The detention by Chinese authorities of a British corporate investigator and his American wife in the wake of a corruption probe into pharmaceutical giant GlaxoSmithKline has had a chilling effect on other risk consultants working in China.

It’s unclear why Peter Humphrey and Yu Yingzeng, whose firm ChinaWhys has done work for GSK and other drugmakers, were detained. But corporate investigators said they were concerned about the repercussions for the industry.

Multinationals, banks and investors rely on corporate investigators for information about potential partners and investments in China, where a lack of transparency is a hurdle to doing business. Restrictions in the flow of such background information could potentially leave foreign investors exposed to greater risk in the world’s second-largest economy.

ChinaWhys offers “discreet risk mitigation solutions, internal process audits, due diligence and commercial investigation services”, according to the firm’s website.

“(Humphrey’s) detention is really disturbing. It gives me an uneasy feeling that people who, on the face of it, are trying to help companies and individuals navigate their way around the system are being targeted,” said Gary Miller, litigation partner and head of the fraud group at London law firm Mishcon de Reya.

Mike Vermillion, senior director of third party risk management solutions at Oregon-based consultancy Navex Global, called the detentions chilling.

“I am certainly not getting on a plane to China next week,” Vermillion said.

Two sources with direct knowledge of the matter have said Humphrey and Yu were detained by Chinese authorities in Shanghai on July 10. They did not specify who was holding the couple.

A Shanghai police spokesman said police there had neither detained nor had any contact with Humphrey. He said Humphrey’s case was being handled by Beijing. Police in the capital declined to comment.

British diplomats have said they were giving consular assistance to a Briton detained in Shanghai but have declined to provide further details. U.S. diplomats have said the same thing about a detained American. Reuters has not been able to determine if the couple have a lawyer.

OTHER INVESTIGATORS QUESTIONED

Their detention has not been an isolated case.

Two industry executives said investigators from other companies were being “invited for tea” by Shanghai authorities, a euphemism for informal questioning in China.

Some investigators, worried they are under surveillance, have scaled back their use of email. Some declined to speak to reporters over the phone, afraid that authorities were listening in to their conversations.

Several investigators said that they had become more cautious about which projects to accept, avoiding any the government might see as sensitive.

Investigators said they had also heard of people requesting reassignment to Hong Kong, which has a separate legal system to mainland China. These movements could not be confirmed.

A series of incidents in recent years has highlighted China’s growing willingness to investigate, detain and prosecute people for crimes involving the use of information for commercial purposes.

Corporate investigators first came under China’s microscope last year after a spate of accounting scandals at U.S.-listed Chinese firms that led to forced delistings, shareholder lawsuits and investigations by overseas regulators.

Many of the scandals followed reports by short-sellers who accused the firms of financial irregularities.

Some corporate investigators in China had worked with short-sellers and hedge funds doing research on those companies, said Paul Gillis, professor at Peking University’s Guanghua School of Management. It is unclear if the recent detentions are related to that work. Short-sellers borrow shares, sell them in the expectation that their price will fall and then buy them back at a lower price.

“I know there’s been a great deal of unhappiness with the activities of short sellers … That’s been one of the things that China has been quite irritated about,” said Gillis.

Jon Carnes, a U.S.-based short-seller who attacked several Chinese companies between 2010 and 2011 using the pseudonym Alfred Little, has said one of his Chinese researchers had been jailed in China.

INDUSTRY HAS GROWN RAPIDLY

The corporate investigations business has expanded rapidly in China in recent years in response to concern about compliance issues, in the wake of increased enforcement of the U.S. Foreign Corrupt Practices Act (FCPA) and a surge in international deals involving Chinese firms.

The big four international accounting firms — KPMG , PriceWaterhouseCoopers, Deloitte and Ernst & Young, along with companies such as Control Risks, FTI Consulting and Kroll are among the largest operating in China.

Investigators say the industry has also grown to include hundreds of small companies and individual operators as well, including ChinaWhys, a consultancy founded by Humphrey in 2003. Humphrey is a former journalist who worked for Reuters for 16 years until 1998.

British drugmaker GSK has declined to comment on the work ChinaWhys did for the firm except to say that Humphrey is not, nor has he ever been, an employee.

GSK is in crisis in China after police this month accused it of funnelling up to 3 billion yuan ($489 million) to travel agencies to facilitate bribes to doctors and officials. The company, Britain’s biggest pharmaceutical maker, has said some of its Chinese executives appeared to have broken the law.

With the investigation industry’s expansion in China, particularly among smaller firms, came an illegal trade in private information, including bank, telephone, and even hukou or household registration records, investigators said. Some investigators claimed they could place moles inside companies.

“Parts of the investigations industry in China were flying very close to the sun from a legal standpoint for a very long time,” said Velisarios Kattoulas, chief executive of Poseidon Group, a risk management consultancy active in China.

Starting as early as late last year, police began questioning hundreds of people involved in the trade of protected information, according to several investigators.

At least one small investigations company in China closed down as a result, investigators said. It was not clear if this firm was run by expatriates or locals.

LEGAL GREY AREA

Investigators concede some parts of their work stray into a legal grey area in China. Private investigations are prohibited under a 1993 Ministry of Public Security notice, though this, like other laws and regulations in China, has only been selectively enforced.

One Chinese lawyer who works with investigation companies said that because they cannot get business licences as private investigators, such firms often register as “business advisors”. This can leave them in a legally precarious situation.

“The negative part of this is that the government can get you whenever they want,” this lawyer said.

It is not only corporate investigators who have fallen foul of Chinese law on the commercial use of information.

In December 2012, a Chinese court sentenced four former executives from a Shanghai unit of Dun & Bradstreet, a global business information firm, to prison for illegally buying information about Chinese consumers. Dun & Bradstreet said in May last year it was shutting the unit.

The scrutiny on corporate investigators comes as China prepares to reopen its equity markets to initial public offerings after unofficially halting IPOs last October as part of a crackdown on fraud.

It is unclear if any investigators were caught up in that crackdown.

At the same time, the government has been tightening access to corporate records. Last summer, it began restricting the availability of corporate filings to China’s main business registry, the Administration of Industry and Commerce. These restrictions are still in force, investigators say.