time Xiao's direct boss as head of the department of listed company supervision. He was also responsible for promoting Xiao as the deputy director of the department.

On April 30, Central Huijin Investment Co, the majority shareholder of Galaxy, appointed Hu Changsheng as the new president of the securities firm. Hu was head of capital market department at Central Huijin Investment Co, an arm of the country's sovereign wealth fund, before taking up his new post.

(China Daily May 19, 2009)