Earlier this month, Chinese law enforcement officials arrested the manager of prominent hedge fund Zexi Investment, as well as executives of trading company Yishidun, for alleged futures trading schemes. First reported by state news service Xinhua, these arrests are part of the Chinese government’s escalating efforts to rein in abuses in the nation’s securities industry in order to bolster investor confidence in the nation’s market.

According to Xinhua, Zexi general manager Xu Xiang allegedly acquired nonpublic stock information in violation of Chinese law and then used that information to commit insider trading and to manipulate stock prices. Xu is well-known in China — Zexi is one of the most successful Chinese hedge funds, managing more than 20 billion yuan — making this one of the most newsworthy arrests yet in China’s efforts to restore calm to trading. Law enforcement officials have also detained a number of Zexi employees, and the Shanghai Stock Exchange has imposed a two-year trading suspension on four companies’ shares held by investors tied to Xu.

Separately, Yishidun executives Gao Yan and Liang Ze were arrested for allegedly using software that enabled them to trade large volumes of futures at prices far different from the going market price. China’s Ministry of Public Security determined that in June and July, when Chinese markets were experiencing significant volatility, Yishidun’s software allowed it to purchase up to 31 futures contracts per second. An associate at a futures company, Jin Wenxian, was also arrested for allegedly helping Gao and Liang conceal their manipulative trading. The investigation is ongoing, and Chinese officials may arrest more co-conspirators connected to the alleged scheme.

Chinese authorities continue to take steps to ease the market uncertainty that has persisted since June. Officials are investigating automated trading like the software used by Yishidun, and laws have been proposed that would bolster the government’s regulation of such trading. Illegal margin financing and malicious short selling are also targets of governmental inquiry. Since August, the China Securities Regulatory Commission has been pressuring hedge funds to curb such activities, and has also opened investigations into additional trading technology companies. The CSRC also announced more than 2 billion yuan ($314.8 million) worth of fines in 12 instances of stock market manipulation.

If you have noticed that newly issued credit cards look different because of a small metallic chip on the front, there is a reason. According to EMVCo, the entity that oversees EMV technology and specifications, these small chips — called EMV microchips — hold payment data and provide codes specific to each purchase, adding another layer of security to transactions. While this technology is new to the United States, it is common around the world. In fact, the United States is the last major market to implement this technology.

While the U.S. government has not yet passed any laws addressing this new technology, several attorneys general have urged financial institutions to expedite the implementation of chip and PIN credit card technology, stating that this implementation is “imperative in order to provide stronger payment security and assurance to consumers.”

This new technology, however, has big repercussions. Effective October 1, 2015, certain major U.S. payment networks (Accel, American Express, China, UnionPay, Discover, MasterCard, NYCE Payments Network, SHAZAM Network, STAR Network and Visa) implemented a supposed liability shift for credit card fraud. If enforceable, the liability for fraud would shift to the party — either the card issuing financial institution or the merchant — that has not yet adopted EMV technology.

Despite this deadline, most merchants were not expected to be prepared by October 1st. With the average cost of EMV compliant equipment ranging from $500 to $1,000, many merchants have struggled to update their technology. One report stated that only 40 percent of retail locations are expected to be EMV compliant by the end of 2015. Regardless, merchants operating without EMV technology are at risk imposed by the EMV liability shift.

Please see below for additional information:

Understanding the 2015 U.S. Fraud Liability Shifts

AG Jepsen and Eight Attorneys General Call for Expedited
Implementation of Chip and PIN Credit Card Technology

Chip Credit Cards Give Retailers Another Grievance Against Banks