Everbright Securities faces fines for erroneous trading

BEIJING - China's securities watchdog confirmed on Friday that abnormal trading on August 16 by Everbright Securities constitutes legal and regulatory violations and slapped the company with record penalties totaling 523 million yuan ($84.75 million).

The company's illegal gains resulting from the malpractice, totaling 87.21 million yuan, will be confiscated, according to a spokesman for the China Securities Regulatory Commission (CSRC). The regulator will also impose an additional fine of 436 million yuan on the company.

It marks the largest fines ever issued by the commission on China's securities companies.

The CSRC identified the company's violations as insider trading, disclosure of misleading information, and other violations against internal control regulations of securities companies.

The CSRC will also impose fines on four Everbright Securities employees responsible for the abnormal trading and ban them from undertaking business on securities and futures market.

Everbright Securities will be asked to shut down proprietary trading desks and there will be a suspension on its proposals for new businesses being approved, according to the regulator.

Abnormal trading by Everbright Securities on August 16 caused a 5.96-percent gain in the benchmark Shanghai Composite Index in about three minutes.

Flaws in the firm's proprietary "strategy trading system" resulted in the placement of a huge number of purchase orders, the CSRC said earlier following a preliminary investigation.

The company's director and president Xu Haoming was replaced by caretaker president Yuan Changqing last Thursday.

Investors also suffered great losses, as many followed the spike to buy stocks only for the market to surrender all the gains quickly in the afternoon trading.

The CSRC spokesman also said on Friday that investors would be allowed to sue Everbright Securities for compensation over losses incurred from the unusual price fluctuation.