China fines brokerage $85m for trading error
August 30, 2013 - 1:51:42 pm
SHANGHAI: China's market regulator on Friday fined a domestic brokerage a record $85 million on Friday for a trading error that rocked its stock market earlier this month, the official Xinhua news agency said.
The penalty levied on Everbright Securities is the largest ever issued by the China Securities Regulatory Commission (CSRC), reports said.
It also banned four of the firm's executives from the industry for life, Xinhua added.
A "design defect" in Everbright's proprietary trading system briefly sent the benchmark stock index up more than five percent on August 16.
The CSRC found the brokerage, China's seventh largest by assets, committed a number of legal and regulatory violations including insider trading as a result of the incident, Xinhua said.
Everbright mistakenly placed buy orders worth 23.4 billion yuan, although not all the transactions were completed, authorities said previously.
But the brokerage made an "illegal gain" of 87.21 million yuan, most of it through short-selling stock index futures and exchange-traded funds before the mistaken trade was disclosed, Xinhua reported.
Authorities have shut down Everbright's proprietary trading operations and ordered it to "rectify" its business, it said.
The CSRC barred Xu Haoming, who stepped down as the firm's president last week, and three other executives from working in the securities sector, the report said.
They were each fined 600,000 yuan or $97,000, Xinhua said.
A fifth executive, the board secretary, was also fined.
Everbright Securities, a unit of state-owned China Everbright Group, said last week its net profit dropped 2.22 percent year-on-year to 811 million yuan for the first half.
Its shares were suspended from trading on Friday. (AFP)