Beijing - China’s securities regulator fined Everbright Securities Company and banned some of its employees from the industry after erroneous stock-purchase orders from the brokerage roiled the nation’s equity market two weeks ago.
The penalties and confiscation of illicit gains from the incident, which the China Securities Regulatory Commission said included insider trading, will total 523-million yuan ($85-million), the official Xinhua News Agency reported on Friday.
Mei Jian, Everbright’s board secretary, couldn’t immediately comment when reached on his cellphone. A second call went unanswered.
The CSRC had banned Everbright from proprietary trading for three months after the buy orders on August 16 sparked the biggest swing in China’s benchmark equity index since 2009. The error, combined with glitches this month at Goldman Sachs Group and in the Nasdaq Stock Market, has fuelled concerns about the reliability of electronic trading systems.
Everbright’s President Xu Haoming resigned after the incident and the brokerage suspended Yang Jianbo, the head of its proprietary trading business, after the error. The firm estimated it lost 194 million yuan on the trades, based on August 16 closing prices, and said the figure may change.
Everbright Securities was also barred by the China Financial Futures Exchange from creating new stock-index futures positions as of August 19 and was suspended from underwriting debt sold by non-financial institutions on the nation’s interbank market.
The National Association of Financial Market Institutional Investors asked Everbright to review and rectify its systems after the bad trades exposed “major problems” in internal controls, the brokerage said in an August 22 statement to the Shanghai exchange.
The value of equities, securities and derivatives held by its proprietary trading desk relative to net capital exceeded the regulatory limit of 100 percent after the incident, Everbright said on August 18. - Bloomberg