(Yicai) April 2 -- The actual controller of a franchise of China National Gold Group Gold Jewellery was detained by police after the jewelry retailer was found illegally acting as custodian of gold.

The controller of Beijing Sandingyuan Gold and Jewellery, a person surnamed Yang, is under police custody after clients could not redeem the gold they had bought and deposited at one of its stores in a mall in Beijing, China National Gold Jewellery announced yesterday.

The police investigation started in early March after some clients reported the sudden closure of a franchise store of China National Gold Jewellery in Beijing that had made it impossible for them to redeem the gold they had purchased and entrusted to the store for safekeeping.

Sandingyuan’s Beijing store was carrying out an illegal gold bar reservation business, which stopped on Dec. 27 last year after it could not deliver products acquired by customers, the Beijing-based state-owned gold giant added.

China National Gold Jewellery will cover the loss temporarily, it noted, without specifying the amount of the losses.

Sandingyuan’s violations have an extremely negative impact on the company, China National Gold Jewellery pointed out, adding that it will make every effort to communicate with consumers and relevant parties, actively cooperate with the judicial authorities on the investigation, bear the corresponding legal responsibilities, as well as strengthen the supervision of its franchise business.

Shares of China National Gold Jewellery [SHA: 600916] were trading up 0.8 percent at CNY11.14 (USD1.54) as of lunch break in Shanghai today.

Editor: Futura Costaglione