Dong Zhengqing of Guangfa Securities, which is based in Guangzhou in southern China, was alleged to have tipped off his brother that the company would attempt to obtain a listing through the acquisition of a firm that already possessed one, the Financial Times reports.
The newspaper added that despite widespread perceptions of market manipulation in China, high-profile convictions for insider trading are rare and the case represents a step-change in the government's efforts to legitimize its markets.
It added that the country's regulator, the China Securities Regulatory Commission (CRSC), has assigned half its staff to investigating insider trading, market abuse and other breaches of trading rules.
One CRSC official recently told the publication: "China's market is an emerging and a transitional market and so it has more irregularities than a developed market."
The CRSC was formed in 1992 to act as China's centralized market regulator.